iPhone SE Component Costs Estimated to Start at $160

[Thunderhawks]

Why are so many people upset when these estimates come out?

Because they are not front page news and we can all just put prices on things with no proof.
Like: Did you know the A9 chip is only $ 17.68?

There all also always enough dimwits who don't know anything about purchasing, production etc. and can't see the entire picture.

I know , we can all choose not to click on the thread, but that would be too easy
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Because Apple apologists don't like facts.

iSupply estimates are not FACTS!

 

[smacrumon]

The Apple iPhone could be a loss leader to draw in more customers and instead profit from apps and the rest of its eco system.

 

[Mr. Retrofire]

Why are so many people upset when these estimates come out?

They do not represent the full facts.

 

[Webb]

Bottled water components cost $0. They sell it for $1.59.

Component costs never tell the true story.

A Dunkin Donuts worker told me,they buy a bottle of water for $0.10 cents each.

 

[kdarling]

There is a basic reason for the storage prices:
The 64/128 buyers are subsidizing the 16GB buyers.

What would happen if Apple applied the same profit margins on all phones? What would the prices look like? Is that what you want? We all know the additional memory only cost about $20 more. So if Apple got the same profit margin on all models the prices would look like this:

16GB iPhone $750
64GB iPhone $790
128GB iPhone $810

What ratio of 16/64/128 buyers are you using in your calculations?

Component costs are useless. Especially when these articles have ZERO idea how much Apple is paying for these components.

That's a bit over dramatic. They of course have more than a "zero idea".

Its pretty obvious what these articles are trying to do: Show that Apple is ripping off customers.

If not why don't we see these same type of articles about Samsung phones? Or other Android phones?

BOM estimates are also reported for major Android phones from Samsung, HTC, etc.

We just don't hear about them on an Apple fan site.

Apple's profit margin is 21%

That's over all their products including Macs, not their net profit margin on iPhones, which is reportedly closer to 30%.

Look at reality. All those Android phone makers are going bankrupt or make very little profit at all. Even Samsung has its profits drop 80% the last couple of years.

Even at that, Samsung mobile is still taking in billions of dollars a quarter. As people are fond of saying here, I would love to have their income problems

Apple makes about 90% of smartphone profits while only selling 15% of the phones. That alone should tell you those Android makers will be bankrupt, just a matter of time.

Smaller phone makers have gotten by with under 10% margins for years. So have many other factories. Heck, Foxconn's profit margins dropped down around 3% because of Apple for many years.

And if a company is inches away from bankruptcy you think they have money to spend on R&D? Hire and keep the best talent? Offer great customer service? Of course not. When a company is on the verge of bankruptcy they cut corners and the customer loses out.

Yet we also see Apple cutting corners on their own devices.

You also fail to account for the costs of creating and maintaining iOS. No Android manufacter has to pay BILLIONS to keep Android up to date and adding new features. That is a massive expense.

Strawman. Apple doesn't pay BILLIONS to keep up iOS.

And the major Android phone makers actually employ quite a few people to customize and maintain their own Android implementations.

 

[iapplelove]

As others have stated, all the money is in R&D.

 

[macduke]

What are you talking about? At $399 with a component and manufacturing cost of $160, they're making almost 40% on a phone that had minimal R&D costs, and as far as I can tell, no advertising costs.

In fact this is AMAZING news as it means what I suspect will happen is more likely to now:

In 12 months when I believe Apple will release a premium 4" 7 phone for $599, the SE as is, can drop to $299 thus making it even more affordable, and maintaining the $250 differential with the 6s with which it will be depreciated alongside. Then when the 6s drops down the the $449 traditional "entry price", there's still room for the SE to drop to $199 and still make a profit, not to mention some of the parts will cost even less then ... and now we're talking iPod Touch replacement territory. If Apple can sell an iPhone for the same price as the iPod Touch, then there's no reason to keep the Touch around.

Meanwhile the "7 mini" or whatever it will be called, will depreciate with the 7 keeping a more profitable premium offering in the 4" lineup, until it too drops low enough to replace the SE.

