iPhone 7 Component Costs Estimated to Start at $220

[noupf]

Before people lose their spit over how much profit the Cupertonians rake in per device, stop to consider costs for:

• Research and Development
• Marketing
• Shipping
• Taxes
• Legal
• Regulatory compliance
• Facilities (leases and sundry expenses)
• Salaries and benefits
• Warehousing
• Product testing
• Event planning and management
• Internal and Retail training

I'm sure there are others but those are at the top of my head.
Also if customers and/or suckers (depends on your perspective) choose to dole what what they're asking for, then keep charging what the market will bear. Capitalism folks!

Couldn't have said it better myself.....you sort of touched on it, but not in totality......is the nearly 70,000 people that apple employs.......you know, to run the entire company.

The ignorance of many people ( not you danakin ) on this forum in simply mind boggling. They have an entire ****ing company to run and pay salaries for people. The raw cost for an ihone is not the end all of this equation.

Example: Random Iphone

Selling Price: $800
Total Raw Cost: $220
Gross profit: $580
Costs to run the business per iphone sold ( pssssssssst, thats the 70,000 employess ): $260
Net profit: $320 per phone
Net Profit margin: 40% ( which is available on their quarterly earnings reports )

For those that dont know, net profit is the profit left over when you sell something, after you subtract every single possible cost to run your business, in this case, to run all of apple.

The result, they are making an average profit margin for their phones.

Just for your reference, that average net profit margin on most clothing and footwear you buy is anywhere from 30-60%. Its even higher ( 75-100% profit margin ) if you buy higher end, name brand clothing ( nike, under armour, banana replublic, AE and so on )

So stop whining.

 

[BootsWalking]

I don't begrudge Apple making a healthy profit. They took an enormous risk with the original iPhone and are still reaping the rewards of that effort. Besides there are products with higher profit margins that aren't nearly as useful or innovative - *cough* HP inkjet ink.

 

[Dmunjal]

No, Apple spends more R&D per product than any other company. And you're crazy if you think a table maker makes as much as a software or hardware engineer in Cuptertino, CA.

Apple spends less for R&D as a percentage of revenue than most tech companies.

 

[Dmunjal]

Actually, I would vote to increase minimum wage to $15 an hour considering the purchasing power of minimum wage in the 1960's was equal to about $21 an hour today. $15 is more in line with late 90's minimum wage. Yet, I also understand that the cost of the iPhone is closer to $450 due to the overhead of the business and the R&D on the phone, etc.

As for employers' costs, you could buy 3 big macs at McDonald's in 1960 after working 1 hour minimum wage at the same place. Now, you can't buy 2. But at the same time, the cost of the meat is incredibly less, probably a fraction of what it was at that time - and is of lower quality. The same circumstances seem to apply to just about any other minimum wage paying business out there. A department store clerk in the 80's could make 3x minimum wage, now they'd be at Walmart and on food stamps.

We, as a country, raced to the bottom and look where that got us - the bottom.

In 2016, five silver quarters is about $24. Better than your $21.

 

[Dmunjal]

R&D Cost? Marketing cost? Shipping cost? Storefront overhead? None of that is ever brought up

Even including all that, Apple has higher profit margins than any of their competitors and even most hardware companies.

 

[Dmunjal]

It is a closely guarded secret that car dealerships buy cars from their manufacturers for less than 50% of the MSRP (sticker price).

How do we know this for sure?

Hackers have broken into car dealer's invoice system and discovered this.

Of course, the entire auto industry vehemently denies this.

But knowing how little these phones cost get me thinking car dealers do indeed get their new cars at 50%.

This article reveals the dirty little secret about buy a car vs. leasing a car:

http://www.truthin7minutes.com/leasing-a-car/

Cars are typically less than 25% profit margins. Apple is close to 40%. Big difference.

 

[Brandhouse]

iPhone 7 component costs are estimated to start at $219.80, which is $36.89 higher than iPhone 6s, according to a preliminary teardown [Excel] of a 32GB model by IHS Markit.

I just love assumptions.

 

[gentleman00]

The cost estimates does not include OS or Software.
It does not include marketing and other expenses.
It does not include taxes, tariffs, shipping.
It does not include profit and investor return.
It does not include R&D.

When you do, I believe that Apple states gross margins around 40% putting the per phone closer to $400.

There is fixed cost and then there is variable cost. What you listed above is the fixed cost required to produce each iPhone unit. Apple's high margin of profits comes from assembling components of iphones in China where labor costs are much cheaper than they are in the United States. Apple can boast as much as it wants about how evolutionary or revolutionary its products are, but it comes at the expense of the average American worker. So the question for all of you who religiously worship Apple' gadgets is this: when will see Apple manfacture iPhones in the United States instead of China? What can be more patriotic than that?

