Cost to build Apple's new iPhone 3G S estimated at $179

[AppleInsider]

Apple's component and manufacturing costs for its new 16GB iPhone 3G S falls within $5 of those required to build last year's 8GB iPhone 3G, this despite a doubling of the handset's built-in storage capacity and the addition of several new components, according to a new tear-down cost analysis.

Market research firm iSuppli, which specializes in dismantling new electronic gadgets to identify their key components and assembly costs, estimates Apple's bill of materials (or BOM) on the 16GB iPhone to be $172.46 with a manufacturing expense of $6.50, for a total of $178.96.

The assessment is slightly higher than the firm's estimate of $174.33 to manufacture the original 8Gbyte iPhone 3G based on pricing in July 2008 when that handset first hit the market. These estimates do not include other charges, such as the costs to develop the iPhone's software, shipping and distribution, packaging, royalty fees and miscellaneous accessories included with each iPhone.

It's also important to note that while Apple's wireless partners offers the 16GB iPhone 3G S for as little as $199 with two-year service agreements, the actual price of the phone paid by those providers is considerably higher, reflecting a common practice amongst carriers to subsidize the upfront cost of a new phones for consumers and then profit off high-margin service subscriptions.

"From a component and design perspective, there’s also a great deal of similarity between the 3G and the 3G S," said Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli. "By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost."

Still, the firm was able to identify a few key differences in component selection of the iPhone 3G S compared to the iPhone 3G introduced a year ago. For starters, it sports a new $5.95 single-chip Bluetooth/FM/WLAN device from Broadcom, first identified by AppleInsider back in April as the BCM4329. This combo chip takes the place of two separate chips required to perform the same functions in the iPhone 3G -- a Marvell WLAN chip and a Cambridge Silicon Radio Bluetooth integrated circuit -- signaling another industry trend by which device makers are moving to higher levels of integration and simultaneously reducing the footprint of their devices by sandwiching many functions into more compact multi-function chipsets.



Also new to the iPhone 3G is an azimuth sensor from AKM Semiconductor, which was also first identified by AppleInsider in May as the AK8973, a 16-pin leadless IC package measuring 4mm square and 0.7mm thick. When paired with STMicroelectronics’ accelerometer, which is a 3-axis device like the AK8973, the parts facilitate the iPhone's new digital compass feature. More specifically, the STMicroelectronics part allows the 3G S to determine device orientation or inclination, while the AKM sensor detects device movement relative to magnetic north, supporting the 3G S’s capability to reorient a map displayed on the screen to correspond with the direction the user is facing.



Also making its debut in the iPhone line is Dialog Semiconductor's $1.30 power management IC serving the 3G S’s Samsung applications processor, which replaces a corresponding NXP Semiconductors device in last year's iPhone 3G, according to iSuppli.

Meanwhile, the firm notes that although there was wide-spread speculation that Qualcomm might displace Infineon as the supplier of the iPhone's critical baseband chip, Infineon was able to hold onto its seat and is currently supplying Apple with its PMB8878 chip, which accounts for $13 of the 3G S's total component costs.* Similarly, TriQuint has reportedly kept its slot as the 3G power amplifier module supplier, supporting the tri-band HSPA functionality of the phone.



Generally speaking, Toshiba is believed to have scored the biggest single design win in the 3G S that iSuppli tore down, with its 16Gbyte Multilevel-Cell (MLC) NAND flash costing $24. However, Apple has long-term supply agreements with at least four other major flash memory suppliers who, including Hynix, Intel, Micron, and Samsung Electronics. Of these, Samsung has most likely been chosen to supply identical parts for a percentage of the iPhone 3G Ss that will be manufactured, as Apple has long sourced its iPhone flash memory from multiple suppliers.


*
Speaking of Samsung, the South Korean electronics maker also maintained its seat as iPhone’s primary SoC supplier, as numerous reports have previously confirmed. Priced at $14.46, the applications processor is the fourth most costly component in the iPhone 3G S after the NAND flash, the display module and the touch-screen assembly. It runs at 600MHz compared to the 400MHz version in the iPhone 3G.

