Fairphone is a small company with a big idea: produce smartphones using ethically-sourced materials and invest some of the profits from phone sales in programs to help the workers that build the phones.

But it’s not cheap to do that: the company’s second smartphone is expected to sell for 525 Euros (about $600 US). That’s a flagship-style price tag for a phone with 2014-era flagship-style specs.

Wondering where the money goes? Fairphone has provided a cost breakdown for the Fairphone 2.

fairphone 2 breakdown

About 60 percent of the cost actually goes to the materials and manufacturing of the phone itself. The next-biggest expense is taxes and reseller margins… although that figure will vary from country to country. Fairphone estimates a Value Added Tax rate of 20 percent for sales in Europe, but that’s not the exact rate for all countries in the EU, and the company plans to expand sales beyond Europe, which means some customers may pay lower taxes and no VAT.

A much smaller amount of money goes to paying for operational costs of the Fairphone company and investments in technology and social programs including initiatives to obtain ethically-sourced materials from conflict-free regions.

It’s worth noting that these numbers are based on an estimated 140,000 phones sold. Costs could go up if fewer phones are ordered, or down if more are ordered… but that number is pretty small compared with the number of iPhones, Samsung Galaxy phones, or other big-name phones that are produced each year. That means a company like Fairphone doesn’t have the same economy of scale as a bigger company: it’s generally cheaper (on a per-phone basis) to make a million devices than a thousand.

Of course, knowing why the Fairphone is priced the way it is might not necessarily make the price more palatable: $600 is still a lot of money to pay in 2015 for a phone with a Qualcomm Snapdragon 801 processor, 2GB of RAM, 32GB of storage, an 8MP rear camera, and a 2420 mAh battery.

The phone does have a few features that don’t seem too dated, including a 5 inch, 1920 x 1080 pixel display, 802.11ac WiFi, 4G LTE support, Bluetooth 4.0, a microSD card slot, and dual SIM support.

The Fairphone 2 also has a modular design, with options to replace or possibly even upgrade components including the camera, screen, microphone, and battery.

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23 replies on “What it costs to build (and sell) Fairphone’s ethical smartphone”

  1. Amazing how some people have such a visceral hatred for aspiring to create a product that doesn’t despoil the environment and doesn’t exploit the workers who make it.

    And very sad.

    1. Some people like being ignorant, and some also have no idea what coltan is and that it’s mined by slaves in the Congo. The world’s a messed up place and unfortunately some people lack sympathy for the harm some people go through all for resources and power.

  2. ok that last little footnote might be one of the most important parts of the article.

    1. Seriously, i bet that the fact that it’s truly modular would get more clicks than the original title

  3. I like the concept because the replaceable battery removes the rampant and crimminal planned obsolescence practiced by most manufacturers today. I am fine with a device that’s two or three years old and I’ll hand it down when I am ready to upgrade. (Hear that Apple Sheeple camping out waiting in line?) But there is something wrong with the high materials cost. Maybe they don’t have the volume to get the economies of scale savings seen by larger manufacturers. Also, significant parts are previous generation. I would think they would cost less this year. I would like to see an itemized BOM with costs. Or maybe send it to iSupply for an independant tear-down and analysis

  4. Concerning those “2014-era flagship-style specs”: they would still be good enough for 90% of all users. What I would like to see from Fairphone, though, is an alterantive OS. F.i. Sailfish, FF OS, Ubuntu…

  5. this could possible be the biggest ripoff in history,,what crappy specs..a 179 dollar moto G puts this to shame.

    1. It is a ripoff if you’re only interested in specs. The goal of the fairphone, as i understand it, is to buy things from companies who treat all the employees in their supply line (material sourcing/manufacturing and the like) like people, its rather expensive to not use forced/slave labor.

      Honestly, the most expensive part of the process is probably verifying the working conditions.

      1. I could see how they might be able to do that with custom parts like the case, frame and battery. But for the electronics (memory/cpu/gpu/screen) I just don’t see how they would have any real control over the component manufacturers, and would be surprised if there’s that much difference between manufacturers. Maybe you could accomplish a little by looking at country of origin, but I doubt it.

  6. what next the first global warming inspired smartphone…they can call it the Algore bs 6s

  7. The first PC smartphone,,,how silly…and their price is unethical…..DOA

  8. I think project Ara will be a much better module phone, if it ever comes to the market….

  9. Interesting there’s no mention of what would be paid to people who would assemble these things.

    1. It is there, it’s the Manufacturing & Assembly line, if I understand the breakdown correctly.

        1. What their manufacturer pays… it will not be much more than average. And the reason for this is obvious: (much) higher salaries would make this phone much more expensive – and than, even less people would buy it. Fairphone can just take little steps…

          1. If that’s all it is then this sounds like complete BS. The one thing that they can easily control is how much is paid to employees that assemble their own product. They can’t control how much is paid to people who produce components. I’m not even sure what “ethically sourced” means when it comes to something like a touch-screen. That they don’t buy product off the back of a truck in a dark alley?

          2. Thats no BS. They can control this, yes, but this would – as I wrote – make the phone way more expensive. And if not enough people can afford it, the whole project will die. Therefore, they have to find a middle way. And btw: at least, they do invest in a welfare fund for workers in China (approx. Euro 2,30 per phone, which might create a total of approx. Euro 322.000).

            As for ‘ethically sourced’: see f.i. this:

  10. I had NO IDEA someone was doing what I was thinking about for so long. The phone isn’t supposed to be cheap, as a matter of fact it could twice as much only to make sure that the materials areally are sourced ethically and working conditions in the manufacturing plant are at a properly high level. Most people aren’t going to care, but there’s the few who do care and it’s a good choice for them. Congratulations to Fairphone for tackling the issue.

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