April 24th, 2017

Samsung Galaxy S8 – What do people like and what does it cost to make?

Rather than spending hours reading through comments from lovers and haters of the new Samsung Galaxy S8 phone, we cede to a survey done by Morning Consult, a DC based pollster who ran a survey earlier this month (2,202 respondents) focused on smartphones generally, and more specifically on how consumers respond to each feature on the new phone.  Starting with the brands themselves, the data indicated that on an over basis, Apple (AAPL) edged out Samsung Electronics (005930.KS) by 3%, within a 2% margin of error, but among women, that edge increased to 7%, and strangely, among those respondents who watch (maybe watched) the O’Reilly Factor, the numbers were only slightly different, at 33% for Apple and 32% for Samsung.

Smartphone Brand Ownership - Source: Morning Consult April 2017

More detail reveals what features make consumers more likely to buy the Galaxy S8, hopefully yielding similar results to Samsung’s expectations, with ‘waterproofing’ being the most important draw, and the curved edges being the least (does this bode poorly for flexible phones?).  Given that getting older smartphones wet was a major cause for invalidating the warranty and/or getting a new phone, likely before all payments were made, it is understandable that consumers would be most inclined to want this feature, but Bixby, at 37%, is certainly going to feel a bit distraught after the daily fanfare that AI has been receiving from the media.

Consumer Feature Set Importance - Source: Morning Consult

However, a teardown of the S8, as it appeared in the Korean market, reveals considerable detail as to the cost structure of the phone, with a BOM of $301.60 and manufacturing cost of $5.90, for a total cost of $307.50.  This is considerably higher than previous models, $43.37 higher than the Galaxy S7, and $36.29 higher than the S7 Edge, which is closer to the S8.  The 5.7” OLED display, which includes touch, represents 28.2% of the BOM, which compares against the Galaxy S7, where the 5.1” display cost $55 and represented ~22% of BOM, and the iPhone 7 where the display cost $43 and represented 19.6% of the BOM.  The unsubsidized Galaxy S8 64 GB version sells for ~$720. 
We note that the versions of the phone that will be sold in the US and China will use the Qualcomm (QCOM) chipset, while other countries will use the Samsung Exynos chipset.  We note also that Samsung has taken a more conservative view of the battery after last year’s Note 7 meltdown’s, with a less dense 3000mAh battery for the S8.

Samsung Galaxy S8 Cost Estimates - Source: IHS Markit