16 GB iPhone 3GS Teardown Reveals $178.96 Parts and Manufacturing Cost

[MacRumors]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com/2009/06/24/16-gb-iphone-3gs-teardown-reveals-178-96-parts-and-manufacturing-cost/)

Research firm iSuppli today announced (http://www.isuppli.com/NewsDetail.aspx?ID=20398) the results of its teardown of the new 16 GB iPhone 3GS, estimating the device's parts cost at $172.46, with an additional $6.50 in manufacturing costs bringing the total cost to $178.96. The data compares to a total cost of $174.33 for the 8 GB iPhone 3G at its launch in July 2008.

BusinessWeek provides a full analysis (http://www.businessweek.com/technology/content/jun2009/tc20090623_210230.htm) of the iSuppli report, noting that Apple's flash memory costs have been adversely impacted by pricing increases precipitated by production cutbacks in response to economic conditions. While Apple previously relied on the ability to be able to double flash memory capacities at the same price point over models from the previous year, the recent fluctuations have resulted in Apple having to pay more in order to bump the iPhone 3GS's capacity to 16 and 32 GB.

iSuppli's teardown also reveals that Apple is using the same BCM4325 combination Wi-Fi/Bluetooth chip from Broadcom used in the second-generation iPod touch, resulting in a cost savings over the iPhone 3G, which had used two separate chips, a Wi-Fi chip from Marvell and a Bluetooth chip from CSR.

As always, iSuppli's cost estimates do not include software, research and development, distribution, and patent royalty costs. Consequently, Apple's true costs are considerably higher than the figures cited in these studies, leading Apple to sell the iPhone at price points hundreds of dollars above the manufacturing costs. Wireless carriers in turn offer subsidies to customers in exchange for signing multi-year contracts, bringing the final handset cost to the consumer back down to lower price points, such as the $199 price for the 16 GB iPhone 3GS in the U.S. on AT&T.

Article Link: 16 GB iPhone 3GS Teardown Reveals $178.96 Parts and Manufacturing Cost (http://www.macrumors.com/2009/06/24/16-gb-iphone-3gs-teardown-reveals-178-96-parts-and-manufacturing-cost/)

[TheOrioles33]

I CANT BELIEVE APPLE! The nerve of them trying to make a profit!!!! :D

[angemon89]

They use 2x8GB nand chips in the 16GB, right?

[bakerster]

why is it not 179.99? :confused:

[spydertim]

I got ripped off I paid $199!

[SkippyThorson]

Damn you, Apple! Shame for trying to profit off of the advancement of a product that took the world by storm - 3 times nonetheless! ;)

[Eidorian]

Hello subsidized price. :rolleyes:

[mca7]

9 to 5 mac is reporting that the new iPhone actually has 512 of RAM. Any truth?

[Beric]

They use 2x8GB nand chips in the 16GB, right?

No. It's 1 16GB chip (see the link). The iPhone has always used one NAND chip, and the iPod Touch two, hence why the iPod Touch always has twice the capacity. The reason is the phone transmitter, etc. take up space.

[jlseattle]

Hello subsidized price. :rolleyes:

So how much does AT&T pay of this cost? So if I renew my contract early I'm paying 599 for the phone. What and who is losing?

[bigmc6000]

They use 2x8GB nand chips in the 16GB, right?

Nope, 1 chip. There's only room for 1 (vs. 2 for the Touch). That's why when they update the touch they tend to give it a max of double because it's using two iPhone chips.

the 32GB is 1 chip as well.

EDIT: Dang, Beric beat me :-P

[Mattie Num Nums]

So how much does AT&T pay of this cost? So if I renew my contract early I'm paying 599 for the phone. What and who is losing?

No matter what Apple is making money because ATT pays them.

[mkrishnan]

9 to 5 mac is reporting that the new iPhone actually has 512 of RAM. Any truth?

iSuppli reported the same in the linked article, did they not?

Well, so Apple has made tidy but not major progress in cost reducing the constant portions of the iPhone. Enough to justify the add-ons but not enough to improve the likelihood of much lower cost hardware...

[bobertoq]

why is it not 179.99? :confused:They wouldn't make any money if they sold it at that price.

[igazza]

They use 2x8GB nand chips in the 16GB, right?

no,1 and it comes in at 24 dollars

[Eidorian]

I think people should take into account the subsidized price and the other price points before saying that it should be sold at 'X' price.

[evilspoons]

What does the iPhone 3G cost to build now?

[swingerofbirch]

Plus you have to consider what just one phone call to AppleCare costs them...lots of costs you would never think of...then again they're certainly not hurting when you think of the thousands of dollars ATT/Apple get over your contract....hopefully they are using some of that money to build their network up.

[nemaslov]

And don't forget to add in marketing, packaging, online tutorials and shipping costs. Plus they need to make a profit...

