As you probably know, the Galaxy S8 is more expensive to buy than its predecessor. According to a report by IHS Markit, the reason for the price hike is quite simple: it costs Samsung more money to make the Galaxy S8 than the S7.
The bill of materials (BOM) for the 64 GB version of the flagship device totals exactly $301.60. When the manufacturing expenses are added ($5.9), the total cost increases to $307.50. This means the actual cost of manufacturing a Galaxy S8 is $43.34 higher than that of the S7. It’s also higher than the total production cost of the Galaxy S7 Edge by $36.29.
The report doesn’t state the price of each component of the device but does mention that the NAND flash memory and DRAM cost. $41.50 combined, while the 3,000 mAh battery comes in at $4.50.
The difference between the production cost and the cheapest retail price of the Galaxy S8 — $720 — is exactly $412.5. However, this isn’t the amount of money Samsung makes every time it sells a unit of its flagship device. We also have to take the shipping and marketing expenses into account as well as various import fees in different countries. Additionally, retailers and carriers take their cut of every sale. There’s also the cost of research and development – Samsung has one of the highest R&D budgets in the industry – $13 billion in 2016 alone – and some of that money went into developing technologies like the iris scanner and edge display. Finally, a large administrative overhead (expenses and salaries of executives and managers) has to be taken into account.
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Don’t get me wrong, the tech giant still makes a nice profit on each Galaxy S8 it sells, but it isn’t quite as big as it initially appears when looking at the bill of materials. The total production cost of its bigger brother isn’t known yet at this point, but it should definitely be a little higher thanks to the bigger screen and larger battery.