Cost to build Apple's new iPhone 3G S estimated at $179 - Page 2

$325 profit per piece.

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The consumer is suffering because they can't buy an iPhone? Capitalism is great not just because it provides the highest standard of living, but also because companies are free to sell their products and services for whatever price they want. Likewise, consumers are free not buy if they don't value said products and services at that price. Guess what? Competitors are almost always willing to fill such a vacuum. (Uncompetitive companies aren't "replaced" by some unseen hand (yet); they just naturally go out of business.)

How are wireless providers inflating the cost of phones? They've determine the "sweet spot" for buyers, and are paying the phone makers the difference in order to sell for that price. Of course, they make up the difference in monthly fees. Everyone understands this is how it works. Why is it necessarily bad, especially if consumers can buy the phone without service at the unsubsidized price?

If you introduced new product and your competitors are selling similar products at a specific price then you should price yours within that range. Cutting the price way below your competition means your product is not as good (from consumer point of view) and will cut your profit.


I really don't think carriers are setting the price of handset higher than they should because they have to buy the phone and sell it at lower price while trying to make up the money from the monthly fees. It makes more sense for them to lower the price they pay the manufacturers, don't you agree?

Fore example, Nokia and SonyEricsson sell the majority of their phones unsubsedized and unlocked and their new smartphone prices are within $500 to $700.

Actually, Apple assesses the life cycle carbon footprint for every one of its products, and gets it verified by a third party. The data for the iPhone are here: http://images.apple.com/environment/...tal-Report.pdf

Transport accounts for 5% of the iPhone's estimated 55Kg CO2e (94% is from production and use, and that would remain largely the same regardless of where manufactured).

Brown display? Please explain.

Agreed 100%. I gave my original iPhone to my wife when I bought the 3G, and every time I look at that screen, I wince at the poorer quality of the 3G display.

CDMA is a channel access method, which WCDMA uses, CDMAOne, and CDMA2000 are Qualcom products (which also use CDMA) and are unfortunately usually shortened to CDMA

And we bemoan the loss of those high quality jobs to Asia...

You just supported what he said.

But they are being made by people who walk to work and eat a largely vegetarian diet due to lack of affordable beef. Not by SUV driving BBQers in the USA

Here's an analogy for you.

Say you (that's you, Mr Denton) are a basketball player. Your can get out in an NBA game and hold your own, over the course of a year you average 12 points, 5 rebounds. Meanwhile Lebron James can score 25 points and get 10 rebounds.

Now, since you are Denton and you don't believe in capitalism, you would argue that since it costs you about the same as it costs Lebron to produce your product (you both eat well, you both have about the same living expenses, you both hit the gym/courts for 3-5 hours a day) you should both be paid about the same.

THANKFULLY in the world we live in, the cost of production does not have any impact on the cost to the customer.

Thank god for that.

You are delusional. It doesn't support CDMA. Not even a little bit. To say that it's just a question of firmware is idiotic. If you have no idea about wireless hardware, stop spreading such crap.

I suspect that the reason Apple manufactures in China has to do more than manufacturing cost of $6.50. Automation reduces the impact of labor cost significantly. The big difference is tax avoidance via transfer pricing. The iPhone may come out of China with almost no taxes since the manufacturing is outsourced to Hon Hai, etc and priced at cost for Apple. Then an offshore Apple company in tax heaven like the Caymans can sell the product to various carriers worldwide at maximum profit. The Apple profit can stay offshore tax deferred. Occasionally the IRS will allow the companies to repatriate the profits to the US with a 5-6% tax.

The Obama administration wants to change all this... but I have seen companies moving their corporate headquarters offshore to places like Zug, Dubai, etc.

Go back to Econ 101.
Or the USSR.

Ugh, do you actually have any evidence that a big, high profile, public company like Apple is actually doing this? Do you think someone might notice if they were?

Or high school.
Or back into the womb and disappear.

Personally I'm pretty pissed that Porsche has a monopoly on Porsches. They're such nice cars, if only there were some competition I'd be able to afford one.

I would imagine that "manufacture" here really means assembly. Also, we don't know how many get assembled in an hour. If it's one, say every ten minutes, that's $39 per hour. Assuming that the cost of labor is 10% - 20% of that ($4 - $8/hour), it is a very respectable wage for China.

I agree that the labor cost would be higher if it were done here.

But even if we allow for $20/hour, and use the same assumptions as above for the rest, that would push up the per hour cost of 'manufacturing' the six iPhones to, maximum, $ $55. That would be $9.17 per iPhone, as opposed to $6.50. Or 5% of the direct cost (of ~$182), as opposed to 3.6% (6.5/179) currently.

Yeah, I guess we should start setting employees salaries based on how much they paid for college
Oh wait.. we will have to set university tuition the same since all professors will be paid the same. Therefore, tuition the same equals everyone paid the same tuition = everyone get paid the same. I wonder what they call this!!!!

Wow, intense much?

