iPhone 3G costs $173 to make

[yode]

http://news.yahoo.com/s/ap/20080624/ap_on_hi_te/tec_apple_iphone

NEW YORK - The cheapest model of Apple Inc.'s new iPhone, which is about to go on sale for $199 in the U.S., costs about $173 to make, according to an estimate by research firm iSuppli Corp.
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The phone, which updates last year's model with faster Internet speeds and an improved navigation feature, goes on sale on July 11.

Apple's profit is much more than the $26 difference between the cost and retail price. The retail price is subsidized by the exclusive carrier, AT&T Inc. In effect, the carrier will be buying the phones from Apple at a higher price, then selling them at a loss that it earns back through monthly service fees.

ISuppli estimates that AT&T will subsidize each phone by $300. Other analysts have put it at $350. In either case, the subsidy creates a substantial margin for Apple.

ISuppli said the margin appears to be higher than for other Apple products, which are generally priced 50 percent higher than their cost of materials and manufacturing.

Because the cost of components has come down, the margin is also higher than for the original iPhone, which was introduced last summer. ISuppli then put the cost of the model at $226.

The $173 estimate applies to the iPhone version with 8 gigabytes of internal memory. A model with twice as much memory will cost $299 from AT&T, but the extra memory only costs Apple another $22.89, according to iSuppli.

The most costly components of the new phone are, apart from the memory, the touch screen and the underlying display, at $20 each. The Global Positioning System chip, missing from the first iPhone, costs $3.60.

The cost estimates don't include software development, packaging, shipping or included accessories like headphones.

The phone will go on sale in 21 other countries on July 11, at varying prices, all subsidized by carriers.

Apple shares rose 9 cents to close at $173.25.

What was with the $100 that was previously stated?

 

[The Sweet Love]

Anyone want to come over and make iPhones in my basement? I will supply pizza..and more importantly no two year contract, or higher price for those not eligible for an upgrade! jkjk

However this story is very interesting. Even after hearing Apple will be making hundreds of dollars per sale..I still don't see why they would enter in an agreement with AT&T that would allow them to possibly sell the iPhone to existing customers who are not eligible for an upgrade at the price the paid Apple or higher. AT&T could break even or even make a profit off the phones...plus the extra money they make for the data plans that Apple sees none of. Seems like a bad deal for Apple.

 

[Me1000]

no one has any idea how much it costs to make...
Speculation and estimates are just about pointless!

 

[bmms8]

even if they do not make that much on the handset, they will make more than a bundle off of the appstore. also, remember that ATT is paying a subsidy, so they do get more than $199.

 

[Michael CM1]

Why does some news outlet make like it's some shocking discovery that something is sold for way more than the parts' total cost? Ask ANYBODY who manages any company and they will tell you the No. 1 cost: labor.

Part of me thinks these articles are some people annoyed at the price, because nobody ever does a story that says "Price of parts for McDonald's 32-ounce Coke: 5 cents."

 

[7on]

Part of me thinks these articles are some people annoyed at the price, because nobody ever does a story that says "Price of parts for McDonald's 32-ounce Coke: 5 cents."

I used to work at McD's. and believe me it's waaaaaaaaay less than 5 cents. the coke itself is about 0.02 cents and the cup might be 2 cents tops.

 

[Michael CM1]

I used to work at McD's. and believe me it's waaaaaaaaay less than 5 cents. the coke itself is about 0.02 cents and the cup might be 2 cents tops.

You forgot the ice and the straw!!!!! That's your missing penny!

 

[kdarling]

Why does some news outlet make like it's some shocking discovery that something is sold for way more than the parts' total cost? Ask ANYBODY who manages any company and they will tell you the No. 1 cost: labor.

I believe the current rate for electronic assembly workers in China is about $1.50 an hour.

If each worker put together just 4 iPhones an hour, the assembly labor cost is less than a US first class stamp.

