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

[JAT]

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".

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

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...

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]

Non subsidised price in Belgium almost $1000

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

Top model costs €675 which is $942.

CRAZY!!!

 

[AdeFowler]

I wonder how much Microsoft get paid per Exchange License

 

[twilson]

And why does this matter?

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)

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.