iPhone 6 Component Costs Estimated to Begin at $200, Samsung Supplying Some A8 Chips

Tuesday September 23, 2014 10:00 am PDT by Eric Slivka
iphone_6_6_plus_compAs it routinely does for new devices, IHS iSuppli has taken apart the iPhone 6 and iPhone 6 Plus in an effort to estimate Apple's costs for the components included in the new devices, sharing the results with Re/code. According to IHS iSuppli's teardowns, parts and labor costs for the iPhone 6 are estimated to begin at $200 for the 16 GB iPhone 6 model, giving Apple a roughly 69 percent gross profit margin on the devices.

That number of course does not take into account an array of other costs, from research and development to software to marketing and distribution, but it does offer an interesting glimpse at what goes into an iPhone.
The margins are in line with more recent iPhone models but higher than the earliest ones. The gross margin on the iPhone 5, released in 2012, and the iPhone 5s, released last year, were about 69 percent, teardown studies at the time of their release showed. On the lower-priced iPhone 5c, also released in 2012, the gross margin was closer to 68 percent. By comparison, the gross margin on the very first iPhone, released in 2007, was closer to 55 percent.
Apple does earn slightly higher margins on higher-capacity iPhone 6 models, as the 128 GB of storage is estimated to cost $47 more than the base 16 GB storage while the device retails for $200 more.

The iPhone 6 Plus is also a higher-margin item for Apple, with IHS iSuppli estimating the device costs just $16 more to produce than the corresponding iPhone 6 models, with roughly half of that difference coming from the display and the remainder presumably related to the rear camera module with optical image stabilization, a larger battery, and other minor differences.

Another interesting observation from IHS iSuppli is that Samsung does indeed remain involved in production of the main A-series processor for the iPhone. Early teardowns had shown the iPhone 6 and 6 Plus using A8 chips manufactured by TSMC for the first time, but IHS iSuppli says TSMC is providing 60 percent of A8 chips while Samsung is handling the remaining 40 percent.

Tag: IHS iSuppli
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nagromme
70 months ago
Yes, because a "ziploc bag of parts" (some manufactured by means ONLY Apple has) is Apple's full cost.

There is no cost to transport those parts. No cost to assemble them. No cost to provide support for them. No cost to market and package them. No cost to transport and store them around the world. No R&D cost to develop the device in the first place. No cost to develop the OS or the apps. No cost for bandwidth. No cost for the cloud services behind it all. No insurance, no taxes, no patent fees. JUST a bag of parts.

...The cost of those parts are what they are to recover R&D expenses.

Thus, the only aspect of the iPhone evaluation that isn't being correctly assumed is ergonomics, advertising and software. As none of those things can be quantified. ...


"Correctly assumed" is wrong: iSuppli does NOT know Apple's R&D details. They don't know much--they guess as best they can at certain elements, because it's free publicity for them.
Rating: 15 Votes
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6836838
70 months ago
Completely pointless test, as it's doesn't capture R&D costs.

You might as well price up raw glass, metal and plastic...
Rating: 10 Votes
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isoft7
70 months ago

Samsung still making the processors for their biggest consumer rival, the likes of which they mock commercially.

Makes it easy to believe in an oligarchical world where competition is an illusion :O

Be very afraid.


:D

Remember, all of these large corporations care for one thing and one thing only... money.

The rest is an illusion perpetuated by their own exclusive fan base.

Apple fans are convinced that Jobs and now Cook really care about them as people. And through that, want to provide their customers a personalized welcoming experience. The reality is, that's all imaginary. All they want is to turn huge profits, make their stock holders happy and keep their jobs for as long as possible.

*REALITY
Rating: 8 Votes
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AppleScruff1
70 months ago

At least this article addresses the fact that it doesn't cost $200 to make an iPhone 6 - millions went into R&D and testing and such.


How many millions is key. If it was $150 million, that would add a dollar to the cost of the iPhone since they will sell somewhere around 150 million a year. If it is $1.5 billion, it would add $10 per phone.
Rating: 7 Votes
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isoft7
70 months ago
Don't put too much stock in the "RD" argument.

Remember, when they make these calculations, they're evaluating cost of individual components.

The cost of those parts are what they are to recover R&D expenses.

Thus, the only aspect of the iPhone evaluation that isn't being correctly assumed is ergonomics, advertising and software. As none of those things can be quantified.

That said, over the sale of all phones, given that much of what is now was taken from research prior, I wouldn't imagine the cost to produce being more than an additional $15 or so.

Bottom line, Apple could sell these devices for a LOT less. But they know their customer base well... they'll buy and pay for just about anything with the Apple logo on it. (that's blunt truth folks)
Rating: 7 Votes
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0815
70 months ago
and this does not even include the R&D that goes into those devices ....
Rating: 7 Votes
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Rogifan
70 months ago
I wish people would stop using the term subsidy. AT&T isn't subsidizing my phone. I'm paying off the phone every month as part of my phone bill. Just because you don't pay the full cost of the phone up front doesn't mean its subsidized. I didn't pay the full amount for my new car when I bought it either. No one says car dealerships subsidize new car purchases.
Rating: 6 Votes
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AlecZ
70 months ago

Bottom line, Apple could sell these devices for a LOT less. But they know their customer base well... they'll buy and pay for just about anything with the Apple logo on it. (that's blunt truth folks)


They sell iPhones at a huge profit because that's what they're worth to the market. And if you think they're worth that much mostly because of the Apple logo, you're more wrong than you're right.
Rating: 6 Votes
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tevion5
70 months ago

so...the subsidized price paid in the US is like getting the phone at cost?


With a contract you end up paying for that phone 3 times over.

199 for an iPhone? Try getting a new BMW for 2000
Rating: 6 Votes
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isoft7
70 months ago

They sell iPhones at a huge profit because that's what they're worth to the market. And if you think they're worth that much mostly because of the Apple logo, you're more wrong than you're right.


Not at all.

There are plenty of options in the cell phone market that provide to the customer identical user experience. And or at least, functionality.

Hell, an old Blackberry still makes phone calls, handles texts, emails, etc. with ease.

The attraction of an iPhone over a cheaper, easier to get Android device is that it is made by Apple.

The only counter argument would be investement in ecosystems. Assuming you've invested hundreds, or thousands into iOS applications. BUT, if thats the case, again, all that means is Apple has you locked in and as such can charge whatever they want.

The freedom for the consumer has never been more large, the choice made is made through emotional needs, not rational ones.
Rating: 5 Votes

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