You would think that Chinese phone makers are dipped in gold, having secured contracts with all of the leading brands. However, the truth is somewhat different. From one billion devices they are expected to make this year, companies which make devices will keep just 1%. You got that right – the rest goes to the major companies/brands which actually sell these products to the users (and operators).
To be fair, we did know that modern smartphones make decent margins for companies designing them, but we didn’t know that the production costs are so low. Sure enough, we would have to add shipping & handling, packing, customs and other related costs to get to the real per-unit cost of making a phone in China. Then add marketing, education, software development and you get to the final price that still leaves room for solid margins.
According to China Times, this situation — when companies who actually make devices earn so little — is causing some concern inside the industry, though we can hardly see that changing anytime soon. If Chinese manufacturers aren’t satisfied, major brands can always move their production elsewhere. Like it or not, it’s just the way modern world works…
[Via: Unwired View]