Tim Cook should use your business acumen. Set up the pricing by pulling numbers out of a head.
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 XS Max Component Costs Estimated at $453 [Updated]
- Thread starter MacRumors
- Start date
- Sort by reaction score
Tim Cook should use your business acumen. Set up the pricing by pulling numbers out of a head.
You’re right this is an estimate. If anyone believes it’s this cost or more they are crazy! In fact chances are it is 15-20% less then these eatimates. Anyone who thinks Apple is making any less then 70-100%+ margin on their products is insanse and naïve.
I don't blame them at all, it's a business. My only point was that they make a ton from iPhone's. So you think it costs them $375 per unit when it comes to R&D, labor, etc.? Seems high to me.
Yea there are certainly a lot of factors to add into their costs, but still a very healthy business for them. No knock at all, just impressive.
Their Gross Margins, operating margins, and profit are public information. They don't "make" $300-$500 on every phone sold. Their ASP for iPhone is around $730. Their Gross margin is 38%. This is not profit. This is the money made after subtracting cost of goods sold (COGS).
Operating margin has more costs and is around 26% and that's after variable costs like wages but BEFORE taxes.
Apple pays another 21% for corporate tax.
All in all, apple only "makes" about $20 for every $100 in sales. That is their profit, net of all expenses and taxes.
It's a great business, but people think sales translate into pure profit. There are MUCH more profitable businesses as a percent of revenue than Apple.
Apple makes the most total dollars, but plenty of companies make better margins.
/Finance lesson.
Add manufacturing costs, product design and research, shipping to retail channels, operating system development, product support and warranty, marketing, retail overheads, fluctuating currency conversion, taxes, lost/stolen/damaged inventory, sales lost to counterfeit industry, etc
Then try to work out the profit margin. Average profit for just about any retail product (all companies combined) is about 7%.
Last edited:
The cost of iPhone 6+ was less than half. So the cost went up over $200 and they added $350, seems reasonable especially since this estimation doesn’t account for other expenses such as R&D, customer service, advertising, etc...
Last edited by a moderator:
Good for you. But I don't care. If I want a new phone, I'm buying it.Vote with your wallets people. If you go out and buy one on day one Apple will continue raising the prices.
The people here who attempt to justify Apple price increases are funny nevertheless. Yes Apple can charge whatever the market will bare (at least as long as there is 0% financing subsidy such as common in US), luckily for me though, my 7+ works like a charm (previous one was a 3GS) and i intend to keep it until it falls apart
Look again at my original post.....you missed the part about direct labor.
Last edited by a moderator:
Not believing the $443 number in parts. Better believe Apple is getting a much better deal on parts. Normal business multipliers would dictate a product with $443 in parts would at least be selling for $2,000 or more.
There’s just so much justification for the prices that Apple is charging. Obviously Apple has the right and ability to charge what the market will bare. The problem is, those who are arguing that prices are high are not disputing that point to begin with. This is not a discussion on freedom to charge what you want, etc.
The truth is, there’s a lot to be frustrated about concerning prices. For starters, one reason for the higher prices is because Apple has failed to grow their market share for iPhones in China as much as they’d have liked to. 2 or 3 years ago, sales of iPhones in China were growing significantly with a promise of more to come. Due to stiff competition and some price sensitivity of the China middle class, market share has instead declined. To make up for that, Apple has raised prices to mainly milk Western countries that have more ready access to debt and a penchant for justification of high prices.
For those who are defending these high prices, there’s an implication that these high prices are needed to maintain or even improve software stability, customer service, etc. The problem is, reality is not panning out. It’s more difficult then ever to get a reservation to see an Apple “genius” and the quality of the service the customer is recieving from the Apple “genius” is subjectively on decline. Heck, there wasn’t even always a need to get a reservation to speak with an Apple genius in the first place.
And while IOS 12 appears to be a huge improvement in software, I believe its more of a response to enchancing the illusion that Apple devices last a long time, and this was needed because of the battery/trottling debacle. In other words, IOS 12 is as much about PR as software improvements. Certainly, IOS 11 didn’t reflect an improvement in software reliability/quality at a time when the iPhone X came up with a large price increase over previous iPhones.
