Even so, I cant find an ARM11 chip for less than 10$ on octopart, and in the 700MHz range its more like 20-30$ just for 1 chip. For qty purchases that can come down to 7.50, but thats being REALLY generous. I have trouble believing they can buy a 700MHz (unspecified on their materials and I couldnt get it off their snapshot either) for less than 15$. The headers and other plastic is at LEAST 4$, USB connectors alone are almost 1$ in qty 5000.

Add in the passives and other junk, and leave out the ethernet module and we are talking about a bill of materials of close to $20.

Now add 1.75 for the PCB (qty 5000), 2.50$ for assembly, another $2.00 for testing, packaging and assorted costs (like shipping raw materials and finished goods to and from china, since US assembly and PCB costs are at least 3 times what I noted) and the bare per-unit cost is $25.

Dont forget to factor in costs like - uhh - keeping the lights on in their officepartment - and even if their dev time is free they just cant sell that product for $25 without outside cash subsidizing the whole thing.

In this business, distributors pretty much demand the product at 25-40% discount, so if they want to be in shops and catalogs, you have to factor that in as well.

Consider the raw cost per arduino is probably around 10.50$, they sell 100,000 units a year, and their onboard processor is about 1$ and they have less overall plastic, passives, and other overhead parts than this thing.