Today, a report from Reuters quoted Google’s Senior Director of Android Global Partnerships John Lagerling explaining that the decision was based on the ability to innovate faster and not necessarily cost:
“We wanted to innovate fast. This is the first end-to-end hardware product that Google has ever put out,” said John Lagerling, Google’s senior director of Android global partnerships.
The cost of building the orb-shaped Nexus Q, a cross between a streaming video box like Apple TV and a stereo amplifier, “was not the No. 1 priority,” Lagerling said. “We wanted to see if we could do fast (design iterations) rather than having our engineers fly across the world.”
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“This is not this big initiative that things had to be made in the USA,” he said.
The model of building locally to facilitate faster design iterations is one employed by retailers in other industries. Notably, it has been reported Spanish clothing retailer Zara takes just two weeks to get designs to store shelves, compared with an industry average of 6-months, due to local manufacturing. While the previous report from NYTimes claimed Google said the Q’s $299 price tag is in part because of manufacturing in the United States, IHS iSuppli analysts provided Reuters with a little more insight:
Lagerling declined to say what it was costing Google to make each Nexus Q, but IHS iSuppli analyst Andrew Rassweiler estimated the company was spending $150 on components per item. Rassweiler cautioned that he had not personally examined the product.
Dinges estimated that a high-volume Asian manufacturer might have charged Google about $8 to assemble each device, while a smaller-lot U.S. contract manufacturer might charge double that amount. The device sells for $299.
Google is apparently hoping that consumers are willing to pay more for a device that is “Made in the USA”, although it told NYTimes last week that there was no plans to include that phrase in marketing efforts. Google also said it expects to drop the price of Q as it increases manufacturing volume. With Google jumping head first into end-to-end designing and manufacturing of its own hardware, this certainly appears to be a long-term strategy, indicating many more products should be expected from Google hardware.