That of course all depends on how well the SE sells. If the demand for a 4" phone doesn't materialize, then Apple could shelve its plans for annual updates. The problem is, they can't continue selling the old 5s case indefinitely. At some point they will need to update the entire hardware, and Apple doesn't do that without charging a premium, nor should they considering the R&D that goes into a new design. Which is why, no matter how well the SE does, unless Apple decides to discontinue the 4" phone altogether, they will most likely release a new 4" phone early enough in the 7 life cycle to earn back the launch costs. And one motivating reason to keep the 4" around is not only lower cost, but crossover with the dwindling iPod market, which could be discontinued entirely in two years once the A8 has outlived its usefulness.

What am I talking about? I'm talking about Apple making $449 per iPhone 6s sold and $239 per iPhone SE sold. The iPhone 6s component cost is about $200, or $40 more than the SE. That makes their margins a lot lower on the SE. So math, yes math is what I'm talking about. Even the iPhone 5c came in at $549 and it had completely outdated components and a cheap plastic shell. So yeah, their margins might look good, but they're not as good as they usually are. Apple has historically relied on ridiculous margins to take, according to a report last November, 94% of worldwide profit share in the smartphone industry. That is pretty wild. They thrive on being the premium brand. It would be a different approach for them to go after market share instead with lower prices, and that's all I was really talking about here. They've lowered their margins to take a different approach. They're still good margins compared to most everyone else. But they're not as good as they have been over the iPhone's lifespan.

Now is it a good idea? Possibly. As 4" phones generally aren't as popular with consumers, it's less likely to dip their average profit margin by very much. But what it could do is introduce a bunch of users who couldn't afford an iPhone before to their ecosystem, which increases overall profits. These people will possibly see the benefit of using an Apple device, and feel the quality and speed of such a modern device, that next time they might just spend a little extra and get the size they really wanted. They also get hooked into the ecosystem and buy apps and maybe get an Apple Music subscription. It also could give Apple a much bigger foothold in emerging markets such as China, India and Brazil. I'm not sure if I were in charge that I would have dropped all the way to $399, but I don't think it's a bad business decision for the reasons I've outlined above. I'm sure they've done the research and found it worth the margin cut. And of course they still making a killing on the storage upsell.

 

[dampfnudel]

Even if the estimate is accurate, who cares? Let Apple charge what they want. If people don't like it, don't buy it. Let the free market play out.

It's beginning to look like the free market will play out a little differently this year for Apple.

 

[kdarling]

Why are so many people upset when these estimates come out?

They do not represent the full facts.

Nobody ever said these estimates did.

They're only meant to give a comparison of material costs relative to other phones. As with any partial report, it's normally expected that others would use it as a basis for doing more research for a more in-depth article.

However, today's internet echo chamber is not usually that industrious

As others have stated, all the money is in R&D.

Nope, not "all" or even most of it. A fraction (under 5%) of Apple's gross revenues is spent on R&D.

Much of Apple's reported costs are in marketing and administration. They also set aside money for taxes in case they ever have a need to bring their cash back into the USA.

 

[iapplelove]

Nobody ever said these estimates did.

They're only meant to give a comparison of material costs relative to other phones. As with any partial report, it's normally expected that others would use it as a basis for doing more research for a more in-depth article.

However, today's internet echo chamber is not usually that industrious



Nope, not "all" or even most of it. A fraction (under 5%) of Apple's gross revenues is spent on R&D.

Much of Apple's reported costs are in marketing and administration. They also set aside taxes in case they ever decide to bring their cash back into the USA at current rates.

I was only referring to the cost of the new phone. To be honest I think they cheap out on spending when it comes to R&D. They don't spend nearly as much as thy use too. But in comparison to physical components it's really what you are paying for in terms of cost of phone.

 

[Bubba Satori]

What is the component cost for Microsoft Office?
What is the component cost for Google advertising?
What is the component cost for a steak at a 4 star Steak house?
What is the component cost of a car?
What is the component cost of a Cake?
What is the component cost of a can of Soda?
What is the component cost of prescription drugs?
What is the component cost of diamonds?
What is the component cost of a Starbucks cup of coffee?
What is the component cost of a Bluray Disc?
What is the component cost of a digital book?