There’s just this perception that these iPhones are some special indication of success and cultural awereness/influence. Yet these phones are not an expensive/aged bottle of wine from a famous vineyard in France. They are a commodity that’s mass manufactured by incredibly poor individuals in China who have little to no other options. And while the phone can do an amazing amount of things i.e. write a great novel, read and respond to important emails, etc., the fact that these tasks can be completed on an iPhone does not mean Apple should be given full credit for it. The concept behind the software used with the iPhone was brought on by decades of development, as has chip development, etc. Heck, your phone wouldn’t work without cell towards or wifi networks, at least not in terms of collaboration and commication.
It’s not really even about the high prices anymore. It’s about the willingness to blindly defend the prices with flawed logic and emotional arguments that bare no resemblence of reality. There’s no point in allowing yourself to be taken advantage of while simultaneously going out of your way to defend your purchase as something of good value. Due to other options available, the iPhone is no longer good value, but a false icon of implied wealth.
The truth is, there’s a lot to be frustrated about concerning prices. For starters, one reason for the higher prices is because Apple has failed to grow their market share for iPhones in China as much as they’d have liked to. 2 or 3 years ago, sales of iPhones in China were growing significantly with a promise of more to come. Due to stiff competition and some price sensitivity of the China middle class, market share has instead declined. To make up for that, Apple has raised prices to mainly milk Western countries that have more ready access to debt and a penchant for justification of high prices.
For those who are defending these high prices, there’s an implication that these high prices are needed to maintain or even improve software stability, customer service, etc. The problem is, reality is not panning out. It’s more difficult then ever to get a reservation to see an Apple “genius” and the quality of the service the customer is recieving from the Apple “genius” is subjectively on decline. Heck, there wasn’t even always a need to get a reservation to speak with an Apple genius in the first place.
And while IOS 12 appears to be a huge improvement in software, I believe its more of a response to enchancing the illusion that Apple devices last a long time, and this was needed because of the battery/trottling debacle. In other words, IOS 12 is as much about PR as software improvements. Certainly, IOS 11 didn’t reflect an improvement in software reliability/quality at a time when the iPhone X came up with a large price increase over previous iPhones.
There’s just this perception that these iPhones are some special indication of success and cultural awereness/influence. Yet these phones are not an expensive/aged bottle of wine from a famous vineyard in France. They are a commodity that’s mass manufactured by incredibly poor individuals in China who have little to no other options. And while the phone can do an amazing amount of things i.e. write a great novel, read and respond to important emails, etc., the fact that these tasks can be completed on an iPhone does not mean Apple should be given full credit for it. The concept behind the software used with the iPhone was brought on by decades of development, as has chip development, etc. Heck, your phone wouldn’t work without cell towards or wifi networks, at least not in terms of collaboration and commication.
It’s not really even about the high prices anymore. It’s about the willingness to blindly defend the prices with flawed logic and emotional arguments that bare no resemblence of reality. There’s no point in allowing yourself to be taken advantage of while simultaneously going out of your way to defend your purchase as something of good value. Due to other options available, the iPhone is no longer good value, but a false icon of implied wealth.
Vote with your wallets people. If you go out and buy one on day one Apple will continue raising the prices.
The people here who attempt to justify Apple price increases are funny nevertheless. Yes Apple can charge whatever the market will bare (at least as long as there is 0% financing subsidy such as common in US), luckily for me though, my 7+ works like a charm (previous one was a 3GS) and i intend to keep it until it falls apart
Every two years, like clockwork, I have gotten a new iPhone, but these prices are INSANE. I keep going back and forth, one day I think I'm going to go ahead and just do it, and the next day I'm just keeping my 7+. Today is an I'm just keeping my 7+ day. What I NEED is a new MacBook pro, mine is from 2010, crazy that a new MBP wont cost much more than a mid-line iPhone. When are people going to wake up? $869 was NUTS for my 7+ two years ago but Verizon gave me $650 for a two year old iPhone 6 for a net price of $219.
