iPhone 3G Manufacturing Cost of $100?

[MacRumors]

EETimes.com reports that technology teardown experts Portelligent have estimated that the bill of materials (BOM) cost to Apple for the iPhone 3G could be as low as $100. While merely an estimate based on assumed components used in the new model, this is significantly lower than the $170 BOM cost at launch for the original iPhone that Portelligent estimated based on their actual teardown of the phone.

Cost savings are estimated to primarily be derived from the touch screen display (decrease of $30), NAND flash memory (decrease of $30 for 8 GB model), and adoption of other components seen in the current iPod touch but not in the original iPhone.

Those changes are only slightly offset by new costs for the iPhone 3G. Carey said the additional cost of an HSDPA chip set are only about $15 plus another $5 for the GPS chip. He also noted that the $100 price increase for a model with 16 Gbytes flash adds to the profit margin because the additional memory chips probably cost Apple only about $20.

While Apple has announced a price of $199 for the iPhone 3G in the U.S., carriers are presumed to be providing Apple with subsidies of up to $200 for each iPhone, meaning that Apple's gross profit on the iPhone 3G may be significantly higher than for its predecessor. It should be noted that other expenses, including research and development, software, licensing, and marketing, are not reflected in these numbers and would reduce Apple's profit by an undetermined amount.


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[nagromme]

"It should be noted that other expenses, including research and development, software, licensing, and marketing, are not reflected in these numbers and would reduce Apple's profit by an undetermined amount."

R&D... not a small thing

And one more little thing not covered in that $100 estimate... manufacturing! Parts don't assemble themselves

Ah well.. the article says "could be," since they haven't actually taken the new iPhone apart. They've taken apart the old one. Guesswork, then--without the information that a real teardown will reveal next month.

[badcrumble]

If this is the case, there's absolutely no reason Apple shouldn't already have a $399 32GB model on the market RIGHT NOW except for the fact that they want an upgrade path for January (storage) and then again next june (camera stuff). Pathetic.

[tirerim]

Originally Posted by badcrumble

If this is the case, there's absolutely no reason Apple shouldn't already have a $399 32GB model on the market RIGHT NOW except for the fact that they want an upgrade path for January (storage) and then again next june (camera stuff). Pathetic.

Well, or that they can't fit 32 GB of chips in the same size case. Not necessarily true, but at least possible.

Also, if you actually have enough money to buy a new phone every year or even six months, congratulations, but I don't imagine most people are going to be upgrading that frequently. The only reason for an "upgrade path" is if you actually expect people to be buying a new one at every iteration.

[macduke]

Originally Posted by badcrumble

If this is the case, there's absolutely no reason Apple shouldn't already have a $399 32GB model on the market RIGHT NOW except for the fact that they want an upgrade path for January (storage) and then again next june (camera stuff). Pathetic.

Pathetic? Really?? Its called business.

What other phone has 16gb of memory, much less 32gb?

If Apple had given us everything we ever wanted the first time around, they wouldn't have an iPhone business anymore. That sucks, but that's life. If it bothers you that much, then wait until the 32gb version comes out. But by then people will probably be complaining about how there's just absolutely no reason why Apple shouldn't have a 64gb version on the market RIGHT NOW.

Pathetic.

[zephead]

Originally Posted by macduke

If Apple had given us everything we ever wanted the first time around, they wouldn't have an iPhone business anymore. That sucks, but that's life.

As much as that sucks for us, you're absolutely right. If the 1st-gen iPhone had 32GB storage, 5MP camera, 3G data, video-conferencing, GPS, and even MMS, then what could they come up with on the new version?

[CrackedButter]

These tear down estimates are useless if they omit x,y,z. Why are they given coverage if they estimate things piecemeal?

[Gravity]

Originally Posted by zephead

As much as that sucks for us, you're absolutely right. If the 1st-gen iPhone had 32GB storage, 5MP camera, 3G data, video-conferencing, GPS, and even MMS, then what could they come up with on the new version?

I really don't think Apple was withholding features with the first iPhone... and even if they did include all of that the first time around... there's always faster processors, greater memory and smaller form factors (except for screen space) as the technologies improve. And who knows what other must-have apps they could come up with that would require newer architecture?

Erik

[mavis]

Originally Posted by macduke

Pathetic? Really?? Its called business.

What other phone has 16gb of memory, much less 32gb?

If Apple had given us everything we ever wanted the first time around, they wouldn't have an iPhone business anymore. That sucks, but that's life. If it bothers you that much, then wait until the 32gb version comes out. But by then people will probably be complaining about how there's just absolutely no reason why Apple shouldn't have a 64gb version on the market RIGHT NOW.

Pathetic.

Well said.

I'm disappointed by the lack of a 32GB iPhone, but I'll pick one up as soon as they're released (assuming there are cosmetic changes as well - not a big fan of that cheap looking, scratch prone glossy plastic) ... Anyway, a 16GB iPhone 3G will certainly hold me over until then!!

[steve_hill4]

I don't get the rationale behind switching to a plastic back. If the rumours are true, and usually they aren't, Apple will transition away from plastics with the next MacBook iteration. They have already begun to do so with the iPod line and iMac.

[skeep5]

Originally Posted by macduke

Pathetic? Really?? Its called business.

What other phone has 16gb of memory, much less 32gb?

