iPhone 5s Component Costs Estimated to Begin at $199

[alent1234]

This is the type of innovation that doesn't get mentioned in the press because it isn't sexy enough.

It's entirely possible that there will only be one model of iPhone 6 that will work all around the world on every supported carrier (in your choice of color, of course). Is anybody else pursuing this as well?

Hell, Samsung even sells the GS4 with different CPUs for different markets around the world. Talk about fragmentation...

normally qualcomm requires a customer to buy their CPU and radio chips for a phone. since the US is way ahead in LTE and we also have CDMA here, samsung has to buy qualcomm LTE chips and CPU's for their US phones.

apple somehow struck a deal with qualcomm where they only buy their radio chips and get support in pairing them with their own CPU's

 

[Jetfire]

Agreed...adding just the labor costs increases it to $200....

FTA
"The cost of assembly adds another $8 per unit"
That's you labor.

 

[Northgrove]

Let's do some quick math here, and let's assume it costs the same to make each model, and assume all are 64GB. And assume no other payouts are being done for R&D, shipping, labour, etc.

For the first weekend of its release:

$199 * 5,000,000 = $995,000,000

$649 * 5,000,000 = $3,245,000,000

$3,245,000,000 - $995,000,000 = $2,250,000,000

Assuming all 64GB, Apple banked 2.25 billion over opening weekend alone for a 64GB 5s.

Holy smeg.

BL.

And what's crazy here is that unless Apple does this, they're disappointing and their stock will tank. Talk about a game with high stakes, haha!

 

[WestonHarvey1]

Apple has no obligation to leave money on the table. They charge a price that gives them the margin they're comfortable with, and they can't make enough of them at that price. They could probably charge even more if they wanted to.

 

[avanpelt]

So, the 16 GB iPhone 5s costs $191 in parts and the 64 GB 5s costs $210 in parts? You can't tell me that there's a lot of extra time required to assemble a 64 GB version vs. a 16 GB version. So, Apple is paying an $19 premium for the 64 GB flash memory and charging the end-user $200 more. That is highway robbery plain and simple.

That said, people are continuing to pony up for the prices Apple's charging so there's really no reason for Apple to lower the prices.

 

[applesith]

Let's do some quick math here, and let's assume it costs the same to make each model, and assume all are 64GB. And assume no other payouts are being done for R&D, shipping, labour, etc.

For the first weekend of its release:

$199 * 5,000,000 = $995,000,000

$649 * 5,000,000 = $3,245,000,000

$3,245,000,000 - $995,000,000 = $2,250,000,000

Assuming all 64GB, Apple banked 2.25 billion over opening weekend alone for a 64GB 5s.

Holy smeg.

BL.

So let's just ignore everything? Holy smeg.

----------

So, the 16 GB iPhone 5s costs $191 in parts and the 64 GB 5s costs $210 in parts? You can't tell me that there's a lot of extra time required to assemble a 64 GB version vs. a 16 GB version. So, Apple is paying an $19 premium for the 64 GB flash memory and charging the end-user $200 more. That is highway robbery plain and simple.

Really? I'm pretty sure customers are willingly exchanging money for the goods.

 

[Maschil]

Sure, but Apple do rip us off respect storage:

"$191 on components to build a 16 gigabyte iPhone 5s. The cost rises to $210 for a 64GB unit"

They charge $200 for something that costs them $19, that's quite a profit they make there

yah thats unfortunate. I really wonder what apple plans on doing with all the cash though lol

 

[Buckeyestar]

These articles never take into thought of R & D costs, shipping costs, and labor costs. So now we will have 30 pages of apple is ripping people off posts

That doesn't excuse that insane markup for the difference between a 16 and 64GB model, it's a 1000% markup. Nuts.

 

[joshdammit]

And what would you say of the "R & D costs, shipping costs, and labor costs" associated with the $19 upgrade from 16Gigs to 64Gigs in the 5s? Apple charges $200 for this.

That Apple charges too much for storage upgrades? This should be common knowledge, and yet apparently people still need to complain about it on MacRumors.

But hey, no one ever said that living in Apple's negativity-free RDF is easy. Right?

It's much easier than displaying public animosity towards people for liking different electronics than you.

Personally, I like the iPhone enough that I'll pay a little extra for it, whereas when I used Android I wasn't a big fan of it. Thankfully, storage isn't really an issue these days. Yes, it's wonderful that Android phones can have their memory cards swapped out, for those who for some reason have over 32gb worth of files, photos and music that they need to carry around with them everywhere. Myself, I'm not one of those people.

Go ahead and call me an "iSheep" if it will make your day better; I used both platforms, and I made my decision. And it was a good decision.

 

[avanpelt]

Really? I'm pretty sure customers are willingly exchanging money for the goods.

I amended my post probably right about the time you were posting this.

 

[joshdammit]

yah thats unfortunate. I really wonder what apple plans on doing with all the cash though lol

Research and development of new products, expansion of Apple's facilities, purchasing of US chip manufacturers so they can get their development out of China, finally.

 

[kwrzesien]

What I don't understand is the $19 cost difference between the 16GB and 64GB, and the $200 price difference. Same R&D, shipping, labor, marketing, etc. costs there.

This.

It is time to do something about the memory inequality. $200 for 48 GB of NAND is not acceptable, and they need to figure out how to work in a new price structure. One way would be to change the levels to $50 instead of $100. The other would be to bump the base level from 16 GB to 32 GB. Both options would be well received and Apple can choose to do one with the iPhone 6 release (probably the later) and then do the other (the former) across all product lines at a later time. It will just increase their demand and customer satisfaction, as well as differentiate their price points for products more. Right now they have overlaps all of the place (32 GB 5c vs 16 GB 5s) that are confusing and arbitrary when the real NAND price differences are $19 for 16 GB -> 64 GB.