[ View this article at AppleInsider.com ]

[brucep]

No product in apple history has ever made more profit than the iphone series .

The large volume of sales makes all expenses nominal, Adding very little to the over all cost. The economies of scale bring a triple jackpot for apple .

Lower cost per sold item for components and advertising.
APP STORE pays for itself . or makes a profit.
Itunes garners 10 MILLION or more new clients a year.
all apple products shine much brighter. < halo effect >

The imac will get the next overhaul. I can't wait.


9

[dequardo]

Manufacturing costs. $6.50.

[nomad421]

And still no mention of the PowerVR SGX chip model number !

[dagamer34]

Any idea on how much the 32GB flash chip costs? I would assume more than double the cost of the 16GB chip.

[antiorario]

Originally Posted by AppleInsider

Market research firm iSuppli, which specializes in dismantling new electronic gadgets to identify their key components and assembly costs, estimates Apple's bill of materials (or BOM) on the 16GB iPhone to be $172.46 with a manufacturing expense of $6.50, for a total of $178.96.

Yet Italian cell companies TIM and Vodafone sell it (unsubsidized) for €619 and €719 (about $875 and $1,015). I don't need to comment on that.

[hmurchison]

Originally Posted by dagamer34

Any idea on how much the 32GB flash chip costs? I would assume more than double the cost of the 16GB chip.

Probably they scale linearly pretty much from what i've seen.

[Rot'nApple]

Is that the standard cost of the supplies that tallied up to $179.00?

I mean, if I ordered all the parts to assemble an iPhone, is that what I would be charge for all the components also or is that the price Apple pays because they expect to sell a few million of them and Apple gets a discount for the prices.

Guess I'm wondering if the cost to build the 3Gs iPhone is less than 179 because those prices in the article are "retail" versus what agreement on prices Apple worked out with all the various component makers?

[scoodog]

There have been NUMEROUS complaints on Apple's discussion boards of the 3GS display not having the same color "pop" -- i.e. colors are dimmer and blacks are gray. I've noticed the same thing. It looks like Apple may be using a cheaper LCD in the 3GS. The LCD in the 3GS costs $19.95 per the article here.

How much did the LCD in the 3G cost?

[ltcommander.data]

Originally Posted by AppleInsider

For starters, it sports a new $5.95 single-chip Bluetooth/FM/WLAN device from Broadcom, first identified by AppleInsider back in April as the BCM4329.

Well, from your own article, AppleInsider would have misidentified the chip since it isn't the BCM4329, but the BCM4325 as clearly highlighted in the iSuppli picture in the article. Sadly that means no hidden 802.11n functionality.

Originally Posted by scoodog

There have been NUMEROUS complaints on Apple's discussion boards of the 3GS display not having the same color "pop" -- i.e. colors are dimmer and blacks are gray. I've noticed the same thing. It looks like Apple may be using a cheaper LCD in the 3GS. The LCD in the 3GS costs $19.95 per the article here.

How much did the LCD in the 3G cost?

Maybe it's the new coating distorting the colours?

[majortom1981]

Does thisa mean that the 3gs has an fm radio thats disabled but can be enabled via 3rd parties?

[Mr. H]

Originally Posted by Rot'nApple

Is that the standard cost of the supplies that tallied up to $179.00?

I mean, if I ordered all the parts to assemble an iPhone, is that what I would be charge for all the components also or is that the price Apple pays because they expect to sell a few million of them and Apple gets a discount for the prices.

No, they aren't the prices you'd pay. For you to get those components from somewhere like digikey would probably cost you more than the unsubsidised price of a new iPhone, if you could get them at all.

The prices are iSuppli's "intelligent guesses" as to what Apple pays. To a degree, the teardowns are pointless as only Apple and their suppliers know how much Apple pays for the parts.

