Apple pays an estimated $207 to build 16GB iPhone 5, report says
Results from a virtual teardown from IHS iSuppli were made public on Wednesday, revealing that Apple pays an estimated $207 to build the base model 16GB iPhone 5, a cost slightly higher than last year's iPhone 4S.
The market research company noted in its report that while previously-expensive NAND flash memory prices have dropped, the iPhone 5's display technology and 4G LTE wireless components brings the build cost up to $207, or $8 more than consumer pricing after wireless carrier subsidies. In comparison, the bill of materials, or price without labor costs, for last year's iPhone 4S was estimated to be $188.
In total, the iPhone 5 is estimated to have a BOM of $199, while the 32GB model rises to $209 and the 64GB version jumps to $230. With a manufacturing cost of $8 across the line, the final cost comes out to $208, $217 and $238 for the 16GB, 32GB and 64GB models, respectively.
A report last Friday from UBM TechInsights pegged the 16GB iPhone 5' BOM to be around $168, substantially lower than the IHS estimate.
Source: iSuppli
The most expensive part in the iPhone 5 is the new 4-inch display which comes in at $44. Apple is sourcing its screens from multiple suppliers, including LG Display, Japan Display and Sharp, as manufacturing the cutting-edge in-cell displays is complex and results in relatively low yield rates.
?The iPhone 5 makes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing,? said IHS Senior Principal Analyst, Teardown Services, Andrew Rassweiler. ?Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer.?
Instead of sandwiching the touch sensing layer between glass substrates, Apple's in-cell technology integrates the capacitive components with the LCD array, thus doing away with at least one layer of glass.
The company is expected to be using a $34, LTE-capable wireless system from Qualcomm similar to the one found in the iPad 3. However, the new iPhone's subsystem swaps out the first-generation MDM9600 baseband processor for the more advanced and power efficient second-generation MDM9615.
In previous years, NAND flash memory was one of the more costly components, however current prices have nearly halved in less than one year.
?NAND flash continues to come down in price as manufacturing processes for these memory chips become more advanced,? Rassweiler said. ?And because it is the world's largest buyer of NAND flash, Apple gets preferential pricing. Apple?s massive leverage in this market is reflected in our price estimate.?
Finally, the firm is estimating Apple's new A6 processor is a bit more expensive at $17.50 than the A5 found in the iPhone 4S, which cost $15 in 2011.
A more comprehensive analysis of the new handset's internal parts is expected to be completed later this week, when the iPhone 5 hits store shelves on Friday.
The market research company noted in its report that while previously-expensive NAND flash memory prices have dropped, the iPhone 5's display technology and 4G LTE wireless components brings the build cost up to $207, or $8 more than consumer pricing after wireless carrier subsidies. In comparison, the bill of materials, or price without labor costs, for last year's iPhone 4S was estimated to be $188.
In total, the iPhone 5 is estimated to have a BOM of $199, while the 32GB model rises to $209 and the 64GB version jumps to $230. With a manufacturing cost of $8 across the line, the final cost comes out to $208, $217 and $238 for the 16GB, 32GB and 64GB models, respectively.
A report last Friday from UBM TechInsights pegged the 16GB iPhone 5' BOM to be around $168, substantially lower than the IHS estimate.
Source: iSuppli
The most expensive part in the iPhone 5 is the new 4-inch display which comes in at $44. Apple is sourcing its screens from multiple suppliers, including LG Display, Japan Display and Sharp, as manufacturing the cutting-edge in-cell displays is complex and results in relatively low yield rates.
?The iPhone 5 makes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing,? said IHS Senior Principal Analyst, Teardown Services, Andrew Rassweiler. ?Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer.?
Instead of sandwiching the touch sensing layer between glass substrates, Apple's in-cell technology integrates the capacitive components with the LCD array, thus doing away with at least one layer of glass.
The company is expected to be using a $34, LTE-capable wireless system from Qualcomm similar to the one found in the iPad 3. However, the new iPhone's subsystem swaps out the first-generation MDM9600 baseband processor for the more advanced and power efficient second-generation MDM9615.
In previous years, NAND flash memory was one of the more costly components, however current prices have nearly halved in less than one year.