 

[iMLo]

You'd think that with half a trillion dollars, they might use a little more of their own money for research and stuff and make the iPhone cost closer to its production cost.

Sure. Why don't you use your money to offset the cost of my iPhone too? I swear people do not understand business at all!

Any company doing what you suggest wouldn't be in business long. They charge the exact right amount, which is what the market will bear while keeping volume high to keep their market share. What you are suggesting is something only a non-profit would do. Welcome to the world, this is how it works.

 

[Brandhouse]

Article Link: iPhone 7 Component Costs Estimated to Start at $220[/QUOTE]

There is fixed cost and then there is variable cost. What you listed above is the fixed cost required to produce each iPhone unit. Apple's high margin of profits comes from assembling components of iphones in China where labor costs are much cheaper than they are in the United States. Apple can boast as much as it wants about how evolutionary or revolutionary its products are, but it comes at the expense of the average American worker. So the question for all of you who religiously worship Apple' gadgets is this: when will see Apple manfacture iPhones in the United States instead of China? What can be more patriotic than that?

That's a question though that is applicable to any country of origin for a. the physical location of a company and b. how/where the parts are manufactured/assembled. In a utopian world they would be made in the country of origin, e.g. Apple/Amercia, BMW/Germany but that is too idealistic and in a world of cost/profit, you'll never get that where labor rates are higher in comparison of country a to b.

 

[SirRahikkala]

People are just circle jerking that even the iPhone parts are maybe less than 300$ but "labor, marketin blaa blaa costs are bit" and at the same time forgets that Apple has $231.5 billion in "cash"(Q3). So tell me again how small the margins are after all those costs?

 

[macs4nw]

Wait, wait! The battery costs just est. $2.50??? Omg, such a cheap part can ruin an entire phone line, e.g. Samsung Galaxy Note 7? Wow, just wow!

Surprised about that too. Apparently the battery was ever so slightly larger than the allocated space in the enclosure, requiring it to have been squeezed into position during assembly, shorting out the contacts.

 

[Teon]

"iPhone 7 Component Costs Estimated to Start at $220"
that's too much, rly

 

[Abazigal]

Even including all that, Apple has higher profit margins than any of their competitors and even most hardware companies.

And that is apparently a bad thing because ...?

 

[RamGuy]

removing the headphone jack must of saved a lot of $ per unit. so courageous of them, saving all of that money.

The headphone jack has to be one of the cheapest components in modern day smartphones. You can source them from an endless list of suppliers. The production of such a component is so overly stimulated in the market so most suppliers have to really compete on prices, driving prices way down. They are dirt cheap to produce and and you won't really see any differentiation on quality between various suppliers so you can source strictly on price alone.

Apple did obviously not remove the headphone jack due to it's component price. But it's most likely a economical driven decision as it will somewhat settle the market before next years iPhone 10th Anniversary Edition that most likely would not feature the headphone jack due to drastic design changes. Apple simply removed it on the iPhone 7 in order to make all the fuzz and negativity settle and go away by the time the 10th Anniversary Edition hits the market.

It also makes perfect sense for Apple to remove the headphone jack in order to push Lightning for use on headphones as Apple gets a royalty from all manufactures adopting the use of Lightning in their headphones and it also makes them have a directly competitive advantage the next couple of months by being prepared with their Beats and Apple headphones line-up adopting Lightning and their new Apple W1 wireless/bluetooth before anyone else on the market.


From a consumers point of view, the whole thing is a mixed bag. But there is no denying that by pushing the use of a digital connection like Lightning for headphones, you open up the possibility for much less EMI noise by having the DAC outside of the phone. Serious audio manufactures like B&O, Sennheiser etc can now integrate great DAC's and amplifiers directly into their headphones instead of being forced to relay on whatever is inside the phone. We should be seeing some great improvements to higher-end headphones as a result of this.


And by measurements over at Head-fi.org, they seems to already have confirmed that having the DAC outside the phone within the Lightning to minijack adapter that Apple sells and supplies for free with the iPhone 7 provides great improvements in terms of EMI noise and the DAC itself performance as good, if not slightly better than the already great Cirrus Logic DAC's Apple deliver within their products.

 

[Substance90]

Cue the apologetic "what about the cost of R&D" comments.

 

[StevieD100]

Who said that?

We know Apple makes a very healthy profit margin. They have some of the highest in the electronics industry.

We hear about it every 3 months.

But that is not enough for Wall St. Otherwise why would so many people short the stock.
Apple can't win with Wall St.
It must be getting close to the time to take the company private and stick a big middle finger up at the [redacted][redacted] [redacted] on Wall St.

 

[el_senor_mike]

I know a lot has been said about the removal of the 3.5mm jack, and I know everyone has an opinion, but I'd like to make a couple of points, particularly from a cost standpoint. By the way I'm not here to flame or get into an argument - I'm just adding my thoughts.

