Why Google Glass costs $1,500 now and will likely be around $299 later (Updated)

Google Glass Eliza

If the $1,500 price tag for Google Glass is a budget buster for you, don’t give up hope just yet. When the wearable gadget arrives on the consumer market it could cost as little as $299 according to Topology Research’s Jason Tsai, as reported by The China Post and Phone Arena.

Obviously, that would be a drastic price drop from the current cost of Google Glass, which was limited to roughly 8,000 Glass Explorers. I think Tsai is far more right than wrong, however, for two reasons.

motoactv-featuredFirst, let’s consider the cost of the components in Google Glass. Outside of the special display and bone conducting speaker, just about all of the same parts are in the Motorola MotoActv smartwatch I bought in early 2012.

It has all of the same sensors, 8 GB of flash memory, a touchscreen, GPS, Wi-Fi and Bluetooth radios. That device cost me $199 and I’m sure the parts for it today are priced far less. And that $199 price tag had some profit margin built in, so the actual bill of materials was likely in the $100 to $150 price range.

Adding in the display to Google Glass will contribute between $30 to $35 in costs, says Tsai. He also notes that this component “will account for the biggest share of the total cost in the near term,” meaning the bone conduction speaker would cost even less to add. It’s also worth a mention that Google recently took a 6.3 percent stake in Himax, the display supplier for Glass: That could help build out production facilities and lower the cost per unit.

Let’s go with the worst case though: $150 for all of the internal parts plus $35 for the display and another $40 — likely a high estimate on my part — for the speaker component and a camera sensor. That brings us to a conservative $225 figure. Of course there are costs involved for the actual wearable part as well as production. Even so, $299 doesn’t sound out of the realm of possibilities. We’re not looking at the chips and memory that are needed to make a $600 smartphone here.

The second reason I think Tsai has a valid point is that $1,500 is clearly an artificially inflated price for what Google Glass is. I’m not suggesting it isn’t worth it for the early access, but Google did something smart when it decided to pick a price. The $1,500 cost weeds out the potential Google Glass audience so that the only people who will spend the money are those sincerely interested in wearables and mobile technology.

Google Glass

This reduces the chance of people using Glass and simply dismissing it because they don’t understand it. Why kill a product with bad reviews when the reviewers may not understand the technology, its potential impact, or the fact that it’s a work in progress?

Google can’t afford that situation with Glass because both the wearable gadget market is starting to take off, as is contextual computing. Glass is a big bet for the company as it looks to expand the types of user data it can gather. That doesn’t mean, however, that Glass will be a big budget item when it goes on sale, perhaps as early as late 2013.

Update on Aug. 9, 1:49pm PT: After publishing this story, I heard from sources close to Google suggesting that for the consumer launch time, the price of Google Glass won’t be as low as $299 but less than $1,500.

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