Engineering and test is part of R&D. Production is included in the table above. Marketing, distribution and sales is handled in large part by the carriers.
Got a tip for us?
Let us know
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
iPhone 5 Component Costs Estimated to Begin at $199
- Thread starter MacRumors
- Start date
- Sort by reaction score
Engineering and test is part of R&D. Production is included in the table above. Marketing, distribution and sales is handled in large part by the carriers.
So after about 6 - 8 months into the data contract it becomes profit for the carriers. Must be nice...
And as previously stated, if there was only $30 difference between models, nobody would buy the 16 or 32gb models.
Marketing genius clearly.
Really? That's quite low give Scilicon Valley wage... Especially rumor of how much a slave driver the Tim Cook/Job management style is...
We might pay $200 upfront, but the carrier pays Apple over $600 per iPhone. (Average $640, I think. It's a big upfront cash hit and affects carrier stocks. This is a major reason why they often push non-Apple devices in their stores.)
We then pay the carrier back for this $400+ loan over a two year contract, at a rate of about $20 per month. (AT&T has stated it takes an average 20 months for them to get back the subsidy.)
WHAT DOES IT COST TO MAKE AN IPHONE?
People keep bringing up R&D and other costs, but never seem to sit down and calculate them. So I did. Using figures from filings and recently revealed Apple trial testimony:
Apple makes an average 53% gross profit margin ($340) on iPhones. That's their raw revenue after paying for the parts, manufacturing, packaging, shipping, and patent licenses per device.
Of that $340 gross per phone, about $20 goes to R&D, $50 to support Apple employees and buildings and sales and ads, and $70 is put aside for taxes... leaving a nice net profit of $200 (30% net margin) per phone.
Note that the R&D portion allocated here is probably high. Perhaps double or more. iPhone revenue is so much higher than other devices, it undoubtedly subsidizes R&D for lower margin devices like the iPad, iPod, Apple TV, etc.
Summary: Out of the $640 Apple sells each iPhone for, $300 goes to making it, $140 goes to corporate costs, leaving $200 or more clear profit to stick in the bank.
Not in my world. R&D is pre-production: prototyping, conceptual modeling, etc. Once those efforts flesh out requirements then it goes to engineering, production, test, etc.
That's hilarious! What makes you think Apple doesn't have huge marketing cost associated with their MOST POPULAR global product?
Distribution and sales IS NOT only handled by the carriers. Ever been in an Apple store, on the Apple site.
Did you even read the article? It says right up front:
"the estimate, which does not include numerous other costs involved in product development, manufacturing, and sales, such as research and development, software, patent licenses, marketing, and distribution expenditures"
(People living in a fantasy world...)
The thing that stood out to me was the $8 for assembly.
----------
I've read somewhere that it wouldn't cost much more to make in the US. The problem is the lack of supporting infrastructure,. For example all the small parts like screws and such made by others. In China it's just down the street if you run out. It could be weeks if not local, and the more that becomes prevelent the harder it is to run a lean manufacturing system, then costs go up.
----------
I've read somewhere that it wouldn't cost much more to make in the US. The problem is the lack of supporting infrastructure,. For example all the small parts like screws and such made by others. In China it's just down the street if you run out. It could be weeks if not local, and the more that becomes prevelent the harder it is to run a lean manufacturing system, then costs go up.
I also mentioned the overhead. Those datacenters didn't build themselves. And they certainly haven't paid for themselves yet.
I noticed that too. Imagine how much the labor cost would be if it were assembled in the US or EU.
I was hoping throughout the rumor mill that we would see decreased prices because you can buy a 64 GB microSD card for $70... Yet we have to pay $200 more for an additional 48 GB, where apple is paying $31. No need to gouge those who want more storage on their phone to that degree.
The manufacturing cost is actually higher than it used to be.
Interestingly, Foxconn had a 2.7% profit margin back in 2007, but that has dropped to 1.5% over the years, so they're making less in profit now.
Probably a combination of higher wages, more complicated designs, and Apple negotiating the lowest price possible.
Depends on the automation.
IIRC, there was a video talking about an iPhone going through 50 workers to be built, a step at a time.
In the US, most of those steps would be done by robot. And, in fact, that's why Foxconn is buying one million robots over the next few years.
Also, in the US, each soldered board would be examined by automated 3D X-Ray for flaws. At Foxconn, it's only one board out of every batch of ... hundreds? So the US longterm yield would be better.
Apple once made a big deal about how easy it was to get Chinese manufacturing engineers, and about how "all the factory engineering firms in the US would fit" in the exhibit room or something. Of course, that's actually over 5,000 such firms, each with up to a dozen employees. Typical Apple handwaving to avoid questions.
The problem is profit margin more than anything. You could increase the cost of manufacturing from $8 to $80 and Apple would STILL profit more than most any other phone maker in the world. But that's not their style.
People don't get phones at cost.
And cell carriers are in the game to make a profit to....though people always give Apple a pass while the telco's work on a MUCH slimmer profit margin.
You probably think that aluminum in iPhone costs more than $2Aluminum (or plastic) is not what defines the quality and cost of the device. As it turns out iPhone 5 is a relatively cheap phone. Nothing surprising here. Given the fact that Apple skimped on many components (lower resolution screen, no NFC chip, no second radio chip, just 1GB of RAM etc.) its BOM is lower than the competitors. Here are some BOM numbers for other phones:
Nokia 900 - $209
Samsung Galaxy S2 Skyrocket - $235.50
Link
I have not seen numbers for Galaxy SIII but they should be higher than that for Galaxy S2 Skyrocket.
This puts iPhone 5 into a upper middle class among smart phones but way behind the elite phones.
The international version of the SIII only has 1GB RAM as well: http://www.samsung.com/hk_en/consumer/mobile/mobile-phones/smartphone/GT-I9300MBDTGY.
Thanks for posting this. There's no need for everyone to guess what their margins are, they publish them every quarter. This post sums that up nicely.
No one is saying they shouldn't make money. That would just be stupid. But they are like crack dealers.
LOLEdit:
I’ll sell you the crack cheap but you pay big $$$ for the needle and spoon. LOL
Yep, where Apple's income goes to is pretty much laid out in their filings.
Now, where the money comes from, that was the big surprise revealed in the Apple v. Samsung case evidence. Previously analysts had estimated the iPhone gross profit margin to be 35-50%. The trial documents revealed that it was higher than anyone thought: 49%-57% depending on model, IIRC.
This also meant that the iPhone now accounts for almost 60% of Apple's profits, which helps explain why they're so serious about trying to stop any competition via legal means. A lot at Apple is riding on the iPhone selling well.
OTOH, iPads have much lower profit margins, and thus are not a huge factor. That was a slight surprise, too.
It's sold directly from Apple at $649 ($700 in Canada even though our dollar is worth more than the American dollar).
I would guess that non-Apple retail outlets are lucky to get even $10 from the sale of an iPhone, probably much less.
A retailer would never sell a $649 item for only a $10 profit. They would go out of business very fast.
Their profit is probably more like $200.
Nope, Apple can't do that. They're always under pressure by investors to improve sales quarter over quarter. When profits drop, the stock price will drop.
You are dreaming in technicolor. I would bet you $10,000 right now that it;s closer to $2 than it is to $200.
Walk into your local Best Buy and ask the manager how much they make on the sale of an iPhone. It's almost nothing.
Yes, it's sold directly by Apple as well of course, although the majority of phones can't be sold by Apple directly I imagine, but in that case there is a cost involved with the store as well. Anyway, the actual numbers have been published so the speculation can end.