Why don't we see DOZENS of article of these component costs yet we see dozens of articles every time a new Apple product comes out?

Why?

Because the media wants outrage and wants people to think Apple is ripping off its customers.

Sounds like a conspiracy.
Odd, considering that 99% of the tech press woo woos whenever Tim breaks wind.

Or more likely a rather over the top case of paranoia.

 

[OldSchoolMacGuy]

And now all those that cry that it's nothing but greed that a company would sell a product with $160 worth of components for double that. That's just the sum of the parts and they forget everything else that goes into a product like R&D, manufacturing costs, marketing costs, administrative, and countless other costs.

The average $30,000 car has just $8,000 worth of parts in it.

 

[bodonnell202]

I'm really surprised that they started it at $399. That lowers their margins quite a bit. I thought it would be $549 at the lowest. However, I don't think they're going to update this product every year. It will be more like the iPod Touch, every couple years or so, and therefore the margins will improve over time as the price comes down on the older components.

I agree. I suspect this will be the best 4" iPhone available for about 2 years, and the price will probably stay put during that time.

 

[Tubamajuba]

Sounds like a conspiracy.
Odd, considering that 99% of the tech press woo woos whenever Tim breaks wind.

Or more likely a rather over the top case of paranoia.

Nah, just a complete lack of understanding in regards to how things are made and companies are run.

 

[AxoNeuron]

Unbelievable.

Just can't quite make it to 32GB can we, Apple? Guess those few extra pennies (literally....pennies) to move to 32GB were just a bit too much. Or maybe you people haven't remembered to change your calendars and you still think it's 2011.

What garbage. Absolute garbage. I hope iPhone growth continue to slows because if any company deserves it, Apple does.

 

[LovingTeddy]

Look at reality. All those Android phone makers are going bankrupt or make very little profit at all. Even Samsung has its profits drop 80% the last couple of years.

Apple makes about 90% of smartphone profits while only selling 15% of the phones. That alone should tell you those Android makers will be bankrupt, just a matter of time. Samsung would be bankrupt also, but they have many other businesses keeping the company afloat and get big discounts on the screens/chips they make in house.

And if a company is inches away from bankruptcy you think they have money to spend on R&D? Hire and keep the best talent? Offer great customer service? Of course not. When a company is on the verge of bankruptcy they cut corners and the customer loses out.

You also fail to account for the costs of creating and maintaining iOS. No Android manufacter has to pay BILLIONS to keep Android up to date and adding new features. That is a massive expense.

And please name me all these amazing stuff Samsung made up?

Multi-touch Apple made - Samsung copied
Physical design of iPhone - Samsung copied
TouchID - Samsung copied
ApplePay - Samsung copied
Home button - Samsung copied
Retina screen - Samsung copied

Hell Samsung does not even have its own operating system running on its premium phones.

This is most ignorant comment ever. Take look at Android world and innovation being made my Android phone maker.

Apple had 90% of profit only shows Apple sucks your blood dry and shows nothing else. And huge profit does not equte with innovation.

Apple did not invent any of those things you motioned.

I still remebred using my old PDA with fingerptint sensor. And retina display is just fiancy term of high resolution screen and none of iPhone's screen is made my Apple anyway. And you really think home button is innovation?

Samsung made AMOLED screen, Samsung made curved screen, Samsung made high density flash storage used on your smartphone, Samsung made foldable screen, Android was first to use dual camera, LG made modular phone, Hey Siri is direct copy of OK Google and Moto Voice, iMessage is rip off BlackBerry's BBM.. The list goes on

Stop protenting Apple is the only one innovate and therefore can charge ridiculous high price. Stop protenting everyone else are Apple's copycat.

You think it cost nothing for Samsung to maintain its TouchWiz UI and update all its phones? You think it is free for HTC to make sense UI? Seriously?

 

[AxoNeuron]

Look at reality. All those Android phone makers are going bankrupt or make very little profit at all. Even Samsung has its profits drop 80% the last couple of years.

