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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: Is Apple different than MS
By holywarrior007 on 6/25/2009 12:19:48 PM , Rating: 1
So u support the greed of many over the greed of one? But why someone would decide about the people oriented pricing when people (shareholders) don't want themselves? Your arguments are fine as they reflect that you do have an acute sense of doing business and earning profits. However, there is one more way of earning more profits which is to make products more affordable yet retaining the quality, and I think that's not a bad business model too.


RE: Is Apple different than MS
By TomZ on 6/25/2009 12:49:49 PM , Rating: 3
I already stated that I think that companies should price their products to maximize profits. That is not in contradiction to your statement that a company could earn more profits by lowering the price.

I also don't understand your notion of "greed." A company that is producing a product that people like and are willing to pay for - that is not greed in the negative sense that you are implying. If that is what you consider greed, then I'd say that "greed is good."

After all, people striving to produce something better, with the ultimate goal of self-enrichment - is what drives our society to collectively great achievements in the business world. A large portion of our civilization is built based on the type of motivation which you label "greed."


"If a man really wants to make a million dollars, the best way would be to start his own religion." -- Scientology founder L. Ron. Hubbard














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