Apple Is Making a Lot Less Money From the iPhone 14 Pro – Here's Why
A key component in the iPhone 14 Pro and iPhone 14 Pro Max is markedly more expensive than than its equivalent in the iPhone 13 lineup – meaning that without a retail price hike, Apple is likely making much less profit on each unit.
The iPhone 14 Pro and iPhone 14 Pro Max contain the A16 Bionic chip, Apple's first 4nm chip. It reportedly costs $110 to produce, making it over 2.4× as costly as the A15 Bionic chip in the iPhone 13 lineup, according to Nikkei Asia.
Geekbench 5 benchmark results indicate the A16 chip delivers around 15 to 17 percent faster multi-core performance compared to the A15 chip. Only the iPhone 14 Pro and iPhone 14 Pro Max are equipped with the A16 chip, while the iPhone 14 and iPhone 14 Plus retain the same A15 chip with a five-core GPU found in iPhone 13 Pro models.
In collaboration with Fomalhaut Techno Solutions, a Japanese research firm specialized in reverse engineering and bill-of-materials analysis, Nikkei found that average production costs have increased about 20 percent across the iPhone 14, iPhone 14 Pro, and iPhone 14 Pro Max compared to the equivalent previous-generation models.
The report claims that given Apple did not raise prices for its latest iPhone models in the U.S. and some other markets, the higher production costs mean that the company's profit margins have "likely shrunk," but prices did increase in key markets like the UK, Australia, and Japan amid a strong U.S. dollar relative to other currencies.
The A16's increased cost is likely due in part to the chip being manufactured with TSMC's 4nm process, while the A15 is a 5nm chip. The higher cost of the A16 chip may also be a key reason as to why only the high-end iPhone 14 Pro models have the new chip, with the two standard models having a chip from the previous year's iPhone lineup for the first time.
iPhone chips could continue to increase in price as miniaturization continues, with rumors suggesting the A17 chip in iPhone 15 Pro models will be based on TSMC's 3nm process, and a recent DigiTimes report claiming that TSMC will begin volume production of 2nm chips in 2025.