All summer long, the Web was filled with rumors about a cheap iPhone 5c that would take the developing world by storm, breaking the $200 price barrier while providing the true iOS experience. The rumored iPhone 5c did come to be, but it turned out to be just another rich man's phone, starting at $500, which in countries like Brazil, South Africa, Argentina, Indonesia, India, Russia, and China is a small fortune.
Now, there's the Moto G from Google's Motorola Mobility subsidiary. It costs $200 and runs the current Android 4.2/4.3 Jelly Bean version, with 4.4 KitKat promised soon -- not the obsolete 2.2 Gingerbread or 2.1 Froyo used by most cheap Android smartphones outside the United States. It's become the new hope for the developing world to get rich-world capabilities at prices they can afford. All the attention has been on the Moto G, but Samsung has had a similar offering, the Galaxy S III Mini, for a full year now. (Samsung has a Galaxy S 4 Mini, but it's not cheap, starting at $400.)
Americans don't really know what their smartphones cost because most carriers subsidize the price. Thus, we think an iPhone 5s or Galaxy S 4 costs $200 or $300, or an iPhone 5c or Droid Ultra costs just $100. The truth is they typically cost $200 to $400 more than the price we pay; the carrier wraps the rest of the cost into our monthly phone charges as a hidden surcharge. By contrast, the rest of the work pays full price for their devices.
There's often a belief that smartphones cost so much because Apple's iPhone set a high bar as a premium product; cynics say it rips off its style-conscious customers by putting pretty shells around common components. That's BS -- but it's true that Apple's physical costs are about half the list price. The same is true for Samsung's Galaxy S line, whose list prices are about the same as Apple's models and whose devices have similar bill-of-materials costs.
Apple and Samsung could reduce their profits -- and, thus, the costs -- on those devices, but they'd still be too expensive for the developing world. Other manufacturers like HTC and Motorola can't cut their profits because they don't have any -- Apple and Samsung are the only two major smartphone makers even in the black.
The answer has to be to make smartphones less capable so that their components cost less to buy and assemble. That's what most manufacturers have done to serve the developing world, resulting in horribly unusable smartphones like the ZTE Open that, compared to having nothing, nonetheless attract the mass market in those poor countries.
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