[thomahawk]

if you think this is a big deal
check out other phones. like the sidekick or android G1 or whatever. those phones cost a certain price but sell at a substantially higher price.

its the only way to make money for phone companies and manufacturers alike.

so dont go blaming apple or AT&T that your getting ripped off

[Kwill]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 3_0 like Mac OS X; en-us) AppleWebKit/528.18 (KHTML, like Gecko) Version/4.0 Mobile/7A341 Safari/528.16)

Now iSuppli needs to do a "teardown" on AT&T billings of $100+ per month.

[Michael73]

None of us (Apple not included) will ever know the true cost of the product. What makes these phones so awesome are the interface, OS AND form factor. Any teardown is useful for the information of the component cost both on it's own and in comparison to other devices but in no way should be representative of the actual cost of the entire device.

I think that iSupply should make it clear that the software, research and development, distribution, and patent royalty costs are not just related to Apple, but also to all the other manufacturers of the parts in the phone.

[uberamd]

How much did those $100 jeans cost to make? Or that $5,000 suit? Or that $50 meal at the fancy restaurant? For the love of god these creation-to-retail price arguments are idiotic.

[Shiner]

I hate articles like this for the simple reason, they do nothing but cause confusion.

The iphone costs $599 dollars plain and simple. It does not cost $199-like the stupid article says. The $199 is the subsidized price of the iphone. AT&T pays the rest.

Who cares how much the parts cost to put together. That has very little to do with the final cost.

If anything you can see that apple always maintains the exact same profit margin on all of their devices.

The parts cost the same as the 3G when it came out. Only reason apple puts these parts in the phone. When OLED allows them to make the same profit they will place it in the phone. Same goes for all of their computers. Follow the money trail.

[fishcove]

Interesting to those waiting for the iPod Touch upgrade as well.

Camera : $9.55
GPS: $2.25

[svndmvn]

what's up with the 2gb SDRAM?
edit: oops, it's Gb not GB

[stevejobbers]

So how much does AT&T pay of this cost? So if I renew my contract early I'm paying 599 for the phone. What and who is losing?

look in the mirror, buddy :D

we are the ones losing out b/c ATT locks you into a 2 yr deal, at like 70 per month. 70 * 24 = $1,680. that easily covers the cost of the phone, and then PLENTY more.

[bob_the_gorilla]

iSuppli pull a lot of these numbers straight out of their ass – they're often complete guesswork. Which might help explain why Apple's margins always seems to be about 30%, when iSuppli pitch them at closer to 70%.

In short – worse than useless.

[Shin3r]

I think it's somewhat funny how we all sit here and talk about how much something costs in relation to what it is sold for. The reality of economics is that if you are willing to pay for it, they will charge for it. Trust me, if the iphone was not a blow out product that has sold millions and millions of phones, they would either have sold them way cheaper, or stopped making them.

Likewise, actual competition helps us out. For instance, they are selling the original 3g 8gb for $99 subsidized. Now, I am pretty sure this was a direct response to the release of the palm pre. Just my 2 pennies though.

[bruinsrme]

What about those $30 wall plugs and $20 sync cables for the iPhones. Do u really think is costs starbucks $5 for a large coffee

[H$R]

so, if there the same BCM4325 chip inside..what about the rumors (http://www.macrumors.com/2009/04/06/next-generation-iphone-to-possibly-offer-fm-radio-reception-and-transmission/) of the next gen BCM4329 chip? Seems that their waiting for the next iPhone (model iPhone 3,1).

Maybe wireless-n end Bluetooth 3.0 then..

Anyways, I am buying me a 3GS soon.

[JeffTL]

What is the $6.50 manufacturing cost? Direct labor and plant overhead? What sort of cost model is this analysis using? I've had a year of management accounting there is just not enough information about where they are getting numbers and what is included or not in them for this to be meaningful besides the pricing of direct materials -- though we can't know for sure what kind of discounts Apple may even be getting on that. It admits to excluding enough costs, and is ambiguous enough, that it doesn't really tell us anything about the true profit margin of the iPhone 3GS.

[WoFat]

I'm waiting for Pystar's version, which should be any day now.

[panamajack]

.... is of interest to consumers.

It's speculated that Apple sells bulk iPhones to AT&T and other carriers starting at around $450 USD, which is then subsidized to $199. That number was probably conjured up for the previous 8GB iPhone 3G.

That's undoubtably changed now with the 16GB iPhone 3GS probably at the same price point for carriers. Whatever the real cost to AT&T for the $99 3G would be interesting, considering Apple has already recouped their associated R&D costs for the device.

[Scarpad]

Spend $5 more and put a better screen on it.

[JForestZ34]

HA HA and apple justifies charging $599 for a phone.. LOL



James

[DELLsFan]

look in the mirror, buddy :D

we are the ones losing out b/c ATT locks you into a 2 yr deal, at like 70 per month. 70 * 24 = $1,680. that easily covers the cost of the phone, and then PLENTY more.

:eek:

Oh it's worse than this for me. Not sure where you came up with $70. With a 700 minute/month plan, I pay:

iPhone 1: $60.00 voice + $30.00 data + $5.00 for 200 SMS txts + tax
iPhone 2: $9.99 voice (family talk) + $30.00 data + $5.00 for 200 SMS txts + tax

That's about $140/month x 24 months = $3360.00 + tax!

