Technology

What the Palm Pre Cost to Build


When the Palm Pre first hit store shelves on June 6, it took no time for analysts to take the device apart.

Among them was Andrew Rassweiler, director and principal analyst for teardown services at iSuppli, a market research firm based in El Segundo, Calif. His mission: to find out which suppliers made the smartphone's innards and come up with an estimate of how much it cost Palm (PALM) to build it.

Rassweiler and his team estimate that it cost more than $140 to build the Pre, and possibly as much as $160. While that figure remains preliminary, it's already higher than an initial estimate of $138, issued in April before Palm released the Pre. Palm had no immediate comment on iSuppli's analysis.

ISuppli takes consumer electronic devices apart and estimates the cost of its various components—including chips, displays, and packaging—to come up with its so-called bill of materials. Once you know a product's bill of materials, you can more closely estimate how profitable the device is on a per-unit basis.

a first for a texas instruments chip?

The main cost driver in the Pre, according to iSuppli's analysis, is the display. In the unit that iSuppli used for its analysis, Sony (SNE) supplied the 16-million color 320-by-480 pixel liquid-crystal display. It's likely that other companies are supplying LCD displays to Palm as well.

Attached to the display is a touchscreen module that enables the user to touch the screen with more than one finger at a time in order to conduct "pinch" and "spread" motions that make items appear larger or smaller on the screen. It's not clear which company supplied this module, Rassweiler says. Candidates include Germany's TPK/Balda, which supplied the same technology for the first iPhone in 2007, and privately held Touch International, based in Austin, Tex.

"The supply chain on the display is very similar to that of the iPhone," Rassweiler says. A chip from Cypress Semiconductor (CY) controls the entire display assembly, for a combined cost of $40.60.

Other big winners in the Pre are chipmaker Texas Instruments (TXN), whose OMAP 3430 applications chip powers the phone's software features. It's the first time this chip has been seen in a handset analyzed by iSuppli.

pre's large memory is a surprise

Rassweiler estimates the applications chip's cost at $14 to $15, a few dollars higher than the $11 originally expected. TI also supplied chips for audio and power management, giving the company a total revenue share of $19.37, iSuppli says.

Wireless chipmaker Qualcomm (QCOM) also has a piece of the Pre. Its MSM6801 baseband wireless chip, combined with two other wireless chips, means Qualcomm's share of the silicon bill on the Pre comes to $18.45. One surprise, Rassweiler says, is that Palm opted not to use a fourth Qualcomm chip to manage the power needs of the other three. That job fell instead to a chip from Maxim Integrated Products (MXIM).

Another surprise lies in the provider of the phone's memory, Rassweiler says. The Pre uses a lot more memory than other phones. Where Apple's (AAPL) iPhone uses one gigabit or less of SDRAM memory, for instance, the Pre uses two gigabits. Japan's Elpida Memory supplied the chips in the unit analyzed. The extra memory is what likely gives the Pre its ability to keep multiple applications open at once, Rassweiler says.

costlier data storage chips

Another type of memory seen in the Pre is NAND-type flash. Used to store data, NAND is common in many consumer electronics applications, from MP3 players such as the iPod nano to SD memory cards used in cameras. It also shows up in the iPhone itself. In the Pre, Palm opted to use a type of NAND specifically made for mobile phones, built with an integrated controller on the chip itself.

Known in industry lingo as eMMC NAND, Samsung sells it under the brand MoviNAND. Others, including Hynix Semiconductor, Micron Technology (MU), and SanDisk (SNDK), sell similar eMMC chips, so the Palm probably has several flash suppliers.

Apple, on the other hand, opted to use garden-variety NAND chips and put the necessary controllers elsewhere. "It's a trade-off," Rassweiler says. "The eMMC chips make it easier to design the handset overall, but they cost more." The 8 gigabytes worth of Samsung chips found in the Pre cost about $17, he says. By comparison, 8 gigabytes worth of NAND flash found in the iPhone 3G cost about $13, but require an additional controller chip.

Other suppliers in the Pre include Kionix which supplied the accelerometer; Murata, which supplied the Bluetooth module that includes chips from Marvell (MRVL) and CSR; and China's Foxlink Group, which provided the USB charger.

Hesseldahl is a reporter for BusinessWeek.com.


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