[merdhead]

Originally Posted by majortom1981

Does thisa mean that the 3gs has an fm radio thats disabled but can be enabled via 3rd parties?

Only if the right pins were connected in hardware. Probably the critical one would be the antenna connection to the headphone jack. I'd say that would be definitely missing.

So the answer is no, unless you want to get out your soldering iron.

[al_bundy]

Originally Posted by dagamer34

Any idea on how much the 32GB flash chip costs? I would assume more than double the cost of the 16GB chip.

why?

it's normal to buy twice the storage at the same price as time goes on

few months ago i priced out some HP servers with 32GB of RAM. They take up to 64GB. The 32GB cost $1500 while 64GB would cost $7000 due to the fact that the higher density chips command a premium. Next year the price is going to fall so if we need more memory we'll buy the 64GB then. 2 years ago 32GB cost around $15000

[merdhead]

Originally Posted by Mr. H

No, they aren't the prices you'd pay. For you to get those components from somewhere like digikey would probably cost you more than the unsubsidised price of a new iPhone, if you could get them at all.

The prices are iSuppli's "intelligent guesses" as to what Apple pays. To a degree, the teardowns are pointless as only Apple and their suppliers know how much Apple pays for the parts.

Yeah, chances are they pay much less. They are pretty fierce negotiators.

[PG4G]

Originally Posted by majortom1981

Does thisa mean that the 3gs has an fm radio thats disabled but can be enabled via 3rd parties?

No. Developers need API's written by Apple to give access. For example, bluetooth has always been in every iPhone but access was not allowed. Simply, developers have no way to talk to that chip directly and circumvent Apple's lockout.

[teckstud]

Originally Posted by brucep

The imac will get the next overhaul. I can't wait.


9

Me neither. When do you think it will happen?

[merdhead]

Originally Posted by al_bundy

why?

it's normal to buy twice the storage at the same price as time goes on

few months ago i priced out some HP servers with 32GB of RAM. They take up to 64GB. The 32GB cost $1500 while 64GB would cost $7000 due to the fact that the higher density chips command a premium. Next year the price is going to fall so if we need more memory we'll buy the 64GB then. 2 years ago 32GB cost around $15000

Uh, but we're pricing them at the same moment, so it's a perfectly reasonable assumption. It could be a little more than twice though because you may pay a price premium for higher density. Then again if the 32GB part is made in higher volume i could actually be less than twice the price. I doubt it though.

[merdhead]

Originally Posted by PG4G

No. Developers need API's written by Apple to give access. For example, bluetooth has always been in every iPhone but access was not allowed. Simply, developers have no way to talk to that chip directly and circumvent Apple's lockout.

Yes they do, it's called jailbreaking.

[Contegni]

Originally Posted by scoodog

There have been NUMEROUS complaints on Apple's discussion boards of the 3GS display not having the same color "pop" -- i.e. colors are dimmer and blacks are gray. I've noticed the same thing. It looks like Apple may be using a cheaper LCD in the 3GS. The LCD in the 3GS costs $19.95 per the article here.

How much did the LCD in the 3G cost?

Interesting... I find the colors on my 3G S to pop MORE than my 3G when they are side by side...

[shanmugam]

Originally Posted by teckstud

Me neither. When do you think it will happen?

mostly an event in first weeks September with

1) Snow Leopard release date
2) iPod update
3) iMac update with some quad config and shipping with Snow Leopard

[Kibitzer]

Originally Posted by merdhead

Uh, but we're pricing them at the same moment, so it's a perfectly reasonable assumption. It could be a little more than twice though because you may pay a price premium for higher density. Then again if the 32GB part is made in higher volume i could actually be less than twice the price. I doubt it though.

As with any larger memory module, production costs are certain to drop significantly over time.

[shanmugam]

not sure whether 32nm from intel will fall in line with september snow leopard release and new iMacs

[PG4G]

Originally Posted by merdhead

Yes they do, it's called jailbreaking.

