Component Cost Of iPhone 3G Estimated By iSuppli at $173

[MacRumors]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Businessweek has a recap of newly-released preliminary research (http://www.businessweek.com/technology/content/jun2008/tc20080623_505287.htm?chan=top+news_top+news+index_technology) from market research firm iSuppli indicating that the component costs of Apple's iPhone 3G will stand at $173 for the 8GB model, down from $226 from the original 4GB version (http://www.macrumors.com/2007/01/18/apple-iphone-component-costs/).

Another market research firm has previously estimated (http://www.macrumors.com/iphone/2008/06/16/iphone-3g-manufacturing-cost-of-100/) the iPhone 3G's component cost at approximately $100, however that firm had estimated a $170 cost for the iPhone's previous incarnation, seemingly agreeing with the notion that Apple has been able to cut costs while adding features with the new iPhone.

Article Link (http://www.macrumors.com/iphone/2008/06/24/component-cost-of-iphone-3g-estimated-by-isuppli-at-173/)

[happydude]

how much does R&D and advertising cost?

[PlaceofDis]

not only does it not take into account R&D, manufacturing, and advertising; but no one has these yet to actually confirm the exact parts, right? so just how accurate can this be?

[radiogod69]

hence that the site is called "macrumors.com"? perhaps, you pratically have to take everything with a grain of salt until it is confirmed through official channels

[naroola]

hence that the site is called "macrumors.com"? perhaps, you pratically have to take everything with a grain of salt until it is confirmed through official channels

Apparently, the truth... hurts! :D

[Rocketman]

R&D for most tech firms is about 15% of budget. Advertising for Apple is lower than most consumer firms, except iPod has had quite a few ads, mainly billboards. Still only around 5%.

Rocketman

[higgalls]

R&D for most tech firms is about 15% of budget. Advertising for Apple is lower than most consumer firms, except iPod has had quite a few ads, mainly billboards. Still only around 5%.

Rocketman

Not to mention the software development, as well as the cost of assembly, warranties (as unfortunately parts do break over time), and also shipping the products all around the world (although shipping costs would be extremely low per unit).

[longofest]

hence that the site is called "macrumors.com"? perhaps, you pratically have to take everything with a grain of salt until it is confirmed through official channels

so when do you think apple will confirm the component costs through "official" channels, I wonder? :rolleyes:

Also, why are you guys knocking the accuracy of this report, citing R&D costs? The article made it clear that the estimate was for component costs, not total cost to apple.

[kdarling]

R&D for most tech firms is about 15% of budget.

That's correct. However...

Apple only spends 3% of their income on R&D. (http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080225/REG/259088503/1022/opinion)

Not to mention the software development, as well as the cost of assembly, warranties (as unfortunately parts do break over time), and also shipping the products all around the world (although shipping costs would be extremely low per unit).

Electronic assembly line labor in China costs $1.50 an hour. R&D for the 3G model, easily well under ten million dollars, would be recovered with the first 100,000 sales even if they only made a paltry $100 per unit over other costs.

They save for warranty replacements, by not spending money up front on extensive testing before shipment. (IIRC, surveys showed that iPods have about a 13% return rate. I suspect the more complicated iPhone is greater.) Cheaper just to wait for customers to find something wrong and return it. (Ironically, it also makes Apple look good because they give replacements so easily. As well they should.)

Don't worry, Apple makes a tidy profit on their gizmos.

[SpinThis!]

I'm not sure why MacRumors has to post this. This report tells us what exactly? People who don't read the whole thing see the component cost, don't put two and two together, and feel they're getting ripped off when there's a lot more to it than that. We've all known Apple makes healthy margins on their products... so what?

You think Jobs' $1 salary skews their 3% R&D figure at all? ;)

[2002cbr600f4i]

Yes, if one figures that AT&T and the other phone co's are subsidizing the cost, and you figure that the unsubsidized prices are more in the $400 (8GB) to $500 (16GB) ranges, and even if Apple sells to those phone co's in bulk at a reduced price (say, take $50 off each of those prices), Apple is still making $150-200 or so over production cost PER unit...

$150 per unit covers a LOT of advertising, R&D, shipping, packaging, warentee replacements, support, software development, etc.

[tingly]

I'm not sure why MacRumors has to post this. This report tells us what exactly?

As you said, the reason MacRumors posted it was to report about iphone component costs. If people want to expose their lack of reading comprehension, they're welcome to. :)

[jonnylink]

This is pointless. An imaginary breakdown with a guess at the prices of components is silly. Even if you had all that information exactly it would still be pointless until products begin to magically do the following all by themselves:

research and develop
license technologies used in it
assemble
package
ship
store
promote
sell


component cost is just a fraction of a significantly bigger number.

[Analog Kid]

Holy cow! 56% margins on a cell phone?! No wonder Wall Street loves Apple these days.

I do find it a bit dodgy that iSupply is releasing hard numbers (accurate to the dollar, apparently) without ever having handled the final product.

how much does R&D and advertising cost?

R&D, at least, is already a sunk cost. There's not much point in tracking it, from a financials perspective. They're interested in what the net money flow is-- profit=revenue-cost.

Somebody on Wall Street is interested in what Apple's R&D budget is for the next iPhone, but they don't care what it was for this one anymore.

Not to mention the software development, as well as the cost of assembly, warranties (as unfortunately parts do break over time), and also shipping the products all around the world (although shipping costs would be extremely low per unit).

I think cost of assembly is included in iSupplies numbers.