Last edited:
How do they know storage manufacturer is charging $64 per unit? Depending if the phone company buys 20 million or just 1 million units the price may double or tripple. There are huge discounts in this business depending on the volume of the orders.
Why not provide an L shape battery for the XS Max also? Or is that a part of next years release to tout more battery life?
Whats supporting it?
Will IOS12 magically stop working on it 3 years from now? Will the apps i currently use magically stop working? (I use the phone for very basic things and really dont care about all the "fancy" apps, which for most people are really "waste my time" apps.
I would only be forced to buy one if:
7/8 are no longer available, and my 7 is broken beyond repair.
[doublepost=1537980643][/doublepost]
If the stock markets implode (more like when), credit will disappear, which leads to much fewer people being able to afford Apple products, which will lead to the stock crash. It has happened countless times, but i am sure this time is different
[doublepost=1537980805][/doublepost]
I agree with you on one key statement - THEIR money. The problem is very few people have THEIR money to spend on Apple products, and instead borrow to finance their wants. The problem ofcourse is that when they default on their debts, its the taxpayer that has to bail (their banks, like in 2008) out. And this , my friend is why i care.
[doublepost=1537981069][/doublepost]
Oh it absolutely does! Without easy credit (or cheap credit) you are FORCED to either: not buy the latest gadget (Which keeps the price lower for those that can, because now you have decreased demand).
Or you have to SAVE UP (saving $1000 is lot for most American families, according to statistics people have on average just 4,830 saved!!!!!. In this case you are also decreasing the demand, and thus lowering prices for those of us who can afford to buy the product in cash.
Last edited:
So when it happened last time, would it have been smart to sell AAPL or buy more?Whats supporting it?
Will IOS12 magically stop working on it 3 years from now? Will the apps i currently use magically stop working? (I use the phone for very basic things and really dont care about all the "fancy" apps, which for most people are really "waste my time" apps.
I would only be forced to buy one if:
7/8 are no longer available, and my 7 is broken beyond repair.
[doublepost=1537980643][/doublepost]
If the stock markets implode (more like when), credit will disappear, which leads to much fewer people being able to afford Apple products, which will lead to the stock crash. It has happened countless times, but i am sure this time is different
[doublepost=1537980805][/doublepost]
I agree with you on one key statement - THEIR money. The problem is very few people have THEIR money to spend on Apple products, and instead borrow to finance their wants. The problem ofcourse is that when they default on their debts, its the taxpayer that has to bail (their banks, like in 2008) out. And this , my friend is why i care.
Markets go down, and that's a good thing. Where are the markets now? I was buying tons when the market was "imploding" and have made out like a bandit, as usual. I wish they'd implode so I could load up on quality companies like AAPL.
You must be a permabear who loses far more money waiting for the next recession than the recession itself.
Welcome to economics 101.
Technically,there are a lot MORE and LESS costs involved than this article displays. As for component costs, I'm willing to bet this estimate is actually far too high. Component costs alone are probably closer to $140-250 per phone (not including assembly). This article seems to give near single-unit costs per piece, as opposed to figuring in qty. discounts. If I can get 256gb modules for $42 at quantities just over 10,000 (vs $120 for a single unit), it's incredibly unlikely Apple is paying $64.50 for millions. Even if custom, after the one-time set up fee, bulk discounts weigh heavily.
Packaging is a non-factor. It is easily between $0.25-2.50 per unit. We had products individually packaged in quantities just over 1,000 (with printing) for under $0.60 a piece. Bulk discounts are no joke - even more if it comes from China. We had a stainless steel component that we used which sold for $9.50 retail. Our cost from the manufacturer was $1.80 for quantities under 1,000. With our bulk discount for 100k qty, it was around $0.18 a piece. ($0.10 if we would've used a Chinese supplier.)
