Apple is separating the new smartphones into its usual low-cost versus high-cost categories, with big differences between the two models coming down to the camera, display, and battery life.
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iPhone 8 Component Costs Estimated to Start at $247.51
An entry-level iPhone 8 with 64GB of storage costs Apple an estimated $247.51 in raw materials, an increase of almost $10 compared to the $237.94 it cost Apple to make last year's 32GB iPhone 7.
The 64GB iPhone 8 Plus costs an estimated $288.08, up from $270.88 for the iPhone 7 Plus.
To compensate for the increased cost, Apple charges $699 for the 64GB iPhone 8 in the United States, up from the $649 starting price it charged for the 32GB iPhone 7 in 2016. The iPhone 8 Plus is priced starting at $799, up from $769 in 2016.
"The added value went to memory, camera, and processing. That's where we can materially identify where they've improved the overall product, and hence why they can command a higher price for it," according to Wayne Lam, an analyst at IHS.According to Bloomberg, some of the most expensive components in the iPhone 8 and 8 Plus include the screens and the mechanical enclosures. Apple's new glass-bodied devices are built around a strong internal frame and include new displays with True Tone support.
Compared to iPhone 7 pricing, the wireless charging module increases costs by $2, the A11 Bionic chip costs $5 more, and the larger 256GB storage options increase prices by $6.
IHS's component costs are only estimates of what the iPhone 8 and the iPhone 8 Plus cost to manufacture, and sometimes those estimates are not spot on. For example, while IHS told Bloomberg cost $237.94 to manufacture an iPhone 7 in 2016, its initial estimates following the iPhone 7's release were at $219.80.
These estimates also only look at raw component costs and do not take into account other iPhone manufacturing expenses like research and development, software creation, advertising, and distribution, so this information, while interesting, is not an accurate measurement of Apple's profit margin for the iPhone 8 and the iPhone 8 Plus.
Back in 2015, Apple CEO Tim Cook said that cost breakdowns are generally "much different than the reality." "I've never seen one that is anywhere close to being accurate," he added.