teardown

According to a report due out tomorrow based on a tear-down analysis of both the iPhone 5c and iPhone 5s, each handset costs Apple between $173 and $218 to manufacture.

AllThingsD got their hands on the report from research firm IHS a day early, and provide component and assembly breakdowns for both handsets. If IHS got their sums right, there is a surprisingly small difference in manufacturing cost between the 5c and 5s, making earlier suggestions of higher margins on the 5c seem unlikely … 

Apple spends at least $191 on components to build a 16-gigabyte iPhone 5S. The cost rises to $210 for a 64 GB unit. The cost of assembly adds another $8 per unit, bringing the range to between $199 and $218m [...]

On the iPhone 5C, the lower-priced model known for its colorful outer shell, IHS estimates the cost of components plus manufacturing ranges from $173 to $183 including $7 for assembly.

Though the true consumer cost of the handsets are often hidden by contract subsidies, the retail price of the 5s ranges from $649 for the 16GB model to $849 for the 64GB model, while the 5c runs from $549 to $649 – giving significantly higher margins on the more expensive model.

Some notable take-outs … the single most expensive component array is the display, totalling $41 in parts; the A7 processor comes in at $19 (against $13 for the A6 chip in the 5c); and the fingerprint sensor in the 5s runs to $7.

If you’ve ordered the 32GB or 64GB models, paying up to $200 extra for the privilege over the duration of your contract, you may want to look away now: the cost to Apple of the bump from 16GB to 64GB is just $19.

Of course, component and assembly costs are just two elements of the total costs involved. Distribution and marketing costs are substantial, and there’s of course a huge R&D effort behind each new model, but it’s not too hard to see why the company has been making more money than it can spend.

The company sold more than 9M iPhones in the first three days, with subsequent stock price boost, though the company did not provide a breakdown of sales between the two handsets.

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20 Responses to “Apple’s component costs for the new iPhones leave ‘marginal’ room, fall between $173 and $218”

  1. I guess ‘significant’ is a relative term, they are both right about 69% profit

    /me shrugs

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    • Ben Lovejoy says:

      That’s in percentage terms. In cash terms, it’s up to $631 vs up to $466. Both figures are of course artificial as they are component and assembly costs only, but so far most of the marketing spend has gone into the 5c too …

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      • Exactly. What it means is, that for roughly every $3 they spend to make an 16GB iPhone (5s or 5c) they are going to bring in roughly $10. Doesn’t matter which model it is. Thats the number (cash) they care about. Not whether one brings in more than the other individually. Margin will be even more for larger capacities. Either way, no matter which they sell, they are wildly successful.

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    • When weighed against parts and assembly only. Excluding ROI from talent aquisition, R&D, D&E, shipping, retail & marketing… But yeah, relative indeed.

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  2. i love how it costs 20$ more for Apple to make 64gb iphone, but 200$ more for customers

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    • Stetson says:

      Which is a tool they use to control their overall margins. If they didn’t charge so much for the high end models they would have to raise the prices on the base models to keep their margins the same.

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  3. As the cost of flash storage continues to fall over the next few years I don’t see Apple being able to continue using storage size as the price differentiator for much longer. Perhaps they will transition to various screen sizes or models (as in the 5C) at that point.

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  4. But also dont forget the price of the phone is also paying back the HUGE development costs, prototypes, paying for developers and engineers and then tooling and designing the machines to mass produce all of the components. Not to mention all of the times they have gotten something wrong and have had to start over again. Everything is cheap at a raw materials scale, that high price is ensuring they can afford to do it all over again next time.

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  5. PMZanetti says:

    Spared no expense.

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  6. you guys are also ignoring all the salaries apple has to pay and all the costs towards maintaining its data centre’s for siri and app stores and also keep in mind that the sales person working at the 5th avenue apple store will receive the same hourly pay as the sales person in kansas regardless of their individual sales.

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  7. Max Salganik says:

    ugh… i love the iphone and will not even consider another phone anytime soon but I have to admit that the upgrade cost for memory has always rubbed me the wrong way. 200 to go from 16-64? That was insane when they first started offering the 64gb and its just insulting now. What’s worst is they know many people will want the upgrades with more and more apps/pics/videos being stored on peoples phones. I don’t mind paying premium for an awesome phone but getting raped for cheap ass flash storage is malicious… not cool Apple even though you know you can get away with it for now :(

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  8. So when I pay them a thousand f*cking dollars for my 64GB phone …

    At what point does Apple’s obscene margins start to bother people? They make four to six times the margin of any other computer or phone manufacturer. And they still think they “can’t” make an inexpensive phone for people who need one? Cause that’s “junk”?

    F*ck Apple and their obscene profits.

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  9. ashtraywasp says:

    I really really don’t believe the prices they’re coming up with to be honest. They’re pretending they’ve come up with exact prices, but it’s all speculation. All of it.

    The fact that they have written down that a mobile 64GB flash hard disk costs only $20 more contradicts absolutely everything about flash memory prices. It’s too small. They even say the 28nm A7 costs only $20 to build. Really? The fastest mobile chip that’s ever been produced, at least in a consumer product, and they mark it that low? Even with a new fingerprint sensor as well they somehow peg it cheaper than the iPhone 5 last year.

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    • Ben Lovejoy says:

      It’s certainly true that there is speculation as to what Apple pays, but you have to remember that what a huge company pays on volumes running into the tens of millions is very much lower than the price paid by most customers

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  10. Dee Baig says:

    This may not be good news for Apple. However, if sales of these iPhones increase, then Apple will be able to give order for these components in bulk. So the costs may be lowered due to scale effects. Moreover, these components may be used in future versions of iPhone. By that time, these components will be even cheaper. So, costs will go down in future raising profit margin.

    DbaiG
    Bolee.com

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