Apple iPhone Component Costs

[GFLPraxis]

thats NOT high. Yes, computers is generally an area where margin isnt very high (buy from newegg.com, theyre getting about 11% margin. i know, i worked there). 50% sounds like alot, but when u count R&D time, thats very little.

Compared to the normal iPod, the 8gb nano costs $90, and they sell it for $250. the R&D costs arent as high either. the Nanos make the most money for them in terms of percentage.

cz

This seems very unlikely to me. I know the prices stores get them at, as I work at CompUSA; we get very little margin at all. While the possibility Apple hordes ALL the margin did occur to me, the fact that Microsoft is selling the Zune at a *LOSS* and its capacity is not significantly better than the iPod, I doubt it.

If Apple was marking up the iPod 300% over cost, then Apple's competitors could be selling 8 GB flash players for $150 and raking up Apple's marketshare.

 

[thejadedmonkey]

If Apple was marking up the iPod 300% over cost, then Apple's competitors could be selling 8 GB flash players for $150 and raking up Apple's marketshare.

http://cgi.ebay.com/Brand-New-MP3-M...QcategoryZ94930QQtcZphotoQQrdZ1QQcmdZViewItem

 

[suneohair]

http://cgi.ebay.com/Brand-New-MP3-M...QcategoryZ94930QQtcZphotoQQrdZ1QQcmdZViewItem

Do you check into things before you attempt to show someone up?

http://feedback.ebay.com/ws/eBayISAPI.dll?ViewFeedback&userid=hongding-1688&myWorld=true

Fake,8GB player has512MB,Offer 100% satisfaction&warranty and dont answer3emails

SCAM!! hacked the firmware & stuck fake 8GB label on player, ACTUAL MEMORY 483MB

Follow-up by berea1978berrym: SEARCH GOOGLE FOR "CHINESE MP4 SCAM" TO SEE WHAT THEY DO! PLEASE DONT BUY ! SCAM

It would seem that is not a 8GB player.

 

[Music_Producer]

50% margin is negligible. Many manufacturers have a 100-200% profit margin. Everyone forgets that the major cost Apple (or any manufacturer) has to face, is marketing. Sure, there are developer, licensing costs, etc.. but marketing beats everything.

A manufacturer has to factor in the cost of marketing.. which can go into billions and make what seems like a huge profit - into almost break even. Most posts I see which claim 'Ahhh.. Apple should have priced this lower' are nothing but people who have no idea how a company does business. You don't think Apple wanted to price this lower? Sure they did, that's why its a 50% margin rather than a 100% one.

Pro-musicians are a different category of customer. The manufacturers know that they will pay for quality.. so pro-audio manufacturers make 200-300% profit on their gear. And yes, we pay for it without complaining.

 

[3nm]

Do you check into things before you attempt to show someone up?

http://feedback.ebay.com/ws/eBayISAPI.dll?ViewFeedback&userid=hongding-1688&myWorld=true





It would seem that is not a 8GB player.

own3d LoL

anyways, to be fair, i think we also have to consider hidden costs such as support, R&D, etc. ppl are basically gonna be paying the whole "apple experience."

 

[cgc]

How much do ya figure 2+ years of R&D on that phone cost Apple? I think the cost is well worth it.

 

[Counterfit]

You'd expect that with contract, the iphone would be cheaper but nooo. You HAVE to be with cingular in order to use the iphone (properly). I have no problem with the cost of the phone itself. but why make us be with cingular/make the phone locked if you're not giving a discount on the phone? It's not like without the contract the phone will decrease or increase in profit much. I still wonder why the phone is locked, with a $500-600 price tag.

There is most likely no subsidy on the phone. This is so Apple controls the iPhone, and Cingular has pretty much no say in it (in regards to software and logos on the phone). Notice how there was no Cingular name or logo except next to the cellular signal bar on the phone?

As for the cost of data on Cingular, T-Mobile's smartphone plan is $29.99 per month, which includes unlimited data and hotspot access (I can't tell if their $5.99 plan includes any kind of data, or just through the supplied WAP browser.). The most similar plan from Cingular, which doesn't include hotspot access, as Cingular doesn't have any, is $19.99 per month. I can attest to this working with any application as well (both Google Maps and Opera Mini).

 

[GregA]

If Apple is going to sell as many iPhones as they can make in the first few months, there's no reason to charge less. You're leaving money on the table. There's plenty of time to drop prices.

Agreed - Apple should charge at a level that has them pushing the speed they can supply iPhones.

If they charge too much, they may make 50% on it but there'll be phones lying around unsold. Charge too little and there'll be a huge waitlist and upset buyers.

Recoup some of the R&D!

 

[GregA]

the Mac OS X cost is factored in at $7 (= $70 million dollars of work to make it run on this new platform) and that will also be used on other devices too.

Ah, I missed that. Good.

I don't know how much Apple spends on their R&D, prototypes, setting up construction etc - I would be surprised if they didn't have multiple iPhone potentials (& possibly separate teams), all of which has to be factored into the design costs. I wonder how much it really is.

why make us be with cingular/make the phone locked if you're not giving a discount on the phone? It's not like without the contract the phone will decrease or increase in profit much. I still wonder why the phone is locked, with a $500-600 price tag.

Do you know that for a fact?