Yup ... I'm thinking I've paid for those phones pretty quick. The rest obviously goes to AT&T to "improve infrastructure" and "pay employees", and "pay for retarded TV ads". :o

[cbw87]

So it's confirmed: notwithstanding exchange rate fluctuations, O2's massive price-hike compared to last year on the initial handset price is totally without justification, given the material cost and US handset price remained the same. They were lying about maintaining the subsidies. I can't wait until their exclusivity ends.

[meagain]

Uh - So is this why my wifi is acting worse than my 3G?

[snowleopard2009]

Tell the auction house that Van Gogh only used $75 worth of paint and canvas so you only want to pay $100.

There is NO WAY of knowing the true cost. Shipping, marketing, packaging, utilities, executive salaries, R&D, etc.

STOP COMPLAINING. Just like when then first iPhone dropped in price after 3 months, whatever price you payed, you saw the tag.

How many of you buy $75+ shoes from Nike, Reebok, Skechers... they cost about $10 to make.

[laughingperson5]

I got ripped off I paid $199!

Cause Apple needs to make a profit. Duh.

[mkrishnan]

STOP COMPLAINING. Just like when then first iPhone dropped in price after 3 months, whatever price you payed, you saw the tag.

You do understand that (1) hardly anyone in this thread has really complained about anything, aside from you complaining about people complaining, and that (2) there are other reasons why this information is of interest than accusing Apple of over-charging for their hardware? :rolleyes:

[wackymacky]

So what?

We aren’t taking about manufacturing plastic cups or zips.

This doesn’t taking into account the coast of R&D of the hardware, of the O.S nor the marketing etc.

Does Apple make a big profit? Well of course! Is it excessive? Well, they can sell a couple of million phones on launch day the last two models. No one's making them pay.

I do agree though that given the raw components compared to the sale price are so cheap that for spending $10.oo more on hardware the could deliver a better device. (screen etc.).;

But then again people now expect Apple to keep the cost of the new devices the same.

If apple cut their profit by $10.00 per phone, at over 8,000,000 iPhone 3G's sold, that’s $80,000,000 of Mc'Profit that they would be forgoing. Investors would not be very forgiving to the Directors of :apple: inc. about this.

[polaris20]

HA HA and apple justifies charging $599 for a phone.. LOL



James

http://www.verizonwireless.com/b2c/store/controller

$469, and it's more mind numbingly crappy Windows Mobile stuff.

http://www.t-mobile.com/shop/phones/Cell-Phone-Detail.aspx?cell-phone=T-Mobile-G1-with-Google-Black

$399, unsubsidized.

http://www.verizonwireless.com/b2c/store/controller?item=phoneFirst&action=viewPhoneDetail&selectedPhoneId=4286

$499, unsubsidized.

All smart phones are expensive. Maybe not as much as the iPhone, but not cheap either.

[winterspan]

Spend $5 more and put a better screen on it.

Well, I agree that I would have love to see an OLED because of the incredible contrast, but who knows what issues that could bring up with the capacitive touch functionality, or issues with heat sensitivity, or voltage needs, etc. I'm sure the design and engineering considerations that went into the iPhone are far more complex that most of us can imagine. Yes I know the Zune HD supposedly is OLED and capacitive touch, but as I said we don't know the details. Maybe the blue phosphour on these small OLEDs loses brightness too quickly for Apple's tastes. It's all a mystery except to those with first hand knowledge.

Regarding screen resolution, I'd imagine Apple didn't want to heavily fragment the platform for 3rd party app and game developers... However, I'm sure they are still working on complete resolution independence for both iPhone OS and regular OSX, which would go a long way to pushing both platforms forward with higher density displays.

[Dammit Cubs]

it just means....I won't pay 400 for 3GS. game over

[chr1s60]

Plus you have to consider what just one phone call to AppleCare costs them...lots of costs you would never think of...then again they're certainly not hurting when you think of the thousands of dollars ATT/Apple get over your contract....hopefully they are using some of that money to build their network up.

A lot of this cost from AppleCare is covered by the AppleCare customers who purchase and never once need to use it. I know I had AppleCare with my first iMac and used it once during the 3 year period for a mouse replacement. I also had it on one of my iPods and never used it. I also know someone who purchased the AppleCare for his iPhone and never used it. I am guessing there are more that purchase and don't use than there are that purchase and use AppleCare all the time.

HA HA and apple justifies charging $599 for a phone.. LOL



James

All cell phone companies do this. Not only does it allow them to get massive profits off the sale of these unsubsidized phones, but it helps the cell companies by encouraging people to purchase the subsidized phones in order to save a lot of money. Plus, the cell phone company is still making a small profit off the subsidized phone.