?NAND flash continues to come down in price as manufacturing processes for these memory chips become more advanced,? Rassweiler said. ?And because it is the world's largest buyer of NAND flash, Apple gets preferential pricing. Apple?s massive leverage in this market is reflected in our price estimate.?
Finally, the firm is estimating Apple's new A6 processor is a bit more expensive at $17.50 than the A5 found in the iPhone 4S, which cost $15 in 2011.
A more comprehensive analysis of the new handset's internal parts is expected to be completed later this week, when the iPhone 5 hits store shelves on Friday.
Comments
That's how most electronics manufacturers do it. Wait a minute... that's how [U]all[/U] manufacturing is done in general.
I don't know why this story is trotted out after every iPhone launch. They never seem to figure out the labor costs and other costs associated with the iPhone, though.
The R&D cost appears to have been left out...
So, tell us more about how Yield affects this. Is that $44 for a good one and all the duds that didn't turn out be damned - not factored into the cost. Or is that $44 after they have adjusted for the low yeild. I'm suggesting, along with labour and R&D, yeild rates might be another cost not factored in. But in fairness, R&D can be approtioned over an ever increasing number of units sold and yeilds should improve so they are moving targets.
BOM of just a FRACTION of the total cost required to bring a product to market. But hey, queue all the LOL 300%+ PROFIT MARGIN posts.
Just a few more things that add to that cost..
Employee wages
R&D
manufacturing
OS development (other companies only need to develop a skin on top of Android)
Manufacturing
Shipping
Marketing
Licensing Fees
Server costs during the life of the product (ie. iCloud)
Etc.
And then, you know, they actually have to make a profit.
Quote:
Originally Posted by Slurpy
BOM of just a FRACTION of the total cost required to bring a product to market. But hey, queue all the LOL 300%+ PROFIT MARGIN posts.
Just a few more things that add to that cost..
Employee wages
R&D
manufacturing
OS development (other companies only need to develop a skin on top of Android)
Manufacturing
Shipping
Marketing
Licensing Fees
Server costs during the life of the product (ie. iCloud)
Etc.
And then, you know, they actually have to make a profit.
There's no doubt about it, then. Consumers are getting ripped off.
Apple is Doomed!!!
Consumers get what they paid for.
Quote:
Originally Posted by Slurpy
BOM of just a FRACTION of the total cost required to bring a product to market. But hey, queue all the LOL 300%+ PROFIT MARGIN posts.
Just a few more things that add to that cost..
Employee wages
R&D
manufacturing
OS development (other companies only need to develop a skin on top of Android)
Manufacturing
Shipping
Marketing
Licensing Fees
Server costs during the life of the product (ie. iCloud)
Etc.
And then, you know, they actually have to make a profit.
To your point, another can read Apple's 10K and see the line item of COGS and Revenue and see they are no where need 300% margin less all the other things that factor into bring a product to market. I bet just for the iphone case they cost are higher since they probable had to pay NRE (non recurring engineering) cost and instead of paying up front it factored into ever case they buy up to some point. This along drives up much of the Cost on a individual parts. Since Apple does far more customer engineering they most likely had higher NRE cost on every product which these analysis have zero insight into.
So how much per unit are those custom diamond screen grinding stations... or that micron level component matcher?
iSuppli does a good job at component estimates. Now if only everyone would recognize the difference between and accuracy of component pricing vs total manufacturing costs. Etc...
We see this every time a new i-Something is released. Constant opinions that Apple is ripping off everyone by charging X when the BOM is only Y. By now most here realize the other costs associated with bringing such a product to market, yet there are still those that believe Apple is more evil than every other company out there. They are very efficient with their R&D, supply chain, and just about every other facet of product creation and manufacturing. That they turn a healthy profit because of this should be admired, not criticized. All businesses should aspire to be this efficient.
Quote:
Originally Posted by dfiler
So how much per unit are those custom diamond screen grinding stations... or that micron level component matcher?
iSuppli does a good job at component estimates. Now if only everyone would recognize the difference between and accuracy of component pricing vs total manufacturing costs. Etc...
It doesn't matter because Apple doesn't pay for them.