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Apple earns approximately a $400 profit per 16 GB iPhone 3G S sold, and $500 per 32 GB 3G S sold.  (Source: iSuppli)
Apple is making a handsome profit on its new phone

Apple has reportedly the world's strongest brand image, and yet manages to maintain some of the industry's largest profit margins, a rare achievement.  Now that the iPhone bill of materials (BOM) for the iPhone 3G S has been divined thanks to an iSuppli tear down, it appears that Apple has another business success story on its hands with the iPhone 3G S.

The hot new phone's components cost $172.46, for the 16 GB model, according to Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli.  The most expensive component is the 16 GB of NAND flash memory, produced by Toshiba and estimated to cost $24/unit.  Least expensive is the audio codec chip, which costs a mere $1.15/unit, produced by Cirrus Logic.

The phone costs approximately $6.50 to assemble, bringing the estimate cost to $178.96/phone. 

The 16 GB iPhone 3G S costs $599.99 for returning customers with less than a year on their contract, and as little as $199.99 for new customer or returning customers with 2 years on their contract.  However, according to reports, Apple sells the iPhones to AT&T at approximately $600 per phone, and the carrier provides the discount.  Apple is also rumored to get a small cut of the subscription fees.

States Mr. Rassweiller, "Although the retail price of the 16GB iPhone 3GS is $199, the same as for the 8GB version of the original iPhone 3G, the actual price of the phone paid by the service provider is considerably higher, reflecting the common wireless industry practice of subsidizing the upfront cost of a mobile phone and then making a profit on subscriptions."

At a minimum, before shipping, R&D, etc., it appears Apple is making a whopping  $422 profit on every $178 (manufacturing cost) phone sold.  That incredible profit margin may be cut into a bit by the aforementioned expenses of transportation, R&D, advertising, and other costs, but likely remains quite impressive at the end of the day.  Even better for Apple, it likely enjoys an even larger profit on the $699 32 GB iPhone 3G S, as the only difference is a marginally more expensive (likely $20 or less) NAND chip.

Concludes Mr. Rassweiller, "From a component and design perspective, there's also a great deal of similarity between the 3G and the 3GS. By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost."


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Bad Article
By listerer on 6/25/2009 9:20:19 AM , Rating: 2
This cost is only the cost of materials. What about assembly cost? Software cost? Then there's all the the indirect costs like setting up machinery heating the factories addedd to the significant amortized development costs. These could easily double the material cost. I'm sure apple is making a tidy profit -- that's their job. This inflamatory article is badly written and researched.
When you get $50 from ads on the site is that all profit? Do you discount all the work that went into writing the articles -- I doubt it. Stop writing go make something!




RE: Bad Article
By Spivonious on 6/25/2009 9:41:24 AM , Rating: 2
Yeah but I doubt they spent $500 per unit on assembly, marketing, and development.

Back in March they hit 17 million sold. $500 per unit = $8.5 billion.


RE: Bad Article
By tilandal on 6/25/2009 1:53:26 PM , Rating: 2
It looks like they only costed the PCB. There is a ton of stuff conspicuously missing from that bom including the charger, the battery, the case, the packaging and the manuals. All these items likely cost a lot more then $1.15 which is the cheapest item on the bom. On top of everything listed so far you need to add the cost of testing, assembly, fallout, warranty and support. Over this you add the one time cost of HW and SW R&D, SG&A (ie the cost of advertising, rent, electricity, water, etc). After all this is done you can finally talk about profit.

Personally I would estimate there is another ~$100 involved in per unit costs. Now we are in the $275 ball-park. SG&A is usually taken as a % of any product made. Having a low SG&A is good for a business. Apple spends roughly 3.8 Billion on SG&A yearly on 32 Billion of revenue. This yields about 12% SG&A (rough estimate). This brings the total cost to about $310 before development and profits. Selling these for $500 - $600 is not unreasonable.

And before anyone asks, I know what I'm talking about because this is part of what I do for a living.


RE: Bad Article
By TomZ on 6/25/2009 2:22:28 PM , Rating: 2
quote:
It looks like they only costed the PCB. There is a ton of stuff conspicuously missing from that bom including the charger, the battery, the case, the packaging and the manuals
You must have overlooked the $48.00 estimated for other items in the BOM.

You do this for a living - overlook things like that? j/k


RE: Bad Article
By tilandal on 6/25/2009 5:40:24 PM , Rating: 2
The other $48 covers thing like caps, resistors, inductors, filters, voltage regulators, voltage references, buffers, logic gates and anything else that costs less then $1.15 (its arranged in order of price) or did you really think there were only 15 item on the entire board? A board of that level of complexity may have 200-300 unique parts on it.


RE: Bad Article
By klamp54 on 6/25/09, Rating: 0
"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home














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