Firstly, cost. A 3.5mm jack of the standard quality used in a smart phone (in other words no audiophile equipment) costs pennies / cents. The expensive part of any music device is the combination of DAC chip, I/V conversion chips, low pass filter, voltage amplification and current amplification. However, the iPhone 7 still has speakers and will play music through the Lightning adaptor, so it still needs both a DAC and amplification stages.

Realistically, the design, build, testing and manufacture of the bundled Lightning to 3.5mm adaptor would be significantly more expensive that the inclusion of existing 3.5mm plug.

Second, sound quality. By having a Lightning port / Lightning to 3.5mm adaptor / 3.5mm jack, you're adding in another step in the chain between the amplified signal and the human ear - and we've already seen multiple reports of poor sound quality and faults with people using the adaptor.

Third, wireless Apple earphones. By having separate ear buds, each set of earphones you need 2 wireless chips, 2 DAC chips and 2 amplification chips - which is why they are hideously expensive - mid range earphone cost for a set of earphones that will only have budget sound quality (they won't compete with wired earphones of the same cost - for example IEMs from the likes of Fidue or RHA).

By removing the 3.5mm jack Apple have made a statement. But by not bundling wireless earphones (presumably due to the mega cost of them) but by chucking in the standard wired earphones and an adaptor, they've not really made that statement particularly well.

I know the iPhone will be popular - and after not having an iPhone since the 4s I was genuinely considering going back to the iPhone with this iteration. But such is my love for music, and owning a pair of Fidue IEMs and a JDS Labs C5 mobile amp (it doesn't have a built in DAC) that I can't realistically go for the new iPhone, regardless of cost.

I find it a strange decision.

 

[blagovest]

Adding a headphone jack would have cost them 1 dollar extra.

1 extra dollar per device and a million of dollars of AirPods and Wireless Beats not bought.

 

[pentrix2]

Ohh, so does this mean the costs really reflect the cost of a "single" iphone, meaning no discounts applied for buying thousands of chips etc.?

actually its millions. the cost comparison again is to make Apple look like Gods. The price is what a regular consumer would pay for...not what Apple paid for them. Their discount is probably about 20% off of this price

 

[639051]

You'd think that with half a trillion dollars, they might use a little more of their own money for research and stuff and make the iPhone cost closer to its production cost.

Funny, maybe you should go bark up Samsung's tree since the Note 7 had a higher cost than the iPhone this year. If you don't see a value in it, don't buy it.

 

[NT1440]

Every year this same article comes out, and every year they miss the ****ing mark. The R&D and manufacturing investments Apple makes in their chip production is never factored in. It costs billions of dollars to set up a chip manufacturing line (and we all know apple goes so far as actually developing/purchasing the equipment that does the manufacturing) yet it never makes it into the report.

I'd imagine with all costs considered it's more likely to be in the $300 mark for an iPhone.

 

[FliccC]

People who think this fairytale number has anything to do with the price you pay at the counter are delusional. Apple is a software company first and foremost, not factored in are the research and development costs of the OS, countless apps, the whole environment including cloud services, app store and many more. There are over 100.000 people working full time at apple for a good salary. Patents, taxes, manufacturing costs (factory, workers etc.), logistics... There are so many things to be considered in the production of an iPhone that only looking at the prices of it's components really paints a wrong picture.

Not saying these estimates aren't informative, they sure are, but they don't give any information on Apples profits.

 

[cosmichobo]

Ok, so $220 in materials... add to that labour... which I googled to be $1.50/hour for their Foxconn slave workforce, plus maybe $12/phone for setup and running costs for the production line robots... So now we have a total production cost of $235 to create 1 phone... (excluding R&D/etc which you probably wouldn't cost directly against a specific item..?)

Apple now has to sell the phone. Some sales will be direct via the Apple Stores (online and physical), but a large proportion of phones will be sold/leased via Telcos. Apple has to give them something for that hassle, though I've long heard that Apple wholesale margins are notoriously thin, so let's say on a retail price of $649 - a wholesaler may be paying around $549, allowing them $100/phone profit.

$235 Cost
$549 Wholesale
$649 Retail

That means that Apple would be making $314 on a wholesale sale, and $414 for retail. That's only a margin of 57% on wholesale and 64% on retail...

The business I work for has margins of 70-90%...

 

[LordVic]

In 2016, five silver quarters is about $24. Better than your $21.

The problem isn't the money itself, it's that inflation exists. Inflation is the problem. every day somewhere in the supply chain someone, somewhere wants more moeny and raises prices and it snowballs and everything always increases in prices no matter what.

The solution is to either limit inflation, or, raise minimums to match the spending power that the minimum's had before inflation.

when you get something like 3-5% inflation a year, but salaries only on average increase 1-3% / year. people start getting left behind.