iPhone 3G saves Apple over $50 per unit

[AppleInsider]

Even with the newer technology inside iPhone 3G, Apple has managed to trim the price of its handsets by over $50 and is making even more profit on each sale, according to a new cost breakdown by iSuppli.

The supply analysis group estimates that the raw cost of parts and assembly for a stock 8GB iPhone now costs Apple $173, or $53 less than the $226 it first cost Apple for the earlier cellphone.

Much of the breakthrough comes through leaving many existing components intact. While the Infineon 3G chipset and the Broadcom Global Locate GPS unit are new, the Samsung processor, flash memory, and numerous other parts are the same as for the 2007-era iPhone, more than offsetting the price increase that stems from the addition of 3G and GPS.

"They [at Apple] have done a good job in using what worked well with the first one and making improvements where it mattered," says iSuppli analyst Jagdish Rebello.

Although some fees can't be escaped, including $45 in royalties to Qualcomm and others for a 3G license, the savings are said to give Apple roughly $281 in profit with each phone's estimated full, pre-subsidy $499 price -- or a more than 56 percent profit margin.

This doesn't, however, include shipping, sales, and the cost of bundling pack-in devices, according to the study. Apple's actual profit from each device is anticipated to be less, though the 16GB model is believed to be more profitable as the extra memory adds just $23 to the cost despite the $100 boost to the retail price.

Apple's cost reductions should also get steeper as time goes on, iSuppli adds. Apple's price to build an iPhone could drop to $148 by 2009, extending the electronics maker's margins even further ahead of the next major iPhone update.

AppleInsider should have more information soon.

[ View this article at AppleInsider.com ]

[Chris_CA]

Originally Posted by AppleInsider

Although some fees can't be escaped, including $45 in royalties to Qualcomm and others for a 3G license, the savings are said to give Apple roughly $281 in profit with each phone's estimated full, pre-subsidy $499 price -- or a more than 56 percent profit margin.

$4,245,000,000 (minus shipping, sales, and the cost of bundling pack-in devices) profit for the iPhone in 2009?
Not too shabby for a company that has been "struggling/bought out by MS/went bankrupt" for the last 20 years...

[SpamSandwich]

That's the beauty of technology and Moore's Law at work.

[nagromme]

"This doesn't, however, include shipping, sales, and the cost of bundling pack-in devices"

Or R&D, support, and advertising among many other things.

[razorpit]

Good for them and my stock!

[Akac]

Not really since it doesn't cover the packaging, the advertising, the R&D, and so on.

[ahmlco]

'Course, their estimates need to be taken with a grain of salt, as they've undoubtedly been done WITHOUT an actual iPhone in their possession to tear down, nor do I suspect that they have access to the numbers from Apple's supplier's contracts.

In fact, it probably isn't so much as estimate as it is a WAG...

[JeffDM]

Originally Posted by ahmlco

'Course, their estimates need to be taken with a grain of salt, as they've undoubtedly been done WITHOUT an actual iPhone in their possession to tear down, nor do I suspect that they have access to the numbers from Apple's supplier's contracts.

In fact, it probably isn't so much as estimate as it is a WAG...

That's not going to stop them from putting out estimates that have three significant figures in the number. Once they get the acual device, they'll pretend that they can make an estimate that's worth going to four significant figures.

I don't understand this business about assuming it has a $300. I don't understand why AT&T would take that on knowing that there's likely going to be hacks, and subsequently a lot of people that's going to buy the device and cancel the contract even if it costs them $175 - $200 to do so, leaving AT&T in the hole for $100 for each unit that leaves their network early. I don't think all the reasons to hack them have been fully addressed, and there are people that are willing to hack it just for the notoriety.

[guppy737]

Partly due to the cheap plastic case back they will be using??? What happened to everything going to glass and aluminum? The only thing I've heard is acceptable reception can only be achieved with the plastic back but is that really true?

[anantksundaram]

Originally Posted by guppy737

Partly due to the cheap plastic case back they will be using??? What happened to everything going to glass and aluminum?

Huh? Has Apple changed the glass in front to plastic with the 3G iPhone? Or was there glass in the previous edition of the iPhone? (I must have somehow missed both).

I'd rather have plastic for the back, since it will probably scratch less than my aluminum 2.5G iPhone.

[JeffDM]

Originally Posted by guppy737

Partly due to the cheap plastic case back they will be using??? What happened to everything going to glass and aluminum? The only thing I've heard is acceptable reception can only be achieved with the plastic back but is that really true?

Plastic doesn't always mean cheap. The kind of plastic Apple tends to use for portable device cases is a bit on the expensive side. The cost to make the aluminum back is probably not much, so it's probably a bit of a wash.

Without seeing a tear-down, I don't think we'll know for sure it's about reception, but it does sound plausible. I don't think Apple publicly stated that reception was a reason to switch. I do hope they pick something that's more scratch resistant while still being impact resistant. Apple has used polycarbonate in the past, which is incredibly impact resistant, but it is scratch-prone when it does not have a scratch resistant coating.

[irnchriz]

Originally Posted by anantksundaram

Huh? Has Apple changed the glass in front to plastic with the 3G iPhone? Or was there glass in the previous edition of the iPhone? (I must have somehow missed both).

I'd rather have plastic for the back, since it will probably scratch less than my aluminum 2.5G iPhone.

The original iPhone has a glass screen and its actually quite difficult to scratch the brushed aluminium back, unlike the shiny aluminium back on the iPod touch which is easily scratched.

[TenoBell]

Originally Posted by guppy737

Partly due to the cheap plastic case back they will be using??? What happened to everything going to glass and aluminum? The only thing I've heard is acceptable reception can only be achieved with the plastic back but is that really true?

Apple has been known to use expensive materials and rare manufacturing techniques in plastics. Plastic is recyclable.

Yes it is true that metal interupts radio signals. The radio transmitter in the current iPhone is located behind the black plastic in the back.

[ahmlco]

Originally Posted by JeffDM

That's not going to stop them from putting out estimates that have three significant figures in the number...

There's a big difference between precision and accuracy.

[JeffDM]

Originally Posted by ahmlco

There's a big difference between precision and accuracy.

I don't see how they can hope to have either.

[jowie74]

Originally Posted by AppleInsider

While the Infineon 3G chipset and the Broadcom Global Locate GPS unit are new, the Samsung processor, flash memory, and numerous other parts are the same as for the 2007-era iPhone, more than offsetting the price increase that stems from the addition of 3G and GPS.

Everything I've ever read says the iPhone has an ARM CPU. Although apparently the CPU is the same in the 3G iPhone, it is supposed to be up to 40% faster.

[JeffDM]

Originally Posted by jowie74

Everything I've ever read says the iPhone has an ARM CPU. Although apparently the CPU is the same in the 3G iPhone, it is supposed to be up to 40% faster.

There's no contradiction here on ARM. The architecture is ARM, but they are likely not the manufacturer. Samsung makes some chips with ARM architecture. I'm not sure if ARM makes chips anymore, many other companies license the cores designs, maybe add their own stuff to it and produce their own chips.

[jowie74]

I stand corrected then.

[anantksundaram]

Originally Posted by irnchriz

The original iPhone has a glass screen and its actually quite difficult to scratch the brushed aluminium back, unlike the shiny aluminium back on the iPod touch which is easily scratched.

Oops.... upon re-reading I noticed I had a missing word - 'no' - in my second sentence.