IHS Google Glass teardown reveals low component cost, but high NRE value

Although Google Glass sells for $1500, it has hardware and manufacturing costs that amount to just $152.47, according to a dissection of the product conducted by the Teardown Analysis Service at IHS Technology (NYSE: IHS) in El Segundo, CA. But as the IHS teardown shows, that does not mean that Google is pocketing a sky-high margin of 90% on each Glass sale--not by a long shot.

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"As in any new product--especially a device that breaks new technological ground--the bill of materials (BOM) cost of Glass represent only a portion of the actual value of the system," said Andrew Rassweiler, senior director, cost benchmarking services for IHS. "IHS has noted this before in other electronic devices, but this is most dramatically illustrated in Google Glass, where the vast majority of its cost is tied up in non-material costs that include non-recurring engineering (NRE) expenses, extensive software and platform development, as well as tooling costs and other upfront outlays. When you buy Google Glass for $1,500, you are getting far, far more than just $152.47 in parts and manufacturing."

Although thousands of units are in the hands of users, Google Glass is not yet generally available through retail. The pre-mass-market status of Google Glass is evident by examining its design.

"Today’s Google Glass feels like a prototype," Rassweiler said. "The design employs many off-the-shelf components that could be further optimized. If a mass market for the product is established, chip makers are expected to offer more integrated chipsets specific to the application that will greatly improve all aspects of performance, including processing speed, energy efficiency, weight and size. Future product revisions are sure to make strides in all of these areas."

Most of the integrated circuits (ICs) in Google Glass are mature when compared with recent flagship smartphone designs. For example, the Texas Instruments Inc. OMAP4430 apps processor used in Google Glass is made with 45 nm semiconductor manufacturing technology--two generations behind the 28 nm chips used in the latest flagship smartphones. The use of more cutting-edge ICs could yield future Google Glass products that are smaller, lighter, more energy-efficient and less costly to produce than the current model.

The second most expensive single component in Google Glass is also its most defining feature: its head-mounted liquid-crystal on silicon (LCOS) projector display. IHS estimates the cost of the Himax Technologies LCOS projection element at $20.00, accounting for 15% of the total Glass BOM. "The LCOS display is the sinequa non of the Glass," Rassweiler noted. "Just as e-readers wouldnot exist without their e-Ink screens, Glass wouldn't be possible with the LCOS display. The display is pretty slick, providing a near-eye viewing experience that must be seen to be believed."

Texas Instruments components dominate the Glass design and an estimated $37.90 worth of components identified so far in the Glass, representing 29% of the BOM. Glass includes two accelerometers: one from STMicroelectronics and another from InvenSense. The titanium frame of the Glass represents the single most expensive component of the device, at $22.00, or 17% of the BOM. "The frame is just one aspect of how Google is presenting Glass as a premium product," Rassweiler noted. "The quality of the packaging and accessories, along with how the box contents are staged, gives the whole Google Glass experience a very high-end feel and appeal."

SOURCE: IHS Technology; http://press.ihs.com/press-release/design-supply-chain/google-glass-far-more-sum-its-parts-ihs-teardown-reveals