Sorry, I was referring to Apple-accepted ways - or ways in which users can expect Apps on the App Store to function.

[mrsteveman1]

Am i missing something or does that hardware support CDMA?

[christopher126]

Originally Posted by dequardo

Manufacturing costs. $6.50.

[christopher126]

That's really the only complaint I have with Apple. Like TV's Apple products aren't manufactured in the US. I understand the labor cost differences, (US vs. China) but then I think of these millions of ipods, iphones, laptops, imacs, etc. being shipped across the Pacific in 747's and the millions of tons of jet fuel being used. Think of the carbon footprint of Apple?

Anyway, got to get in my SUV and go have a hamburger at McDonald's, and make some calls on my iPhone!

[teckstud]

Originally Posted by shanmugam

mostly an event in first weeks September with

1) Snow Leopard release date
2) iPod update
3) iMac update with some quad config and shipping with Snow Leopard

Forget update- we were talking overhaul.

[Denton]

Originally Posted by AppleInsider

Market research firm iSuppli, which specializes in dismantling new electronic gadgets to identify their key components and assembly costs, estimates Apple's bill of materials (or BOM) on the 16GB iPhone to be $172.46 with a manufacturing expense of $6.50, for a total of $178.96.

Considering that it costs about $155 to make an iPod Touch (see here for instance), I find it difficult to understand why the unsubsidised price of an iPhone is not within $100 of the price of an iPod Touch (of the same memory capacity). Are iPhone prices high as a subsidy that allows iPod Touch prices to be lower? Or is there insufficient competition for the iPhone that allows Apple (and/or AT&T, Rogers, etc) to be able to charge monopolistic prices?

[Hattig]

Apple must be making a mint on these devices, assuming they sell them to the carriers to subsidise for $499/$599, and the carrier (or Apple Store) whacks on a $100 profit for themselves which is factored into the contract, resulting in $599/$699 devices.

Even when all other costs are factored in, 20 million or more devices sold over the next year will drive the per-device cost down way low. Apple could be making more than 100% margin here. Talk about laughing all the way to the bank. There's just no competition - Palm needs to charge a lot to make some income to keep them afloat. WinMob is irrelevant. Android is too young and geeky. BB, well they like profits too.

Even assuming $250 profit per device on average, that's $5b profit in the next year (of course, split over 24 months, so Apple's quarterly figures are going to continue to be nice for some time to come).

[macslut]

Originally Posted by mrsteveman1

Am i missing something or does that hardware support CDMA?

I believe it always has, but of course the firmware doesn't. I've never understood the claims that it would be an issue of cost for Apple to support CDMA...other than the exclusivity/subsidy deal with AT&T. However, even that I don't fully understand because it seems like Verizon and AT&T would get in a subsidy war if Apple released it for Verizon as well.

I'm not saying it wouldn't cost anything to develop and test the CDMA firmware, but the cost would pale in comparison to the additional sales.

[NasserAE]

Originally Posted by Denton

Considering that it costs about $155 to make an iPod Touch (see here for instance), I find it difficult to understand why the unsubsidised price of an iPhone is not within $100 of the price of an iPod Touch (of the same memory capacity).

Products are priced based on the market and demand. Unsubsidized smartphone prices range between $400 and $600 therefore Apple need to price the iPhone within that range.

[PaulMJohnson]

Originally Posted by Kibitzer

As with any larger memory module, production costs are certain to drop significantly over time.

In this case, the 32Gb will probably be about double the 16Gb. The chip they are using is a multi-layer package, so they effectively add more individual bits of silicon into the same package, to get the memory size they want. Both chips will be manufactured with the same density, but the 32Gb will have twice as many bits of silicon in there. The price will be slightly more than double, as the wiring inside the package will be more complex.

