A report by hardware analysis firm iSuppli found out that that bill of materials (BoM), that is the total cost of components, of the Google Nexus One is roughly $174.
The smartphone, which was released last week, costs $529 unlocked, which means that the gross profits after components are accounted for is around $350.
The costs though do not take into consideration other significant factors such as the actual cost of manufacturing, the packaging, marketing costs, the development of software - Google Android is free - and other related costs such as accessories and royalties.
Out of the 17 or so components that make up the Nexus one, the Qualcomm Snapdragon processor accounts for around a sixth of the price or $30.50.
The 3.7-inch AMOLED display, manufactured by Samsung comes next with a pricetag of $23.50 (adding capacitive multitouch features increases the price to $41) followed by a multichip package, again from Samsung comprising of a 4Gbit NAND Flash and 4Gbit Mobile DDR DRAM memory for $20.40.
The digital camera, a five-megapixel model with autofocus, costs only $12.50 while the 4GB microSD card comes in at a whopping $8.50, significantly more than what you'd expect to pay in retail.
Google manages to keep costs low by slashing the amount of non volatile memory onboard. Competing smartphones like the iPhone have up to 32GB onboard which adds to the cost.
But the search giant did not forego the cost of having a machined aluminium unibody which greatly increases the overall quality and makes it both sturdy and resistant.
HTC might be playing with fire here as strong sales of the Nexus one could hamper the sales of its own Android-based smartphones (Hero, Tattoo etc) but it could be a matter of divide and rule. In effect, HTC could be replicating the techniques that consumers can find in supermarket ranges where products from the same stable are often rivals.