If Apple had given us everything we ever wanted the first time around, they wouldn't have an iPhone business anymore. That sucks, but that's life. If it bothers you that much, then wait until the 32gb version comes out. But by then people will probably be complaining about how there's just absolutely no reason why Apple shouldn't have a 64gb version on the market RIGHT NOW.

Pathetic.

You tell em!

[Sun Baked]

Originally Posted by macduke

Pathetic? Really?? Its called business.

What other phone has 16gb of memory, much less 32gb?

Yep, why do people only harp on one point in the chain and say aha, they're cheating me.

Funny, I walked into a restaurant and proved their cost of components for the meal were only $14 so why were they charging me $95 for the meal.

Cost of components can at times be less than store overhead, labor, insurance, shipping, start-up cost recovery, etc.

[Saladinos]

There are loads of overheads - like staff at the Apple Stores, the stores themselves, packaging and logistics (not a small figure if they're made in China). And then they need to pay for advertising. It all adds up. It's typical business expenses, and large profit margins are also fairly typical.

Still, it looks like they've turned that 'low volume, high margin' ideology in to a 'high volume, high margin' philosophy. Good news for shareholders.

[Anuba]

Originally Posted by macduke

What other phone has 16gb of memory, much less 32gb?

That's a good point. I think Apple users are a bit spoiled and somehow assume that iPod storage capacity is the norm.

Take the SonyEricsson X1 ("Xperia"), one of the supposed iPhone killers coming out this year. The specs are quite impressive; 800x480 touchscreen (iPhone=480x320), 3.2 Mpixel camera with flash and 30 fps video recording, quadband GSM and tripleband HSDPA, full QWERTY slide-out keyboard, front-facing videocall cam, 830 hours standby time... and...

(drumroll)

...400 MB storage. The iPhone 16 GB has 40 times more.

So it's on par with or outspecs the iPhone in every way, and SonyEricsson considers 400 MB the appropriate storage capacity to match those specs.

One blogger referred to this as "whopping": "...Simply put, you need a very huge storage capacity for your mobile phone, and fortunately Xperia X1 has it. It has a whopping 400MB internal memory, more than enough to store video games, songs, and even short movies."

[!¡ V ¡!]

Originally Posted by Anuba

...400 MB storage. The iPhone 16 GB has 40 times more.

So it's on par with or outspecs the iPhone in every way, and SonyEricsson considers 400 MB the appropriate storage capacity to match those specs.

One blogger referred to this as "whopping": "...Simply put, you need a very huge storage capacity for your mobile phone, and fortunately Xperia X1 has it. It has a whopping 400MB internal memory, more than enough to store video games, songs, and even short movies."

If I am not mistaken many phones have the option to expand with miniSD anywhere from 2-8GB chips.

400 MB is the "internal" memory, similar to digital cameras with 16-64MB of internal memory and expandable up to 8GB.

The iPhone without a mniSD slot is locked in the memory dept.

Plus, no disk mode on iPhone and iPod Touch make it seem like one critical thing is missing. When disk mode is activated, count me in for either product.

[Passante]

Originally Posted by badcrumble

If this is the case, there's absolutely no reason Apple shouldn't already have a $399 32GB model on the market RIGHT NOW except for the fact that they want an upgrade path for January (storage) and then again next june (camera stuff). Pathetic.

And how is Apple not meeting your assumptions about the iPhone "arousing pity, esp. through vulnerability or sadness" or " informal miserably inadequate"?

[MacBoy08]

Originally Posted by badcrumble

If this is the case, there's absolutely no reason Apple shouldn't already have a $399 32GB model on the market RIGHT NOW except for the fact that they want an upgrade path for January (storage) and then again next june (camera stuff). Pathetic.

hey what color shorts am I wearing, and how many fingers am i holding up..




its pathetic to see someone who thinks they have all of the answers...just sit back and enjoy the show man, dont act like zeusius and try to wow us with your probably innacurate insider info.


thanks.

[jonnylink]

Originally Posted by nagromme

"It should be noted that other expenses, including research and development, software, licensing, and marketing, are not reflected in these numbers and would reduce Apple's profit by an undetermined amount."

R&D... not a small thing

And one more little thing not covered in that $100 estimate... manufacturing! Parts don't assemble themselves

And don't forget packaging and shipping. So, my guess is their guess is wrong by a significant factor. I can't say I'm even close to an expert, but when you add all those extras in each phone has to cost a good deal (though probably not a great deal) more than $100. I wouldn't be surprised if the number doubled though. $200 seems like a reasonable figure. My guess might suck, but it is a good as theirs. Both as based on things pulled out of the air.

[mkrishnan]

Originally Posted by nagromme

R&D... not a small thing

And one more little thing not covered in that $100 estimate... manufacturing! Parts don't assemble themselves

This is true, but the BOM cost estimate is being compared to the BOM cost estimate for the iPhone 2G.

I don't see why assembly costs should be substantially higher for the new iPhone. In fact, I'd suspect they'd be lower due to continuous process improvement.

As for the R&D also, again, with Apple having already developed multi-touch, the hard touchscreen, the operating system, etc, etc, etc, with the first iPhone, I would guess that perhaps slightly less R&D cost is amortized against the new iPhone....

In other words, I think it's a reasonably direct comparison, and it should be reasonably useful in inferring that it costs Apple significantly less to make the new iPhone than it did the old one at launch.