[iphones4evry1]

For those wonder why the case and the exterior looks of the phone are unchanged from the 3G and why so many components are the same as the 3G ... this is helping keep prices down. The new iPhone3GS costs the same $199 that the previous 3G had cost, and you get 16GB instead of 8GB. If Apple had redesigned the case and all kinds of other stuff, you would not be able to get a 16GB 3GS for $199. Apple is going to maintain their profit margin, so they would have raised the phone from $599 up to whatever it would cost, and your $199 would go up also.

If there is a profit margin of $400 here (that AT&T pays, and then makes up from our increased monthly service fees), then you can see how Apple can afford to give AT&T a better deal on the previous 8GB 3G so it can be sold for $99. (8GB of flash costs Apple a lot less than 16GB, which means the 3G cost to build is even less)

[alhedges]

I have run across one reference saying that the AT&T subsidy was $450, meaning that apple would get $299+$450=$749 for the 32G iphone. Others have suggested that the subsidy is $400; since you can buy an unsubsidezed 32G for $699, this seems to make some sense.

[aristotle]

Guys, have you stopped to consider that you would get charged the same for your monthly plan regardless of whether you received a subsidized phone, bought a phone unsubsidized or did not upgrade at all?

If all of this is true, then when you get a subsidized phone, the provider is actually making less money on that same plan and are using the phone as an incentive to commit to a contract term and to add on features like a data plan which you might not have subscribed to if you had not used a smart phone on their network before.

Phones like the iPhone when sold subsidized can be an incentive for some to switch over from Verizon to AT&T. AT&T is willing to swallow the price difference in exchange for a new customer on a contract term with data service.

[BlizzardBomb]

So that explains why it's £440 in the UK on PAYG. Oh wait, what? That's almost a 200% profit margin?

[cbw87]

So that explains why it's £440 in the UK on PAYG. Oh wait, what? That's almost a 200% profit margin?

Tell me about it. The sooner Apple just start selling this thing unlocked without carrier margins the better: rumour has it that O2 is sticking £120 quid on that price for their year of data - there's no way to just "buy the new model" and upgrade without either paying for data you already have or taking a full subsidised contract.

********.

The iPhone needs carrier competition and unsubsidised straight-to-consumer handset sales, ASAP.

[Goona]

I think it's somewhat funny how we all sit here and talk about how much something costs in relation to what it is sold for. The reality of economics is that if you are willing to pay for it, they will charge for it. Trust me, if the iphone was not a blow out product that has sold millions and millions of phones, they would either have sold them way cheaper, or stopped making them.

Likewise, actual competition helps us out. For instance, they are selling the original 3g 8gb for $99 subsidized. Now, I am pretty sure this was a direct response to the release of the palm pre. Just my 2 pennies though.

You would have a point if the price of purchasing a Palm Pre was cheaper than an iPhone.

[chrmjenkins]

what's up with the 2gb SDRAM?
edit: oops, it's Gb not GB

Yeah, it's 2 Gb, or 256 MB. I don't know where people are pulling 512 MB from.

What is the $6.50 manufacturing cost? Direct labor and plant overhead? What sort of cost model is this analysis using? I've had a year of management accounting there is just not enough information about where they are getting numbers and what is included or not in them for this to be meaningful besides the pricing of direct materials -- though we can't know for sure what kind of discounts Apple may even be getting on that. It admits to excluding enough costs, and is ambiguous enough, that it doesn't really tell us anything about the true profit margin of the iPhone 3GS.

It is this company's job to do teardown and cost analysis. I'm sure they have a pretty good idea what they're doing.

[phillyeagles615]

I hate articles like this for the simple reason, they do nothing but cause confusion.

The iphone costs $599 dollars plain and simple. It does not cost $199-like the stupid article says. The $199 is the subsidized price of the iphone. AT&T pays the rest.

Who cares how much the parts cost to put together. That has very little to do with the final cost.

If anything you can see that apple always maintains the exact same profit margin on all of their devices.

The parts cost the same as the 3G when it came out. Only reason apple puts these parts in the phone. When OLED allows them to make the same profit they will place it in the phone. Same goes for all of their computers. Follow the money trail.

exactly

[svndmvn]

Yeah, it's 2 Gb, or 256 MB. I don't know where people are pulling 512 MB from.

that makes sense, but at the same time the memory MCP is supposed to be 128Mb NOR and 512Mb Mobile DDR
while the 3g has 64Mbit NOR and 32Mbit PSRAM
how much of a difference does that make?
http://gizmodo.com/assets/images/gizmodo/2008/06/iSuppli_iPhone_2_0_BOM_Table.png
http://images.macnn.com/esta/content/0906/iphone3gs-isuppli.jpg

[chrmjenkins]

that makes sense, but at the same time the memory MCP is supposed to be 128Mb NOR and 512Mb Mobile DDR
while the 3g has 64Mbit NOR and 32Mbit PSRAM
how much of a difference does that make?
*snip*

Ok, I see where the 512MB comes from. It's actually 512Mb (64MB). PSRAM (pseudo-static) is probably for suspending the phone and dumping parts of the RAM to a non-volatile memory to save power. This is similar to suspending your computer to the hard drive to save power but not completely turn off.

