Talking tech since 2003

While on stage at D11 during his interview with Walt Mossberg, Motorola (now owned by Google) CEO, Dennis Woodside went on the offensive about the prices of smartphones.  Woodside stated, “Every product in technology…the price has gone [down] because component costs have fallen.  Those companies [smartphone makers] can earn 50 percent margin on those products, we don’t necessarily have the same constraints.” [emphasis added]

He went on to say, “One of the areas that we think is really open for Motorola is building high-quality, low-cost devices.  The price of a feature phone right now is about $30 on a global basis, the [wholesale] price of a smartphone is $650? That’s not gonna persist.”

At face value, it may not seem like much of a statement, if anything it may be an obvious one — as technology becomes cheaper so do the products.  However, the part I emphasized, where he says “we don’t necessarily have the same constraints,” is not what I would like to hear if I were Samsung, HTC, or any Android smartphone manufacturer.

While Motorola is supposedly operated as a separate entity from Google, it seems [based on that statement] like Google is more than happy to allow Motorola sell devices at cost if it means that Android eats up even more marketshare.  While Google doesn’t make any money directly from Android itself, it does make money from people relying on its services such as search, Google Drive, Google Play, etc.  And obviously, the more people who are using Google services, the better.  This strategy isn’t unheard of, in fact, it’s the same strategy used by Amazon with its Kindle and Kindle Fire line of products — get people on your hardware, and into your ecosystem, so they have to rely on your services.

If Motorola offers a high quality smartphone, with top of the line (or close to) specifications running the latest version of Android, at a price that cannot be matched by Samsung or HTC, people will likely choose the Motorola smartphone over the others.  I mean why pay more for essentially the same thing?

Right now, the Samsung Galaxy line of products is by far the most popular Android product out there, which also means if Samsung does well, so does Google.  The relationship between the two companies was even described as “symbiotic” by Android and Chrome OS chief, Sundar Pichai.  So it will be really interesting to see how that relationship evolves if Motorola starts to cut into Samsung’s profit margins.

We already know there are other mobile operating systems being developed — Ubuntu Phone OS, Firefox OS, and Tizen (backed by Samsung, Intel, and others) are just a few of the newcomers on their way to market, and with the number of choices increasing for smartphone manufacturers one wrong move by Google could pose some problems for the continued expansion of Android.

Mobile is really starting to heat up.

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