[macslut]

Originally Posted by scoodog

There have been NUMEROUS complaints on Apple's discussion boards of the 3GS display not having the same color "pop" -- i.e. colors are dimmer and blacks are gray. I've noticed the same thing. It looks like Apple may be using a cheaper LCD in the 3GS. The LCD in the 3GS costs $19.95 per the article here.

How much did the LCD in the 3G cost?

It's really hard to compare displays, even side by side. The issue is that you can't accurately set the brightness to one specific value, unless you crank it all the way up, or all the way down. Side by side, my 3GS has significantly higher brightness than the 3G. This will result in colors being dimmer and blacks grayer. But...it's also brighter, and can reveal more details (for example, I looked at some photos from a car show, and with the brightness all the way up, I could see the words on the tires with the 3GS, but not the 3G). This was a very subtle thing, but definitely showed the difference.

Bringing the brightness down would make the displays match, but again, it's hard to do this with precision until the jailbreak for the 3GS comes out and you can use exact numeric values.

On a side note, I miss the cooler color of the original iPhone/OS. I remember when I got the 3G thinking I was going to have a hard time living with the brown display (they fixed it a bit with firmware, but it's still too warm for me).

[al_bundy]

Originally Posted by macslut

I believe it always has, but of course the firmware doesn't. I've never understood the claims that it would be an issue of cost for Apple to support CDMA...other than the exclusivity/subsidy deal with AT&T. However, even that I don't fully understand because it seems like Verizon and AT&T would get in a subsidy war if Apple released it for Verizon as well.

I'm not saying it wouldn't cost anything to develop and test the CDMA firmware, but the cost would pale in comparison to the additional sales.

I thought everything CDMA was owned by qualcom and apple would have to pay them licensing costs

[brucep]

Originally Posted by teckstud

Me neither. When do you think it will happen?

In sept i think they will speed bump the MBP mini air line ups. and the IMAC might go native and we get 4 choices . 2 old models price reduced and 2 new models with faster and better stuff inside.

Maybe it will be a uni body IMAC with the 2 GPU chip's and quad core CPU chip with sd card slot.

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[scottybe]

I wonder if/when Apple would use the temperature sensor to throttle the speed of that processor. Reports say it's currently clocked at 600ghz but has the ability to go up to 833ghz. Of course, the reason they don't may be a battery issue more than a heat issue...

[Denton]

Originally Posted by NasserAE

Products are priced based on the market and demand. Unsubsidized smartphone prices range between $400 and $600 therefore Apple need to price the iPhone within that range.

What you describe is monopolistic pricing. If we assume that the Touch is sold at a competitive price, then the competitive price for the iPhone is around $300 (for the 16GB model) and $400 (for the 32GB model). As you cannot buy an iPhone at those prices, the consumer is suffering.

If it really does cost other companies $400 to $600 to produce an iPhone competitor, they should be driven out of business and replaced with other firms that are better able to compete. It is the wireless carriers (in my opinion) that introduce this monopolistic pricing. I really wish that Apple (and other handset manufacturers) would cut them out of the equation. Your internet provider is not allowed to inflate the price of your computer, why are wireless providers allowed to inflate the price of phones?

[brucep]

Originally Posted by christopher126

That's really the only complaint I have with Apple. Like TV's Apple products aren't manufactured in the US. I understand the labor cost differences, (US vs. China) but then I think of these millions of ipods, iphones, laptops, imacs, etc. being shipped across the Pacific in 747's and the millions of tons of jet fuel being used. Think of the carbon footprint of Apple?

Anyway, got to get in my SUV and go have a hamburger at McDonald's, and make some calls on my iPhone!

Apple re did all there boxes and saved 40 % in room. They also went %60 green ON many products and %100 percent green by year end . Go to the apple sore and watch the green video . it makes all tHe DELL'S l look like toxic mud.

But yes
why can't apple make a factory in america or canada or nova scotia .??


9

[davebroham]

CDMA and WCDMA are not the same thing...also I don't believe the patent license costs are factored in this report either