When Samsung announced the S6 and S6 Edge a while ago a lot of us were surprised that the company didn't push the Edge model more. But the reality was that this device was more complicated to build and generated less profit for the firm than its "flat" S6 varient. Now Samsung has got rid of the standard device, and offers only phones with a curved edge - and it's clearly going to affect profitability.
According to data from IHS Markit and published by Statista, the Samsung Galaxy S8 costs $307.50 per unit. That's a jump from last year's Galaxy S7 Edge which costs $271.20 to produce. By way of comparison, the iPhone 7 costs just $224.80 to produce, $82.70 less. The Samsung Galaxy S8 is the most expensive phone to produce currently on the market.
Samsung's S8 is even more expensive than last year's model - stats from Statista
StatistaSamsung charges $720 for the S8 with no carrier ties. That leaves about $420 in potential revenue from each sale, but of course Samsung will have further costs in each sale. The build price also ignores things like marketing, shipping costs and, most significant of all, R&D.
The cost of producing the phone cuts into its profit margin substantially, and marketing and shipping costs will eat into it further. Samsung's ad spend on the S8 alone must be quite staggering. And while none of this is bad news for Samsung, it does mean that it will have to sell more units to keep shareholders happy.
The good news is that the phone is outselling the S7, according to Samsung. Some analysts suggest the firm might sell 50m S8 handsets this year. Samsung has clearly opted to use high-quality parts. This can only be seen as a positive sign, and no doubt part of that has come from its need to make the S8 a roaring success to recover some of the money it lost with the Note 7. It will also want to avoid more exploding phones.
Currently leading the pack on cheap-to-produce smartphones is Huawei's P9. What's interesting is that the P9 is actually an excellent phone, with a good camera system, and is very nearly as well-built and solid as Samsung's devices. It has just $205.30 worth of materials and construction costs baked into its build price.
Google's Pixel XL is also expensive at $285.80, just a little less than $22 cheaper to produce than Samsung's high-end phone. Interestingly it looks from the data in the Statista chart that the Pixel XL is also the most expensive phone to assemble.
In the long term though, it's likely that Samsung's investment in the S8 will pay dividends when it launches a new Note 8 later this year. What the company spends now should help it design a more efficient and cost-effective device next.
