Cost breakdown of the Fairphone 2

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At Fairphone, transparency is one of our core principles for creating fairer electronics. Besides digging deeper into the supply chain and gaining a better understanding of industry practices, we also want to give you the inside scoop on how we do business.

Since we started taking pre-orders in mid-July, we promised to provide you with a cost breakdown of the Fairphone 2 so you can see what your purchase supports. And we’re finally done crunching the numbers! Keep reading to find out where your money goes if you buy a Fairphone 2.

See how your money is spent

The cost breakdown for the Fairphone 2 is not just about the phone. We believe that our ambitions for a more responsible economy should be evident in every aspect of what we do. This graphic offers a glimpse of everything that goes into running our business, from developing, manufacturing and marketing our product to investing in programs that contribute to fairer electronics supply chain.

Explore our interactive version of the Fairphone 2 cost breakdown.

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Cost Breakdown of the Fairphone 2
Download the complete Fairphone 2 cost breakdown.
Download für die komplette Fairphone 2 Kostenaufschlüsselung auf Deutsch.
Téléchargez l’analyse complète du coût du Fairphone 2 en français.

We’ve done our best to be as accurate as we can, but this remains a projection. The cost breakdown should be viewed as an exercise in transparency and not an official accounting exercise or annual report. Some of the costs we are completely certain, of course – for example, the required certifications. For others we’ve made an estimate based on input and our experience in the past. Finally, these figures are based on selling and producing a total of 140,000 phones – which includes expanding to markets beyond Europe – and an average exchange rate of 1.08 dollars to the euro. If we surpass that number of sales, certain costs will decrease per phone (like software development) while others may actually increase (like expanding our customer support team, perhaps).

What you’re supporting when you buy a Fairphone 2

When you buy a Fairphone 2, your investment supports more than the production of a smartphone. It also covers the basics of running our business and contributes to creating positive impact throughout the supply chain as we work to expand the movement for fairer electronics.

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Evolution of how we put each euro and dollar together.
So where exactly does all your money go? We’ve attempted to divide it into a few logical categories:

Average consumer price: €525
This includes taxes, and is based on an average European VAT rate of 20%. However, very few customers will pay exactly €525 – the actual VAT rate varies per country, ranging from 17% in Luxembourg to 21% in the Netherlands.

Taxes and reseller margin
A considerable portion of the phone’s consumer price (nearly a fifth!) goes to taxes. This includes the value-added tax (VAT) as well as WEEE, a European Community directive which sets targets for the collection, recycling and recovery of consumer electronics. It also covers margins for our reseller partners to ensure that they can pay for costs and services related to distributing the phone as well as receive a marginal profit. Once the taxes are paid and these margins are taken into account, we receive an average of €407 for each Fairphone 2 sold.

Product
The majority of the phone’s retail price (65%) is dedicated to making the actual product. This process includes everything from manufacturing (components, assembly line rental and labor) to royalties and logistics (like packaging and insurance). Because these manufacturing and assembly costs are not yet fixed, this is still an indication.

These are the costs our manufacturing partner Hi-P estimates for these activities, which they are responsible for paying directly, eg the workforce, assembly line and equipment. To understand more about wages and our projects in this area, please read about the Social Assessment Program at Hi-P and overview of the Worker Welfare Fund. The modular design of the Fairphone 2 does not represent a major increase in the materials costs versus a more “traditional” smartphone. However, the size of our company significantly impacts our expenses. As a small manufacturer with a limited production run, materials represent a larger-than-average portion of our costs.

The modular design of the Fairphone 2 does not represent a major increase in the materials costs versus a more “traditional” smartphone. However, the size of our company significantly impacts our expenses.

Our product costs also account for projects and premiums designed for social innovation projects like contributing to a Worker Welfare Fund at our production partner in China and an e-waste collection program in Ghana.

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Finance Director Fabio checking over the numbers.
Investments
Fairphone invests in product development as well as social innovation. For the Fairphone 2, we invested a considerable amount to create an original modular design that incorporates our values of openness, longevity and repairability. Besides supporting the creation of our phones, many of our internal teams also research and manage projects that influence a more ethical supply chain. We invest in continuing existing projects like sourcing conflict-free tin and tantalum from the Democratic Republic of the Congo, as well as exploring new projects like exporting conflict-free tungsten from Rwanda and integrating Fairtrade gold. Compared to the other figures in this overview, the total of this investment is divided over 250,000 phones, which we expect to sell over a period of two to three years.

Operations
Part of the income from our phones covers operations, including the essentials for marketing and selling our product. It also includes many of our internal costs, like our core teams, office space and even the monthly electricity bill. To avoid excessive spending in this area, we handle customer support ourselves and thanks to the enthusiasm of the Fairphone community, we can limit advertising costs by relying on word-of-mouth marketing and speaking engagements.

Net result
After accounting for all of the costs above, the net result is what we have left: €9 for each Fairphone 2 sold. We reserve this remaining profit for unexpected costs or additional investments in our social impact programs.

Pre-order the Fairphone 2 and show your support

The information in our cost breakdown is a simplified representation of all the work (and money!) that is required to make our latest phone and run our business. But we wouldn’t have gotten this far without the support of the first 60,000 Fairphone owners. Over the past two years, we’ve been able to grow our organization and expand our ambitions without relying on external investments… and it’s all thanks to you!

And now, we would like to ask everyone else to help us take the next step. To kick-start continuous production and stay financially independent, we need to sell 15,000 phones by 30 September – and we’re almost there! So if you’re in the need of a new phone, head over to our online shop and pre-order the Fairphone 2. Or if your current phone (or Fairphone 1) is working just fine, then please share the movement with friends and family.

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The team celebrates passing the 10,000 mark of our Fairphone 2 crowdfunding goal!
Because deliveries start from November, we realize that being one of the first backers is a major commitment. To show you how much we value your support, we’re putting the finishing touches on a special edition Fairphone 2, available only if you pre-order by the end of this month.

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