Apple is making a handsome profit on its new phoneApple has reportedly the world's strongest brand image, yet it also has a reputation for being pricey and marking up its products. Many wonder if such a reputation is deserved, or just rhetoric from opinionated tech observers. Now that the iPhone bill of materials (BOM) for the iPhone 3G S has been divined thanks to an iSuppli tear down, readers can judge for themselves whether Apple is marking up the iPhone 3G S.
The hot new phone's components cost $172.46, for the 16 GB model, according to Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli. The most expensive component is the 16 GB of NAND flash memory, produced by Toshiba and estimated to cost $24/unit. Least expensive is the audio codec chip, which costs a mere $1.15/unit, produced by Cirrus Logic.
The phone costs approximately $6.50 to assemble, bringing the estimate cost to $178.96/phone.
The 16 GB iPhone 3G S costs $599.99 for returning customers with less than a year on their contract, and as little as $199.99 for new customer or returning customers with 2 years on their contract. However, according to reports, Apple sells the iPhones to AT&T at approximately $600 per phone, and the carrier provides the discount. Apple is also rumored to get a small cut of the subscription fees.
States Mr. Rassweiller, "Although the retail price of the 16GB iPhone 3GS is $199, the same as for the 8GB version of the original iPhone 3G, the actual price of the phone paid by the service provider is considerably higher, reflecting the common wireless industry practice of subsidizing the upfront cost of a mobile phone and then making a profit on subscriptions."
At a minimum it appears Apple is making a whopping $422 profit on every $178 (manufacturing cost) phone sold. That incredible profit margin may be cut into a bit by transportation, advertising, and other costs, but likely remains quite impressive at the end of the day. Even better for Apple, it likely enjoys an even larger profit on the $699 32 GB iPhone 3G S, as the only difference is a marginally more expensive (likely $20 or less) NAND chip.
Concludes Mr. Rassweiller, "From a component and design perspective, there's also a great deal of similarity between the 3G and the 3GS. By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost."
credited to dailytech.com
The engineers that design the phones need to be paid. Some of that profit goes into that. If you like having things that work awesome and look nice the people who work to create these things need to be paid and taken care of.
Sure the hardware only costs what it costs but it would be nothing without the people who create them.
I think what you want to say is "Apple Makes over $400 Gross Margin". This is the cost of the materials and assembly only, which is not even close to being the same as the profit.
Where's your corresponding "Apple sinks hundreds of millions of dollars in iPhone development" article?
You're missing some components off that list.
Why not just weigh the metal, glass, and plastic, which probably adds up to about 2 bucks worth of raw materials, and claim Apple is making 99.9% profit?
You'd be better off buying an android based phone. Not just for the price and better OS but because you won't look like such a poser.
I'm glad I own Apple Stock!
Holy Crap! Apple is making bank from this... It's kind of hard to believe.
Makes us wonder how much money they must be losing on the computer business!
Using this logic:
Cost of blank CD: 4 cents
Cost of Adobe Photoshop: $699.99
So, Adobe makes $699.95 on every copy of Photoshop it sells. That's 17,500% the cost of materials! Wow!
I like Apple's margins, even if I think you've left a few things out of your calculations.