What’s certain, Liang says, is that the quality of the phones his factories produce will rise. “There is no profit at the bottom,” he says. “Everyone is trying to improve their techniques.”
Manufacturers built about 700 million smartphones last year. The change began in 2011, when computer-chip makers began selling off-the-shelf chipsets—the set of processors that are the brains of a touch-screen phone. Those, plus Google’s free Android operating system, made smartphones much easier to produce.
Taiwan-based MediaTek and Spreadtrum, started offering “turn-key” systems: phone designs plus a set of chips with Android and other software preloaded. Spreadtrum says it may sell 100 million units this year.
Each chipset costs $5 to $10, depending on the size of a phone’s screen and other features. In total, Liang says, his cost to make a smartphone is about $40. He says he can manufacture as many as 30,000 smartphones a day for brands such as Konka Mobile and for telecom operators like China Unicom.
In the United States, a smartphone’s high cost is generally masked by wireless companies, which discount them steeply if consumers agree to a contract. In China that happens as well. Liang says his phones retail for about $65 or $70 but can cost only $35 with a contract.
SOURCE - Technology Review
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