Technology

The Eye of the (BlackBerry) Storm


iSuppli took apart Research In Motion's BlackBerry Storm to determine the cost of its components. Guess what? The iPhone parts are cheaper

As the battle for the smartphone market heats up, comparisons abound between Research In Motion's BlackBerry Storm, released in November, and Apple's iPhone.

For starters, both devices boast a touchscreen, forgoing the buttons found on more conventional phones. But the more important comparison, from the bottom-line perspective, lies in which device carries a fatter margin. And on a cost-per-unit basis, the advantage for the moment appears to belong to Apple (AAPL). A new analysis of the BlackBerry Storm by market research firm iSuppli indicates the cost of components and manufacturing for RIM (RIMM) is slightly less than $203. By comparison, those costs for Apple's iPhone 3G, the second iteration of the device, are less than $175. iSuppli's estimates factor in only the cost of components and assembly and don't include estimates for the cost of software, licensing of patents, or distribution. But they do help fill in the blanks on how profitable a device may be.

Though it has yet to disclose official sales data on the Storm, published reports say RIM sold half a million during its first month on the market. In August-September 2007, the first two months the first-generation iPhone was on the market, Apple sold 1.1 million units. Apple quickly ramped up sales and moved more than 2.3 million during the following quarter. RIM declined to comment for this story.

Apple in Hot Pursuit

Rapid-fire sales are bringing the iPhone to within spitting distance of the BlackBerry, which has been on the market for about a decade. During the quarter that ended on Dec. 2, RIM added 2.6 million new accounts and sold 6.7 million devices, bringing the total of subscriber accounts worldwide to 21 million. In its most recent quarter, Apple sold 4.4 million iPhones, bringing its total to more than 17 million.

Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone (VOD), sells the Storm for $249 in the U.S. and then offers a $50 mail-in rebate, reducing the purchase price to $199 for customers who agree to a two-year wireless plan. AT&T (T), Apple's exclusive partner in the U.S., sells the iPhone for $199 with a two-year plan.

While the iPhone has a unique multi-touch screen that lets users use two fingers at once for various gestures when using applications like the Web browser, a common criticism among its users is that typing on the iPhone is tricky because there's no tactile feedback. In RIM's case, the Storm's screen is "clickable," essentially one big button, creating the tactile sensation that makes virtual on-screen buttons more like real buttons. On the other hand, Apple's screen boasts multi-touch capabilities that mean it can register as many as 10 touches simultaneously, giving the software applications a lot of flexibility.

Storm Suits More Carriers Than iPhone

What helps make the Storm's screen work is a $15 screen overlay device from Synaptics (SYNA), a maker of touch-interface technology that at one time supplied some of the click-wheel technology used on Apple's iPod music players. Andrew Rassweiler, teardown manager at iSuppli, said the device used in the Storm is a first for Synaptics. "It seemed for a while that Synaptics was getting edged out of phones, but now we think we're going to see more of these in other phones," he says.

The most expensive component in the Storm is a $35 chip from Qualcomm (QCOM) that may give it an edge over the iPhone. Currently the iPhone only works on so-called GSM-GPRS technology-based wireless networks, which in the U.S. are used by carriers including AT&T and T-Mobile, a unit of Deutsche Telekom (DT). The other two dominant wireless service providers, Verizon Wireless and Sprint Nextel (S), employ a technology called CDMA. There is as yet no version of the iPhone that works on a CDMA, while the Qualcomm chip gives the Storm the ability to work on either network type, Rassweiler says. "RIM can sell the same phone to all major carriers around the world," Rassweiler says. "Apple can't do that with the iPhone yet."

Buying from Qualcomm is a departure for RIM, which usually uses chips from Marvell (MRVL). While that makes it easier to manage the phone for carriers with different needs, putting one chip in charge of so much can have some drawbacks, Rassweiler says. "You're burdening one processor with all the important tasks," he says. "That can ultimately slow things down when push comes to shove."

The Storm has at least one other advantage over the iPhone: It sports a better camera. Rassweiler says it's not clear who built the full camera module assembly; he estimates it added about $13 to the cost to build the Storm. But Omnivision (OVTI) supplied the key camera sensor chip. The camera takes pictures at a resolution of 3.2 megapixels vs. the iPhone's 2 megapixels. It also has an auto-focus feature, which the iPhone camera lacks.

Hesseldahl is a reporter for BusinessWeek.com.

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