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Phone prices have been totally skewed for a long time, and most new high-end phones have cost $600 only because that's what they were expected to cost. The release of the first iPad made that obvious, because it was the same mobile components as the iPhone, a bigger battery, a larger screen, and more aluminum and other materials for the case, but still cost $100 less. And the iPad was still profitable! The only reason companies continue to get away with $600 phones is that carrier subsidies distort the market. The notion that there's some mythical "correct" price that manufacturers used to charge that's now being undercut by Google is ridiculous. This is a market correction.

In certain situations there is an engineering cost to miniaturization of components.

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