[steamed.hams]

Don't forget that R&D (research and development) takes millions, or even tens of millions of dollars to be spent before a single 3GS hits the shelves...!

[BlizzardBomb]

Don't forget that R&D (research and development) takes millions, or even tens of millions of dollars to be spent before a single 3GS hits the shelves...!

I seriously doubt the 3GS needed much more R&D considering that it's basically an incremental bump on iPhone 3G.

[chrmjenkins]

I seriously doubt the 3GS needed much more R&D considering that it's basically an incremental bump on iPhone 3G.

It's probably similar to the 3G cost. What it didn't have in external design it made up for in internal redesign. It has a ton of new components in there.

[TSX]

I think one of the reasons its so cheap to make is because, apple buys millions of each part. Im sure they get a discount buy buying 10 million+ processors, now if they only bought 100 processors the cost would go up.

[E.Lizardo]

look in the mirror, buddy :D

we are the ones losing out b/c ATT locks you into a 2 yr deal, at like 70 per month. 70 * 24 = $1,680. that easily covers the cost of the phone, and then PLENTY more.

And of course we all know their network cost nothing to build and maintain.

[chrmjenkins]

And of course we all know their network cost nothing to build and maintain.

I DO know text messages don't cost them near 20 cents to send ;)

[Maserati7200]

This article fails to mention the cost of shipping and taxes.

[E.Lizardo]

Tell me about it. The sooner Apple just start selling this thing unlocked without carrier margins the better: rumour has it that O2 is sticking £120 quid on that price for their year of data - there's no way to just "buy the new model" and upgrade without either paying for data you already have or taking a full subsidised contract.

********.

The iPhone needs carrier competition and unsubsidised straight-to-consumer handset sales, ASAP.

It's been done(see 1st gen iPhone price)

[E.Lizardo]

You would have a point if the price of purchasing a Palm Pre was cheaper than an iPhone.


So making the iPhone cheaper than a pre is not competitive how?

[hexor]

iPod touch is nearly same hardware (minus phone, gps, camera, compass). I highly doubt that extra hardware costs $500+ more than an iPod Touch to justify the unsubsidized price of an iPhone.

[miniConvert]

I'm quite surprised by how expensive the iPhone is to produce, to be honest. Add on the substantial software development and R&D, and all those pesky licencing costs, and I think it's quite easy to see how the iPhone gets to its selling price.

[TSX]

that makes sense, but at the same time the memory MCP is supposed to be 128Mb NOR and 512Mb Mobile DDR
while the 3g has 64Mbit NOR and 32Mbit PSRAM
how much of a difference does that make?
http://gizmodo.com/assets/images/gizmodo/2008/06/iSuppli_iPhone_2_0_BOM_Table.png
http://images.macnn.com/esta/content/0906/iphone3gs-isuppli.jpg

Can someone show me where to buy these parts online so i can put my own iPhone together.

[chrmjenkins]

Can someone show me where to buy these parts online so i can put my own iPhone together.

Please tell me this is a joke.

[diabolic]

Please tell me this is a joke.

I'm pretty sure he's making a point.

[TSX]

Please tell me this is a joke.
Yea it was a joke. If it wasnt i would be putting some iPhones together and sell them on eBay for some serious cash.

[Feng Shui]

These just pop into my head: R&D, shipping, rent, security, and advertisement costs. Did those get added in?

[chrmjenkins]

Yea it was a joke. If it wasnt i would be putting some iPhones together and sell them on eBay for some serious cash.

Forgive me, but not recognizing your posts plus no distinguishing characteristic on this forum = I have no idea if you're serious ;)

[sammich]

With all the crap that flies around when an iSuppli article comes out, I wouldn't mind a slashdot like rating and thus, automatic threshold ignoring of comments.

So that explains why it's £440 in the UK on PAYG. Oh wait, what? That's almost a 200% profit margin?

Do the carriers still have to pay Apple a monthly royalty?

Oh, and I think it's funny how they use the term "Grand Total" at the bottom of their list. So it takes into account everything?

[JAT]

:eek:

Oh it's worse than this for me. Not sure where you came up with $70. With a 700 minute/month plan, I pay:

iPhone 1: $60.00 voice + $30.00 data + $5.00 for 200 SMS txts + tax
iPhone 2: $9.99 voice (family talk) + $30.00 data + $5.00 for 200 SMS txts + tax

That's about $140/month x 24 months = $3360.00 + tax!

Yup ... I'm thinking I've paid for those phones pretty quick. The rest obviously goes to AT&T to "improve infrastructure" and "pay employees", and "pay for retarded TV ads". :o
I'm no fan of AT&T, don't own an iPhone, and am a customer of T-Mobile. However, I am an accountant, and some of you are completely lacking in any understanding of business.