I definitely agree - if Cingular isn't subsidising it, why lock people in? Of course, perhaps Cingular says it's the cost of altering their voicemail (if so, I'd guess Cingular has made a VERY good deal - the voicemail is a great idea but not that revolutionary)

Look like LG was planning a similar product

I doubt it. No more than Windows 3.0 & MacOS6 were similar (both had screens, keyboards, etc). The LG is just a touch screen - how it works we've no idea.

 

[leezly]

Apple iPhone Component Costs (real profits)

IMHO a contract with a phone always means that they will get the discount you get for the phone back through the contract. Usually a contract causes more costs for you than you would have without it. True? Sure you have all those useful schemes where you save money on calling your girl friend or grandmother. But this just keeps you calling more and thus spending more.

Anyhow, recently Amazon was offering the iPhone for sale for 1000 Euro. Though, it cancelled that offer again. Maybe due to complains of Apple or unreliability. But this should give you a clue of the real price aimed by APPLE. Meaning a profit of about 75% (without research an stuff), doesn't it?

leezly

 

[BuzWeaver]

Since this thread is talking about money. This is a good little article on the profit margin. Not to mention if as Job's illustrated that there are 1 billion cell users world wide, though I heard just yesterday those numbers are more like 2 billion cell users world wide, but who's splitting hairs when it comes to profit margins right? If Job's is getting 1% of that 1 billion he's still going to make a cool 100 million dollars.



http://www.macworld.com/news/2007/01/19/iphonemargin/index.php

 

[Speedracer04]

But, this does'nt account for their R&D. What does it cost to have a team of engineers, designers, developers, (developers, deveoplers) and lawyers running for 2.5 years.

A team of 10 engineers, 5 designers,10 developers and 10 lawyers I would estimate at 8.75 million dollars at an average salary of $100,000 each per year. Considering apple is projecting to sell 10 million iPhones by the end of 2008 with an average price of $550 (($600+$500)/2)....this puts their gross sales at 5.5 billion dollars. Subtracting the cost to produce the iPhone (2.3 Billion)...this gives them a gross profit of 3.2 Billion dollars

I could be off with the number of engineers, designers, devlopers and lawyers...but I think you get my point. The cost for them to develop the device is a small margin in the whole scheme of things...

 

[GregA]

I could be off with the number of engineers, designers, devlopers and lawyers...but I think you get my point. The cost for them to develop the device is a small margin in the whole scheme of things...

That's a good salary estimate in many ways, I think. Need to at least double that salary to get the costs of supporting those same employees in the office (computers, real-estate, etc et) and add the costs of prototyping, setting up manufacturing facilities.

I would also assume that for every cool-new-product Apple releases, 4 more don't ever happen - so multiply the whole cost by 5? (since it needs to be paid for by the ones that work!)

 

[gwangung]

That's a good salary estimate in many ways, I think. Need to at least double that salary to get the costs of supporting those same employees in the office (computers, real-estate, etc et) and add the costs of prototyping, setting up manufacturing facilities.

I would also assume that for every cool-new-product Apple releases, 4 more don't ever happen - so multiply the whole cost by 5? (since it needs to be paid for by the ones that work!)

Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

 

[Speedracer04]

Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

After reading your posts I can easily understand that the cost for a single employee including health care, equipment, building costs and what not could possibly be much higher...but I think your missing my point.

Yes I came up with a number of 8.7 million in my post based off of a 100,000 annual salary...even if I came up with a number of 50 million or 200 million for R&D...my point was that if you look at the big picture it is still a relatively small amount.

Im not going to assume I can pinpoint the exact salary or budget things even close to what they really are. My point being that even with an R&D cost of 200 million (which is definitely possible) they are still netting a profit of close to 2-3 billion by the end of 2008. Not bad for a first year device. Apple posted a profit of 1.0 Billion for last quarter...

Neither of us will will be able to accurately project these numbers...Im sure apple has analysists that do this full time...so in the end this is all just basically for fun and to get some type of (large) ballpark idea.

 

[GregA]

Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

When I've compared contracting to employment, it's usually around the 1.5 multiple. Of course, both end up supplying the desk/computer/etc. I would have estimated that double an employee salary would cover all that (as I did) - you're saying it costs 4 times the salary?

That just doesn't gel with my experience at al.

 

[gwangung]

When I've compared contracting to employment, it's usually around the 1.5 multiple. Of course, both end up supplying the desk/computer/etc. I would have estimated that double an employee salary would cover all that (as I did) - you're saying it costs 4 times the salary?

That just doesn't gel with my experience at al.

I thought you were including the support personnel in your costs, and with projects like these, these personnel would be dedicated...and you'd have benefit and other overhead to cover them as well as the engineers.

But perhaps I misunderstood.

 

[GregA]

I thought you were including the support personnel in your costs, and with projects like these, these personnel would be dedicated...and you'd have benefit and other overhead to cover them as well as the engineers.

But perhaps I misunderstood.

Hell, it's all assumptions. Is 30 full time people at 100k for one project an accurate guess? What multiple on those people for benefits? and desks etc? How many failed projects need to be supported by the successful ones? What are all the other associated costs?

I just meant that the guess made (30ppl x 100k x 2.5years) showed a high figure, but even then needed to include much more.