What iPhones cost to make

[xg4bx]

Just an interesting story I came across.

iSuppli, which is known for its gadget component costs analysis, released a breakdown of the parts that make up the iPhone 4S. The most basic 16GB model carries a bill of materials worth £118. This total is a long way from the sale price of £499.

Earlier this year, ABC's ‘Nightline’ show went into the Chinese factories of Foxconn, where most of the world's Apple products - iPads, iPhones and Mac computers - are manufactured. The investigation revealed that workers earn just £1.12 an hour, work long hours and live in dorms with fellow employees.

Asymco analyst Horace Dediu used the ‘Nightline’ report to estimate that Apple pays labour costs of between £7.86 and £18.56 for every iPhone it makes, which represents just 2-4% of the iPhone's sale price.

So if the materials cost roughly £118, and Dediu has calculated that an additional £58 is spent on manufacturing its smartphone, (a cost that includes the labour costs, transportation, storage and warranty expenses) we reach a total of about £176 to manufacture an iPhone that retails at £499. This represents a profit for Apple of £323 per iPhone.

http://uk.finance.yahoo.com/news/wha...t-to-make.html


From what I've heard, for an extra $50 usd, they could be making these in America and helping our economy and job market considering we buy the most apple stuff here but hey, whatever.

[HarryT]

The "profit" has to pay for the development costs; these devices don't materialise out of thin air.

[xg4bx]

Originally Posted by HarryT

The "profit" has to pay for the development costs; these devices don't materialise out of thin air.

Unfortunately the article doesn't spell out how much apple spends on research, which is a fair point, but considering just how much money they make it can't be more than a pittance per unit.

[David Munch]

Apple spends a LOT on research. Also, Apple is a company with stock options. Shareholders prefer money.

[Kumabjorn]

Even if they sell for £499, that is not what Apple charges for it. The operator puts on a nice margin for themselves. But yes, they have a nice profit margin for Apple, while still going like hotcakes.

[petermillard]

Worth noting too that the £499 price quoted includes VAT at 20%.

Originally Posted by xg4bx

From what I've heard, for an extra $50 usd, they could be making these in America and helping our economy and job market considering we buy the most apple stuff here but hey, whatever.

Back when Apple was widely being panned by critics for the Foxconn situation, lots of commentators were saying that they'd happily pay extra for a product that was made in the USA. Well, they had their chance with Google's Nexus Q; how did that work out?

And FWIW as of the last financials from Apple, the US accounted for around one-third of total sales.

[Kumabjorn]

Originally Posted by petermillard

Worth noting too that the £499 price quoted includes VAT at 20%.



Back when Apple was widely being panned by critics for the Foxconn situation, lots of commentators were saying that they'd happily pay extra for a product that was made in the USA. Well, they had their chance with Google's Nexus Q; how did that work out?

And FWIW as of the last financials from Apple, the US accounted for around one-third of total sales.

Let's be honest, the Q had other problems than its price and Made in USA label.

[petermillard]

Originally Posted by Kumabjorn

Let's be honest, the Q had other problems than its price and Made in USA label.

Certainly, though the price was a real stumbling-block, and there's a connection between the price and the Made in USA label, no question.

[HarryT]

Originally Posted by Kumabjorn

Even if they sell for £499, that is not what Apple charges for it. The operator puts on a nice margin for themselves.

Actually the operator subsidizes the price. Buying a "SIM-free" iPhone direct from Apple (as I did) is the most expensive way to buy one (in "money up front" terms). I paid £599 for my iPhone 4, direct from Apple.

[Kumabjorn]

Surely they only subsidize the phone when you subscribe to one of their plans, or have it operator locked?

[HarryT]

Originally Posted by Kumabjorn

Surely they only subsidize the phone when you subscribe to one of their plans, or have it operator locked?

Yes, that's what I was referring to.

[Kumabjorn]

Ahh, the £499 price point is for an operator locked phone then? Sorry, I assumed the posters were discussing the profit margins from the real price of the phone.

[David Munch]

Originally Posted by Kumabjorn

Even if they sell for £499, that is not what Apple charges for it. The operator puts on a nice margin for themselves. But yes, they have a nice profit margin for Apple, while still going like hotcakes.

Actually, margins for resellers are extremely low on Apple products, which is why they almost never go on sale. The whole ecosystem of i-accessories is what they earn most of their money on.

Apple on the other hand, has around 50% margins on their products.

[HarryT]

Originally Posted by Kumabjorn

Ahh, the £499 price point is for an operator locked phone then? Sorry, I assumed the posters were discussing the profit margins from the real price of the phone.

No, £499 is the UK price of the SIM-free 16GB iPhone 4S. The £599 I paid was for the 32GB iPhone 4.

[Kumabjorn]

Originally Posted by HarryT

No, £499 is the UK price of the SIM-free 16GB iPhone 4S. The £599 I paid was for the 32GB iPhone 4.

What then would be the operator's margin on selling those phones? £50 for the 16 GB and £75 for the 32 GB?