Per their 2008 Annual Report, AT&T spent $18,078,000,000 on wireless service & equipment in 2008, which was an increase of over $2 billion compared to the prior year. Virtually all of the increase was equipment, not increased service costs. (which could theoretically be something to complain about if they raised their service rates) In large part due to more and more expensive phones being purchased, like the iPhone 3G.

How much did you spend on your equipment again?

I guess, maybe, they need to charge customers something. Let's see, they went from 70 mil to 77 mil customers, or an average of over $500 per customer for the year in total expense. (total expense was $38 bil) So that means they have to charge you at least $42/line/month just to break even. You have chosen the most expensive line with those iPhone data charges since you WANT IT. Others will spend less.

And please don't forget that a whole bunch of your monthly cost goes straight to someone else. aka, the United States of America and other govt-types. That complaining no doubt belongs in a different thread.

[dehory]

It actually costs more to make than I'd thought.

[pwn247]

Apple gains back only about 15% when you leave the store with an iPhone 3G S and an AT&T contract. It's clear that AT&T shoots back most of their funds from the 3G S buyers' plans down the line.

As long as Apple puts that money to good use, I'm cool with paying the extra $25 out the door with a contract.

[jw2002]

iPod touch is nearly same hardware (minus phone, gps, camera, compass). I highly doubt that extra hardware costs $500+ more than an iPod Touch to justify the unsubsidized price of an iPhone.

Exactly. My ipod touch cost $229 or so, and last time I checked there weren't any long term service contracts or claims of its price being subsidized by some other entity. Considering just the phone technology part of the iphone (since it is identical to the ipod touch in all other respects), the patent and technology costs will not amount to much, certainly not the supposed hundreds of dollars worth of AT&T subsidizing. Today I can buy an el cheapo unlocked handphone and use it on a pay as you go network such as Boost Mobile.

I think it's good that these tear downs itemize the true cost of parts. It helps to challenge the phony claims that AT&T is bringing lots of value to the iphone equation when that simply is not the case.

[BruiserBear]

The defensiveness in this thread has been most amusing to watch. All this "subsidized" pricing talk has always cracked me up when you see them selling the 8gb iPod touch at a profit for $230.

[Ammo]

Soo...how much can we assume it would cost to make a 3rd gen. iPod touch?

Assume compass and GPS are included.

[SandynJosh]

if you think this is a big deal
check out other phones. like the sidekick or android G1 or whatever. those phones cost a certain price but sell at a substantially higher price.

The numbers I've seen show Apple's costs being even better controled than some of the competition, including the BB Storm.

What amazes me the most is the estimate that Apple's cost of manufacturing is only $6.50 per unit, that's astonishingly low. Give that iPhone girl a penny raise. ;)

[ptsube]

For Apple:
$178.96+
R&D for hardware
R&D for software
R&D for future software(firmware upgrades)
R&D Salaries
Shipping
Taxes
Customer Service(help desk)
Customer Service Salaries
Store leasing
Store personal
Store fixtures
Corporate and related building leases and purchases
Corporate salaries
Server upkeep
Medical
Dental
Retirement
And much more.

[Wicked1]

There is one thing everyone who is complaining is forgetting?

If you do not think it is fair or you do not like that Apple is very good at marketing and way better at profit margins then HP, Dell, Sony, you have one thing going for you?

Don't Buy it :eek:

Each Wireless carrier has the same or similar deal with their high priced phones:

ie: Verizon Blackberry Storm, Sprint Palm Pre, T-Mobile Sidekick.

We all knew this was going to happen, and as newer and better phones come out some will cost more depending on what they are including and some will get cheaper just like the iPhone bc of competetive pricing. Apple sells a newer model will better features then the previous 3G 16GB unit for $100.00 less, that is because things get competetive and prices of material go down, so maybe the next Gen iPhone will have a lot more technology or Development costs, so things will stay the same go up, or they could go down.

One thing is for sure there are those Techno Junkies that no matter what cost, they will complain, but have to have the new Gear ASAP so they will pay the Piper regardless. To those who are more frugal and cautious they will complain a little and wait until they can switch with competitive pricing.

I just bought my first iPhone 3GS so I have two years to wait, or next year I could upgrade by paying a premium, naa I think I will wait.

Look at all those who just bought the Verizon Blackberry Storm for $199.00 with a two year contract, do you think Verizon or RIM will allow those ppl to get the Storm 2 in September for $199 again, no way, you either ante up Full Retail $499 or wait.

You can't always look at as your getting ripped off, because if you want a cool phone with great features like the iPhone, well you have to pay $30 for Data, you need a plan, and maybe SMS and some other stuff, so your base costs monthly will be like $90, so buy it or not, Apple will sell them, AT&T will get the contracts and either you walk around with a Smile bc you got a great phone, or walk around with a frown bc you feel you are getting ripped off, it is just the way it goes in Business...:D

iPhone compared to Storm

iPhone: AT&T
450 min plan with rollover $39.99
Unlimited Data Plan $30
SMS unlimited $30

Total $100

Storm: Verizon
450 min plan without rollover $39.99
Unlimited Data $30
SMS unlimited $30

Total $100

I just switched from Verizon, in fact I had a Verizon Phone and my new iPhone at the same time, I have great signals with either phone/carrier in my area. Verizon as it gets bigger is getting worse with dropped calls and problems, plus I am a fan of neither, just that I wanted the iPhone really bad bc I have a uMB and it works together better and the other carriers selections of phones are horrible, I had a Storm for one week, it doesn't come close to the iPhone.

