Why is the $299 OnePlus One so cheap? Because they're selling it at cost

There were many who doubted that OnePlus could deliver on its promise to deliver a high-end device at a low price, particularly after the company said it would be made available for under $500, before later revising that downwards to under $400.

And yet, the company finally unveiled its long-awaited One with a price tag of just $299 for the entry-level 16GB model (and $349 for the 64GB version) – a remarkable price, given the device’s flagship-class specs. The OnePlus One includes a quad-core 2.5GHz Qualcomm Snapdragon 801 processor, 5.5-inch display with 1080p resolution, a 3100mAh battery and 3GB of RAM, along with a 13MP six-lens rear camera and a 5MP cam up front.

Those specs put the One up against the likes of Samsung’s Galaxy S5 and the Nokia Lumia Icon – handsets that cost almost twice as much. So just how on earth does OnePlus do it?

The answer is that the company isn’t making a profit on the devices at all, as its CEO, Pete Lau, explained to TechRadar. “We are selling the phone at cost,” he said. “We are able to do that by redistributing our costs to better benefit the user.”

He added that the company is taking a somewhat different approach to marketing the device, compared with larger manufacturers. Samsung, for example, spent an astonishing $14bn on worldwide marketing last year, which International Business Times reported was the largest proportional advertising spend of any company in history. Needless to say, a start-up smartphone brand with just one device can’t compete with that kind of dough.

“Rather than put money towards a large marketing budget,” Lau said, “we are focusing on online marketing and community interaction. Rather than working with retail partners, we rely on selling the device online." 

The company's approach to marketing and retail has caused some headaches so far, however. Those who wish to purchase the device cannot do so unless they have an invite, which can only be acquired from someone who has already purchased the handset, or by entering 'contests and promotional events' on the company's forums and social media channels. As we reported previously, this 'invite system' has already been met with considerable backlash from the community, but the company hopes to increase availability of the device in late June. 

Source: TechRadar | image via OnePlus

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If I can get one of these to Australia (and it fully supports the Telstra 3G and 4G networks), I'm all over it. I'm waiting for my iPhone to die before I switch back to Android, but if I can import this one cheap enough I'd leap at it.

I hope it works out. The only way (at least in the USA) to break the stranglehold that Apple, Samsung, to an extent HTC have along with the carriers, keeping people locked into a contract, just to get a new device by keeping the off contract price WAY out of bounds for the average consumer. Not only that, if you take a look at the hundreds of different types of devices in the world, very few make it to the USA because of agreements between carriers & device makers. Even though it is cheaper (non family plans) to buy a device full retail, and go on a MVNO or just a simple month to month plan, most people don't want to shell out 700 to 1000 dollars on a device. By seeing a device at a major carrier, with a retail price in the astronomical range, then seeing "199.99 on contract" the low information consumer thinks they get a bargain, but in the end, they end up paying WAY more. If Xiaomi , Oppo, OnePlus can put a dent in the "flagship" pricing scheme, consumers will benefit with lower price options.

There's no reason to suggest they haven't licensed the appropriate patents from their respective companies...

What the Oneplus One shows us is how companies are ripping off us consumers. For example their able to sell the 64gb version for $350 over their 16B version which sells for $300. Apple adds 100 bucks everytime you double up on the storage. 16GB $649, 32GB $749, 64GB $849. $200 profit their making on something that shouldnt cost more than $50.

I've said that for years. It's not just Apple, but they're by far the biggest example. Memory is cheap. Plain and simple. Just higher margins because people need it. Or at least think they do. I've never had to expand the memory in my phones, but I don't use it for a music player, either. I do install a LOT of apps and have been fine with 8-16GB.

farmeunit said,
I've said that for years. It's not just Apple, but they're by far the biggest example. Memory is cheap. Plain and simple. Just higher margins because people need it. Or at least think they do. I've never had to expand the memory in my phones, but I don't use it for a music player, either. I do install a LOT of apps and have been fine with 8-16GB.

Yeah Other companies do it as well I just used Apple because I know they have a 3 stage process which is more expensive than all the others. The other companies like HTC charge like a 100 more for the 64GB versions of their phone.

warwagon said,
I just scanned the article, but didn't see an answer as to which carrier will this work on?

I just looked at the specs, and as far as I understand, it can do both AT&T and T-Mobile. It will be sold unlocked. I'm intrigued!

warwagon said,
I just scanned the article, but didn't see an answer as to which carrier will this work on?
From the specs, it has very wide coverage of bands in GSM/WCDMA/LTE, so at least in the US it would work on both AT&T and T-Mobile very well. It should also work in nearly every other country on one or more carriers.

This phone is getting a lot of free press, and I'm sure a lot of word of mouth - I hope it lives up to the hype, and I can replace my Optimus G :)

Well, it says "Never Settle" but only offers Android OS as an option. I don't want to settle for that. Since WP is free to license, I hope they'll have that as an option at some point.

Enron said,
Well, it says "Never Settle" but only offers Android OS as an option. I don't want to settle for that. Since WP is free to license, I hope they'll have that as an option at some point.

QFT +1

Raa said,

So does AMD. So I bought Intel.

Why would you choose Intel over AMD when it comes to GPU game bundles? (that's what the tagline refers to in their case)

Luc2k said,

Why would you choose Intel over AMD when it comes to GPU game bundles? (that's what the tagline refers to in their case)

It was slightly tongue in cheek...

Luc2k said,

I understood your intention, but nvidia would have made more sense.

True. I always buy NVidia too. :)

They are definitely making a profit, but they are probably accepting a smaller profit margin as they work to build the brand. Selling "at cost" can be a very misleading term (as you can roll your "profit margin" in as a "cost")...

I would have considered picking one up just to see what it is like if they didn't do an invite system (I don't work to spend my money) and it wasn't so big.

Chinese companies like Oppo and Xiaomi manage to launch phones at similar prices, which is pretty much the exact cost it took to make the phone itself, because they hope to hook you in with their app store and services that they milk you for.