Google is facing yet another controversy surrounding its wearable tech Google Glass after reports that the company is selling the product for profits that are unseen in the business world. Based on a new report, the Glass tech costs only $152 to make, yet Google is looking to sell each product for $1500, a hefty profit margin that many are beginning to question.
IHS Inc. says that the product, which has sparked controversy across the country, and especially here in the Bay Area - where a number of restaurants and bars have banned Explorers from donning the headgear while in their establishment - is being priced far above the cost of parts and manufacturing.
"When you buy Google Glass for $1,500, you are getting far, far more than just $152.47 in parts and manufacturing," said Andrew Rassweiler, an IHS senior director. "As in any new product-especially a device that breaks new technological ground-the bill of materials (BOM) cost of Glass represent only a portion of the actual value of the system."
Google disagreed with IHS's breakdown of costs. Still, IHS says that the estimated cost of manufacturing and parts does not take into account the development of the software and tools implemented in the product.
Even while that cost may increase a few hundred dollars, IHS believes that the overall retail cost of Google Glass is far above where it should be. But Google still wants to maintain the price, keeping it as a novelty item for the wealthier out there.
"While we appreciate another attempt to estimate the cost of Glass, this latest one from IHS, like Teardown.com's, is wildly off," a Google spokesman said. "Glass costs significantly more to produce."
Teardown.com had estimated the cost to be nearly half of what IHS has stated.
Most tech products take into account the manufacturing and parts as well as the software and development of each individual product in its pricing, which Google has argued in its defense of the high price tag. This means that even if parts and manufacturing are small, as appears in the case of Glass, the overall price jumps due to the humanpower and development of the technology and apps of each product.
"IHS has noted this before in other electronic devices, but this is most dramatically illustrated in Google Glass, where the vast majority of its cost is tied up in non-material costs that include non-recurring engineering (NRE) expenses, extensive software and platform development, as well as tooling costs and other upfront outlays," says IHS.