[ibjoshua]

For a decent take on the ******** that is iSuppli, look no further than John Gruber: http://daringfireball.net/search?q=iSuppli

PS: wow! I never realised ******** was a swear word. Is this US network television?

[SandynJosh]

The defensiveness in this thread has been most amusing to watch. All this "subsidized" pricing talk has always cracked me up when you see them selling the 8gb iPod touch at a profit for $230.

Yeah, it's hard to know what AT&T is kicking back to Apple in actual subsidy. But one can determine Apple's gross profit easier on an iTouch. That said, all of the various cost centers that need to be met before one gets to NET profit can seem to be endless.

The rules of thumb in most industries is that your end price needs to be 2 to 5 times the cost your bill of materials to be sure you will make an end profit. Apple's formula seems to be closer to the low end than the high, which is what I'd expect.

[twoodcc]

well that's not a huge increase a year later. and much better hardware as well. can't wait til i get my hands on a 32 gb iphone 3gs. hopefully soon

[Skuman]

I've been in electronics manufacturing a long time, and a simple rule of thumb I use when I see any electronics device selling is to divide the price by 3, and that's what it cost the manufacturer to buy components. Typically, the retailer will get the highest profit, followed by wholesaler then the manufacturer.

Apple, with its higher service levels would want to increase the profit margin, and as others have said, a company will charge what people are willing to buy. The cost of Porsche components can't be that much more than the cost of a Toyota.

[petedskier]

I have run across one reference saying that the AT&T subsidy was $450, meaning that apple would get $299+$450=$749 for the 32G iphone. Others have suggested that the subsidy is $400; since you can buy an unsubsidezed 32G for $699, this seems to make some sense.
It's speculated that Apple sells bulk iPhones to AT&T and other carriers starting at around $450 USD, which is then subsidized to $199. That number was probably conjured up for the previous 8GB iPhone 3G.

That's undoubtably changed now with the 16GB iPhone 3GS probably at the same price point for carriers. Whatever the real cost to AT&T for the $99 3G would be interesting, considering Apple has already recouped their associated R&D costs for the device.
I look at the iSuppli estimate as an estimate. The estimate has no effect on the price of the iPhone or probably much of anything. It is just a fun piece of data that someone put together. Oooohhh.

I don't know how much AT&T subsidizes the iPhone, nor do I know if it is a loss leader as suggested. However, I would speculate that AT&T does not lose money on iPhone sales. That would make the iPhone subsidy to be in the range of the $175 early termination fee.

Sure, the unsubsidized iPhone is much more. You should definitely sign up for a 24 month contract, voice and data, or … It's hype. I'll bet there are people that buy iPhones and break the contract.

[nos]

In Belgium the only way is to buy the iPhone non-subsidised.

Top model costs €675 which is $942. :eek:

CRAZY!!!

[AdeFowler]

I wonder how much Microsoft get paid per Exchange License :eek:

[twilson]

As always, iSuppli's cost estimates do not include software, research and development, distribution, and patent royalty costs.

And that's the main reason this sort of thing is a pointless exercise. It has already been acknowledged with this sentence that they have absolutely no knowledge of what will make up around 50% (probably more) of the cost of the device prior to it receiving its relevant markup.

Also, Apple probably doesn't pay the price for the components that iSuppli was able to get (Apple probably pays less).

What's so difficult to understand about a company having an obligation (especially to shareholders) to make as much profit as they can?

[surferfromuk]

So assuming Apple make 100% profit ( i.e sell to O2 at £210) it seems that the O2 hardware subsidy on a 16GB 3GS runs to about £30 on an 18 month contract.

They way O2 have been going on about it you'd think they'd been giving us £700 or something!

I think Apple should consider selling direct for £250 unlocked - to be used on ANY CARRIER YOU CHOOSE

[plinden]

A break down of a typical human body shows the following components:
65% Oxygen
18% Carbon
10% Hydrogen
3% Nitrogen
1.5% Calcium
1% Phosphorous
0.35% Potassium
0.25% Sulfur
0.15% Sodium
0.15% Chlorine
0.05% Magnesium
0.0004% Iron
0.00004% Iodine

Given this list, what's to stop some clever people out there building a human body for a few dollars? (Yes, I know you can do it for zero initial cost, but upkeep and maintenance is expensive)

[Eidorian]

A break down of a typical human body shows the following components:
65% Oxygen
18% Carbon
10% Hydrogen
3% Nitrogen
1.5% Calcium
1% Phosphorous
0.35% Potassium
0.25% Sulfur
0.15% Sodium
0.15% Chlorine
0.05% Magnesium
0.0004% Iron
0.00004% Iodine

Given this list, what's to stop some clever people out there building a human body for a few dollars? (Yes, I know you can do it for zero initial cost, but upkeep and maintenance is expensive)http://att.macrumors.com/attachment.php?attachmentid=167244&d=1239828174

This comes to mind.