 

[tbrinkma]

Let's do some quick math here, and let's assume it costs the same to make each model, and assume all are 64GB. And assume no other payouts are being done for R&D, shipping, labour, etc.

For the first weekend of its release:

$199 * 5,000,000 = $995,000,000

$649 * 5,000,000 = $3,245,000,000

$3,245,000,000 - $995,000,000 = $2,250,000,000

Assuming all 64GB, Apple banked 2.25 billion over opening weekend alone for a 64GB 5s.

Holy smeg.

BL.

Um, you forgot about the fact that a significant portion of that was sold by resellers. Unless they get $0.00 of the sale, then Apple's share is significantly less.

 

[applesith]

I'm sure all the people complaining about the markup on 64GB model are likely overpaid for what they do from 9-5 everyday.

 

[knuster]

Let's do some quick math here, and let's assume it costs the same to make each model, and assume all are 64GB. And assume no other payouts are being done for R&D, shipping, labour, etc.

For the first weekend of its release:

$199 * 5,000,000 = $995,000,000

$649 * 5,000,000 = $3,245,000,000

$3,245,000,000 - $995,000,000 = $2,250,000,000

Assuming all 64GB, Apple banked 2.25 billion over opening weekend alone for a 64GB 5s.

Holy smeg.

BL.

WRONG!!
Maybe for the usa but not in europe!!

My iphone5S 64GB was 899€
899€ = 1211,23$
Soooo apple banked wayyyyy more than your estimated 2.25 billion.

 

[Rocketman]

Some quick math. $200 cost. $550 retail. $350 gross margin. 35% net margin or $192.50. $157.5 each unit amortized overhead. That includes 28% taxes or $98.00. So net R&D + overhead is $59.50. Only about 10% of retail due to taxation.

Rocketman

 

[joshdammit]

This.

It is time to do something about the memory inequality. $200 for 48 GB of NAND is not acceptable, and they need to figure out how to work in a new price structure. One way would be to change the levels to $50 instead of $100. The other would be to bump the base level from 16 GB to 32 GB. Both options would be well received and Apple can choose to do one with the iPhone 6 release (probably the later) and then do the other (the former) across all product lines at a later time. It will just increase their demand and customer satisfaction, as well as differentiate their price points for products more. Right now they have overlaps all of the place (32 GB 5c vs 16 GB 5s) that are confusing and arbitrary when the real NAND price differences are $19 for 16 GB -> 64 GB.

While I would certainly love to pay less for storage, you're acting like Apple didn't consider this at all ("...they need to figure out how to work in a new price structure.") They're not charging us that extra money because they have to, they're doing it because they want to.

 

[legacyb4]

Clearly the benefits of designing your own hardware at a scale that suppliers can't ignore; very little is ever reported about the behind-the-scenes engineering that goes into the iPhones (miniaturization, custom hardware, etc.) which would be a fascinating topic to read about.

 

[jmerchlinsky]

Apple releases some margin information as part of a court case. The iPhone margin was reported to vary between 49% and 58%. It's not clear if that varied over time of models. This shows the iPhone margin is much higher than on other Apple products, particularly iPads which had margins between 23% and 32%.

Apple prices iPad much more competatively. Why? Because they have to. Apple's pricing strategy is clearly US centric at this point. In the US the price of the iPhone is obfuscated by the carrier subsidy. Consumers generally aren't aware that they are shelling out $650 for the phone because they're only putting down $200 up front and the other paymentis routed through their carrier.

BTW, a 58% margin would suggest total cost to Apple would be $275 when all other expenses are taken into consideration.

 

[MRSucks]

Okay, I will make one that will look like iPhones with more features. And sell it for (much/slightly) lower price.

Wait, there are so many already doing that?

There is really nothing to get angry about here.

 

[ValSalva]

Apple has no obligation to leave money on the table. They charge a price that gives them the margin they're comfortable with, and they can't make enough of them at that price. They could probably charge even more if they wanted to.

True, it's all about supply and demand. And there is plenty of demand. I just wish Apple would up the basic storage to 32, 64, and 128GB though. Maybe next year...

 

[Rootus]

That doesn't excuse that insane markup for the difference between a 16 and 64GB model, it's a 1000% markup. Nuts.

The point of a business is to charge as much as the market will bear, not as little as they can scrape by with. If you think you can run a more successful phone business by doing it your way, by all means...

 

[mschmalenbach]

When I worked as a design & production engineer in the electronics industry (admittedly some time ago!), we had a rough rule of thumb during early design stages.

The BOM (bill of materials) cost could not be more than 1/3 of the target end price. This allowed us to account for R&D, shipping, marketing, other general admin & fixed costs etc etc etc, and still make reasonable net margins at the end of the day.

It looks like Apple is not too far from this model, though they squeeze more margin out of the supply chain than is usual, and make a big chunk of change out of the middle-of-the-range models, which is where I believe the majority of the actual profit comes from - much bigger margin and a sizeable percentage of unit volume sales combines to generate >50% of the profits for the product in question - especially the iPad, iPod and iPhone.

 

[Dionte]

So how much would 2 gigs of ram cost over 1 gig?

 

[BaldiMac]

Sure, but Apple do rip us off respect storage:

"$191 on components to build a 16 gigabyte iPhone 5s. The cost rises to $210 for a 64GB unit"

They charge $200 for something that costs them $19, that's quite a profit they make there

And what would you say of the "R & D costs, shipping costs, and labor costs" associated with the $19 upgrade from 16Gigs to 64Gigs in the 5s? Apple charges $200 for this.

But hey, no one ever said that living in Apple's negativity-free RDF is easy. Right?

At some point, you have to realize that the cost to produce each additional widget does not determine the amount you charge for it.