Apple makes about 90% of smartphone profits while only selling 15% of the phones. That alone should tell you those Android makers will be bankrupt, just a matter of time. Samsung would be bankrupt also, but they have many other businesses keeping the company afloat and get big discounts on the screens/chips they make in house.

And if a company is inches away from bankruptcy you think they have money to spend on R&D? Hire and keep the best talent? Offer great customer service? Of course not. When a company is on the verge of bankruptcy they cut corners and the customer loses out.

You also fail to account for the costs of creating and maintaining iOS. No Android manufacter has to pay BILLIONS to keep Android up to date and adding new features. That is a massive expense.

And please name me all these amazing stuff Samsung made up?

Multi-touch Apple made - Samsung copied
Physical design of iPhone - Samsung copied
TouchID - Samsung copied
ApplePay - Samsung copied
Home button - Samsung copied
Retina screen - Samsung copied

Hell Samsung does not even have its own operating system running on its premium phones.


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So you would love for the 16GB model to start at $750?

That's crazy talk. Tell that to the tens of millions of people who buy $650 iPhones each year.

Yet somehow, those brilliant folks at Apple haven't managed to figure out how to increase the capacity of the base model iPhone since 2011. Samsung, meanwhile, has made the most innovative advances in NAND storage in years, they've moved forward the entire industry, yet Apple is stuck in 2011.

Sorry bud, it's not black and white. Samsung is quite innovative in some places where Apple is quite backwards.

Apple's profit margins should only be considered amazing because there are so many koolaid lovers out there just waiting to be robbed to get a phone with a fruit logo on it.

 

[Palladium SG]

I won't be surprised if the real cost is even lower than $160. Apple vastly outsells anybody else that has the same amount of component sharing in the iPhone 6S+SE.

 

[DanGoh]

Apple totally suckers us with the storage.

 

[skinned66]

So you would love for the 16GB model to start at $750?

That's crazy talk. Tell that to the tens of millions of people who buy $650 iPhones each year.

I would. 16GB iPhones and iPads are completely useless to me. I've been paying the generous additional storage tithe since the 3GS - for the benefit of myself and apparently others too if what you say is true.

And the crazy talk here IMO is that the 64GB and 128GB owners should get ripped off on storage so that the 16GB lovers can get a better deal on what is otherwise the exact same device. If they really want that device they should pay their full measure.

As for the tens of millions who buy $650 iPhones each year: consider yourselves told.

 

[mi7chy]

You get what you pay for.

 

[Tech198]

IHS iSuppli. sounds familiar.....

Why does a company insist on giving out false info, and not provider any proof to where u can *buy* these off the shelf components they predicted. to oh its some magic number they cannot prove.

It must be hypothetical.... just like how the NSA always talks..

"if these components could be bought off-the-shelve they'd be worth a total of $160."

Those hypothetical responses always freak me out.

 

[tresmith]

Well, of course the sales are "lackluster", most people don't want a dinky phone anymore. Some people do, so they will buy it, but most people are happy with a larger phone.

I don't believe that's the case.

Sales are lackluster cause Apple decided to sell a phone they released three years ago as new. If they changed the design, they'd sell a whole lot more.

For a lot of people, the iPhone is a status symbol and it ceases to be a status symbol when they use a three year old design.

I was just thinking that maybe that was the point. Give the people a half-hearted device and they'll want to buy the more expensive device.

It's what they've been doing with the memory. Make the lowest end 16gb iphone so unbearable that people will spend the extra $100 for the 64gb.

I have to be honest. It's working on me. I was almost 100% sure I was going to buy the SE and now that it's been released the 6S looks a lot more appealing.

 

[Substance90]

There is a basic reason for the storage prices:

The 64/128 buyers are subsidizing the 16GB buyers.

That's not how upselling actually works though. What Apple does is called price discrimination - they allow for each customer segment to pay the maximum price they're willing to pay for more or less the same product. So you could say it's actually the 64/128GB buyers who are getting gouged.

If the iPhone was selling for less than its production cost, you could say it's being subsidized, but that's clearly not the case.

 

[G4DPII]

As others have stated, all the money is in R&D.

You mean all 30 seconds of it, to look in the scraps bin?