There's a reason why Apple has $18 billion in cash reserves, double what they had just a couple of years ago. And they only spend 3% of their sales income on R&D.

 

[bmms8]

I believe the current rate for electronic assembly workers in China is about $1.50 an hour.

If each worker put together just 4 iPhones an hour, the labor cost is less than a US first class stamp.

that might be true, but i truly do not believe apple is trying to make money on the iphone itself. i do believe that the appstore will bring them huge revenues. along with selling the iphone comes hundreds of expenses...

 

[kdarling]

that might be true, but i truly do not believe apple is trying to make money on the iphone itself.

They're definitely making money on the iPhone itself. But I agree that Apple is keen about selling add on services / music / videos for longterm revenue.

i do believe that the appstore will bring them huge revenues.

I agree, but I had to chuckle this morning because...

1) On the one side, there are many people predicting that Apple is going to make millions off the app store.

2) On the other side, there are also lots of people trying to claim that Apple must charge 30% because "that will barely cover the cost of servers and hosting free apps, etc". Poor Apple, they'll make no money at all.

It can only be one way or the other. Hint: it's NOT #2. Jobs is out to make money, not become a charity.

Cheers - Kev

 

[bmms8]

They're definitely making money on the iPhone itself. But I agree that Apple is keen about selling add on services / music / videos for longterm revenue.



I agree, but I had to chuckle this morning because...

1) On the one side, there are many people predicting that Apple is going to make millions off the app store.

2) On the other side, there are also lots of people trying to claim that Apple must charge 30% because "that will barely cover the cost of servers and hosting free apps, etc". Poor Apple, they'll make no money at all.

It can only be one way or the other. Hint: it's NOT #2. Jobs is out to make money, not become a charity.

Cheers - Kev

I totally agree with you, they will make money on the iphone. no one knows this, but my opinion is that over time, they will make a lot on the appstore. over time it seems like expenses will go down with the appstore, while selling the actual product will always have expenses.

 

[tritonj]

iPhone is a platform, just like a PS3 and XBox 360 are platforms. the money isn't made in hardware it is in the software.

 

[dgdosen]

So now I wonder what Apple is really charging AT&T for a phone - I wonder if it's really the 199+325 or $525 - because you know that's what AT&T is representing (or rumored to represent) to the gullible.

Of the $173, I agree labor isn't included, nor is the investment in the iPhone 3G, but I know incremental labor is marginal and investment costs will be dwarfed by the volume that Apple does on this device. Both AT&T and Apple are overly greedy. I'd say a fair end-user price for the 3G phone is about $300-400 (16 GB no contract) with unlimited data - including tethering for $20/data $30/voice a month. - Let's hope the GPhone will push the market towards what is a bit more sane from an economic perspective. Otherwise, Apple will sell 10 million iPhones, when they could sell 100 million...

 

[bmms8]

So now I wonder what Apple is really charging AT&T for a phone - I wonder if it's really the 199+325 or $525 - because you know that's what AT&T is representing (or rumored to represent) to the gullible.

Of the $173, I agree labor isn't included, nor is the investment in the iPhone 3G, but I know incremental labor is marginal and investment costs will be dwarfed by the volume that Apple does on this device. Both AT&T and Apple are overly greedy. I'd say a fair end-user price for the 3G phone is about $300-400 (16 GB no contract) with unlimited data - including tethering for $20/data $30/voice a month. - Let's hope the GPhone will push the market towards what is a bit more sane from an economic perspective. Otherwise, Apple will sell 10 million iPhones, when they could sell 100 million...

I don't understand how a business can be overly greedy with money when their customer base is so loyal, i am sure we are not loyal on wasting our money on the products they offer. There is no other phone on the market today which offers anything close to the iPhone for $199.

Based on their monthly plan, members are idiotic to be upset that ATT is charging $30 for unlimited data when any other phone costs $30 for the same service. Apple customers cannot always have a "special price" forever.