I spent 3 years in purchasing at a small/mid-range company, so it's not 'armchair expertise.' This is how business works with sourcing and procurement. From assembly to shelf, our high-end products carried a 1,000% markup. But this included free shipping, warranty, free returns, advertising, wages, etc. Without a doubt, the largest cost on these iPhones is everything outside of the components, which is near impossible to calculate per device. So yes, they could honestly afford to drop the price by $300 and still make excellent profits. But you do pay for the brand and everything that brand does, whether it's Samsung or Apple.
How do people think companies like Oukitel can make phones with 1080p displays, 4,000 mAh batteries, etc for just $99 and still make a profit? No brand premium, almost no advertising costs, horrible employee wages, etc. The components are not what you pay for. Yes, Apple gouges a little more than others, but it's not that out of place.
Permabear or permabull does not matter. What matters is that most people are gambling on the stock market, and when you gamble my dear friend, eventually you lose. Just ask people in 1987, 2000, 2008. And especially the Japanese, whos stock market still didnt recover to its highest point. Historically, very few people get to keep their gains, and most of those very few are insiders. But personally i dont care, everyone is free to do as they please. What does piss me off is that we the people had to bail out the banks in 2008, who basically doubled down on bad behavior which will cause the same results. But as i said, this time is different right?
That’s all part of it spread out over all of their sales and they make tons of money. So I don’t get the poor apple attitudes. They have the highrst markup in the business......by a long shot. Even if they lose market share their profits rise.
Sorry, they get no pity from me even though I use apple products. More power to them, but no pity.
They all slap down millions on stuff like that. It really amounts to very little on each product.
Consumers defaulting on debt is literally a cost of doing business. Credit grantors aim for a certain percentage of bad debt in order to maximize their profit.You and every other teen and tween on the block.
Seriously though, if people could truly afford the cost of these, i would have no issue. but people get into debt for these, then they default on it, then taxpayers bail them (well their banks really) out. Be it iphones, cars or real estate - personal responsibility is long gone
This is silly. The cost of all the components is the cost? So they're making more than 50% profit? No. There are design costs, publicity costs, support costs-- Apple has probably the best customer support in the business-- and above all, the design costs. Not just the Jony Ive type stuff, with all those milling machines, prototyping and stuff, but the chip operation they have with 1000 or more employees, that probably gives its smartphone the best chip in the business, particularly when it's designed only for the iPhone and iPad. I'm not an accountant, but I know that when they say they made 20% profit, that has to be an accurate statement, or somebody goes to jail, or at least their stocks plummet. And then, what's the cost of getting thousands and thousands of software people to build new iterations of all of Apple's own software.
This silly story comes around after everything Apple makes. It's like the story that used to say, "All the chemicals in a human body cost about $4 dollars. That's IT. (Those stories started being printed at latest in the '50s, and you still see modern updates. There's the inflation angle. It might be $30 dollars now. Oh, that means we're worth as much as our various parts.) Imagine, you could buy all the chemicals for a few dollars, and build your own Einstein or Marilyn Monroe!
No, you can't. With hardware, software and human systems, we are more than the sum of our parts.
Know why Apple wants higher margins? Because they would have disappeared by 1998 had Steve Jobs not come back. They clearly saw that they knew they were in a global industry, both sales and costs were from all around the globe.
This silly story comes around after everything Apple makes. It's like the story that used to say, "All the chemicals in a human body cost about $4 dollars. That's IT. (Those stories started being printed at latest in the '50s, and you still see modern updates. There's the inflation angle. It might be $30 dollars now. Oh, that means we're worth as much as our various parts.) Imagine, you could buy all the chemicals for a few dollars, and build your own Einstein or Marilyn Monroe!
No, you can't. With hardware, software and human systems, we are more than the sum of our parts.
Know why Apple wants higher margins? Because they would have disappeared by 1998 had Steve Jobs not come back. They clearly saw that they knew they were in a global industry, both sales and costs were from all around the globe.
this is nothing -- the cases for the iphones are a huge mark up. A $1-$2 accessories can sale for $9.99... ever watch Shark Tank? it's common practice to sale 3x or 4x of the cost.