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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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RE: Minimum?
By retrospooty on 6/25/2009 9:53:29 AM , Rating: 2
"Not much has changed from the orignal iphone in terms of software and r&d. I would say most of the r&d and software were recovered for the first iphone and maybe some of the first iphone 3g"

That's nice of you to say that, but the fact is you dont know how much it is, or was, or continues to cost in updates, bugfixes and new features, writing the ROM upgrades, QC etc etc. The way companies work is they pay internal costs. The hardware/iphone division pays X amount of dollars to the OS division per phone. The OS may or may not have paid for itself by now - it WAS a huge leap forward that changed smartphones forever.

Everyone acting like these costs dont exixt, or minimalizing thier impact, incvluding the article's author have obviously never working in a manufacturing environment - at least not a high level job.


RE: Minimum?
By omnicronx on 6/25/2009 11:32:12 AM , Rating: 2
While all of that may be true, Apple does have a track record of having impressively high profit margins, it would not be beyond the realm of possibility to believe that Apple is making a pretty penny on these iPods. You don't need to work in a manufacturing environment to make this inference ;)


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