[kdarling]

Ok, I see where the 512MB comes from. It's actually 512Mb (64MB). PSRAM (pseudo-static) is probably for suspending the phone and dumping parts of the RAM to a non-volatile memory to save power.

I believe those NOR and RAM are used by the baseband processor.

[chrmjenkins]

I believe those NOR and RAM are used by the baseband processor.

Ok, I wasn't aware basebands needed their own dedicated RAM. I'm not too familiar with their topologies.

[iphones4evry1]

"iSuppli's particular iPhone contained 16 GB of flash memory from Toshiba, worth about $24. It's the most expensive component in the device"

http://www.fool.com/investing/general/2009/06/25/iphones-innards-cheap-chips-fat-margins.aspx

[iphones4evry1]

A break down of a typical human body shows the following components:
65% Oxygen
18% Carbon
10% Hydrogen
3% Nitrogen
1.5% Calcium
1% Phosphorous
0.35% Potassium
0.25% Sulfur
0.15% Sodium
0.15% Chlorine
0.05% Magnesium
0.0004% Iron
0.00004% Iodine

Given this list, what's to stop some clever people out there building a human body for a few dollars? (Yes, I know you can do it for zero initial cost, but upkeep and maintenance is expensive)

Actually, hydrogen is the most abundant component in the human body. (I have a B.S. in biochemistry) With water being the most abundant molecule in the human body, and each water molecule, H2O, containing two hydrogens and one oxygen, there are twice as many hydrogen as oxygen from the water alone. In fats and carbs and protein, hydrogen is more abundant than any other element. So, the sum of all parts shows hydrogen to be the most abundant. Believe me, I work in a lab eight hours a day, five days a week, and I've been doing this for many years since I graduated. I know this, I'm not just guessing.

[angemon89]

the 32GB is 1 chip as well.Interesting. That means that a 64gb iPod touch could be just around the corner.

[Skuman]

Actually, hydrogen is the most abundant component in the human body. (I have a B.S. in biochemistry) With water being the most abundant molecule in the human body, and each water molecule, H2O, containing two hydrogens and one oxygen, there are twice as many hydrogen as oxygen from the water alone. In fats and carbs and protein, hydrogen is more abundant than any other element. So, the sum of all parts shows hydrogen to be the most abundant. Believe me, I work in a lab eight hours a day, five days a week, and I've been doing this for many years since I graduated. I know this, I'm not just guessing.

The list was probably calculated by weight rather than number of moles.

[uaecasher]

This price is only for raw material cost, people are forgetting: R&D, ads, taxes and don'y forget that their software is super cheap

[iphones4evry1]

The list was probably calculated by weight rather than number of moles.

Oh, I figured it was by weight, but since the person posting that seemed so confident and hadn't indicated it was by weight, I just wanted to make him/her stop and think for a moment. I am glad to see that another human being out there understands the difference between %weight and %moles. :)

[BitShifter01]

What about the time they spent actually writing the Operating System for the iPhone and all the cool features and bleeding edge technology that is bundled into this phone? I think people forget how expensive software can be and all the time that is spent in making software. Yes I'm a developer so I may be a little biased :D.

This is my 3rd iPhone so to me it is worth it. On the other hand, I don't think $100 pair of jeans is worth it. it all depends on what people are willing to pay for a product. Everyone has different wants/needs...

just my $.02 worth :)
BitShifter01

[grapefruitx]

well sort of explains why its about 400 quid here in the UK, by the time it hits the street, For me too expensive needs to be about half that (some chance)

[danjferguson]

Don't forget AT&T has costs in processing and getting those customers. Supposedly it costs a couple hundred dollars just to set someone up with an account taking into account the advertising, processing, paying employees who are doing the work etc. Really the only complaint I have on the prices of anything is the text/data package. I can see paying $30 for unlimited data, but every carrier is charging another $20 per month for unlimited texting. There shouldn't even be an option for anything less than unlimited. It should just be a flat rate. Texting package is $10 bucks. Stop allowing these cheapskate customers to have $250 messages for $5. It is $5!!! At least on AT&T I keep my rollover minutes and can use up all that service I paid for already, unlike with Verizon where if you don't use it you lose it.

I'm perfectly fine with the price of the phone. I think it is fair for one of the best electronic devices ever created.

[danjferguson]

This price is only for raw material cost, people are forgetting: R&D, ads, taxes and don'y forget that their software is super cheap


taxes are either already lumped into a price of a product or added on after the fact to pass on to the consumer. Governments are never going to let us forget about taxes.

[djellison]

I think people should take into account the subsidized price and the other price points before saying that it should be sold at 'X' price.

On PAYG it's £440.