When it comes to Google’s Nexus line of devices, the profit margins are razor thin to allow for the aggressive pricing. This strategy has worked very well for Google pushing Nexus devices up the aspirational queue. So it would only make sense to use the same approach for one of Motorola's phones, and that's exactly what Google has done with the Moto G.
The Moto G, which will launch in India next month, has a price tag of $179 for the base model (8GB) and $199 for the 16GB model. That’s a terrific price point, when considering the specs. But a look at Wall Street Journal’s break down of the component parts of the phone shows it took Google $123 just to put it together. Research firm TechInsights told WSJ that Google has a likely operating profit margin a quarter of what other manufacturers expect from a similarly-positioned device.
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Add to this the manufacturing charges, labour costs, import duties, regulatory test fees and other such costs, the profit margin goes down even further. The firm estimates that Motorola takes away around 5 per cent in operating profit on each Moto G. If you look at the likes of Samsung, this figure would be about four to five times the Motorola number. For example, TechInsight says, the operating profit on a device of the calibre of Galaxy S3 mini is around 20 per cent.
Obviously, the higher up you go in terms of product positioning, the margins increase. Each Galaxy S4 gives Samsung an estimated 28-percent margin. The margin is wider for Apple, which as greater control over components. Each iPhone 5s costs the company around $200 to make, when the actual unlocked price for the base model is $649. That’s a huge chunk. This inforgraphic prepared by WSJ shines light on the estimated operating profit for some phones in comparison to the Moto G.
The reasons behind Google replicating the Nexus strategy for the Moto G are not yet clear. Considering the global bent to the launch of the Moto G, it’s presumably been adopted to aggressively price the phone for emerging markets.