You're right. I had read the whitepaper PDF and other documents on the Infineon chipset and believed it supported CDMA. It doesn't, it supports WCDMA...not the same thing. I'm sorry if this makes me delusional and idiotic, but at least I'm not alone.

Still, my point still stands, the direct cost of supporting CDMA isn't the real issue when you compare it to how many more iPhones they could sell with Verizon. It's the other issues involved that have prevented this from happening.

True. What he's trying to say is that color images are very subjective, whether its TVs or photos. Your mind adjust to off balance color images. I spend way too much time in color darkrooms before the digital revolution to know this. You can see this if you redo and undo image adjustments in Photoshop.

White is actually a very difficult thing to achieve. Take a white sheet of paper and hold it up to different things you think are white...do this indoors and outdoors and you'll see there's a whole lot of different white.

When you go to white balance, you can adjust warmer (brown) or cooler (blue). Some people have a preference for one side or the other. For me, the preference is to be slightly cooler (blue). So when I upgraded from the original iPhone to the iPhone 3G, the warmer color really stood out for me as being too brown (instead of white, or even more to my preference, slightly blue).

They corrected this a bit in a subsequent firmware release, but it was still too warm for my preference. I was hoping there would be a manual adjustment for this, but it's really not that big of a deal for most people.

Well some people keep on spouting absolute crap about this phone. With the first version it was that it secretly supported 3G, with the previous model that it secretly supported 7.2Mbps HSDPA and then your comment. I think misinformation should be put down. Just because I have my unique personal style is neither here nor there.

Adding is an issue. It makes the handset much larger, more expensive, less efficient or makes manufacturing more expensive (due to more models, less volume).

All this for a standard that represents 10% of the market and is shrinking. CDMA is dead. It lost. Just because 2 US carriers support it doesn't make the economics of it any better.

Post math

iPhone 3Gs cost $180 materials $20 labor and shipping =$200

Sells for $599 aka $600 - $200 = $400 margin. (spare r&d etc for now)

-------

$200 for iPhone 3Gs + AT&T contract $100 (apx) a month for 24 months = $2600

AT&T voice unlimited $30 a month x 24 months = $720

$2600 - $720 = $1880

To determine AT&T data lets assume $30 a month for another $720 deducted so $1880 - $720 = $1160

So $1160 - ($600-$200) = $760



AT&T got their $60 a month (for 24 months) for voice and data.

Apple got their $600 for the iPhone.


So where is that spare $760 going?

Verizon is a problem, not a feature. If the US had not built out 2 parallel, redundant, and mutually incompatible cellular infrastructures, the consumers would be so far ahead in capabilities and features over today, it would not be funny. Instead, Verizon uses CDMA, which is only in the US, Canada, Japan and S. Korea. The rest of the world is GSM.

Billions and billions wasted on creating incompatible networks! Like having standard and narrow gauge railroads everyplace - incompatible, and everything redundant.

Apple products have always been open data formats, supporting industry standards, or at the very least, providing bi-direction data translation capabilities, unless contract (RIAA comes to mind) obligations negated this. Hardware has always been proprietary - and quality - a price I readily pay, especially since it is cheaper than the top quality gear from any of the top tier players. (go buy a Nokia N71x at about $800 - where is the outrage on that??)

Oh, this iPhone cost is for the hardware - assembly is negligible. But R&D is not rolled into this. I would guess that about 4 million iPhones would need to be sold, before the product was profitable to Apple. Then there is the R&D for the next version, and support, and overhead.

Based on this logic, a B2 Steath bomber is about $18M LESS than a 747. Forget about the $19 BILLION dollars of R&D that went into creating it in the first place - that is free, right? makes the $247M B2 cost over $1B a copy. If you amortize the factory and R&D cost of a Saturn automobile, and make 15 of them, they would cost $178M each - place your order here. The materials cost for a Saturn is less than 20% of the sales price. Are they ripping you off, or making massive profits?

I hope we see the new auto-focus camera from the iPhone in the iMac.
The nice thing is that because the components can be used in both iPhones and Macs, they can save money on the desktop components.

The new MacBooks have the same integrated headphone/mic port as the iPhone.

Ignoring the fact that there is no reason to think your numbers are correct, the profit goes into the bank. Did you really wonder that?

The better question: do you think that companies profiting is wrong?

The corollary: do you put any money in savings at the end of the month from your work?

The Socratic: do you understand why those two questions are related?

No, I guess not, if you want to be a jerk and hurl personal insults instead of simply correcting misinformation.


I wasn't talking necessarily about adding. As the iPhone would be sold through Verizon, or to Verizon customers like Apple does for AT&T, it could be done the same way RIM and others do this...separate phones for different carriers.

CDMA is just as dead as GSM in the US. It's worth noting that in the US Apple is selling the iPhone for a network with around 78 million subscribers, when Verizon has about 87 million.

Sure, people are switching from one to another, but many can't or don't want to.

What's you most outrageous over-estimate of developing, shipping, marketing and all costs around a CDMA iPhone? $1 billion dollars?

At that cost, it sure makes sense to have a CDMA iPhone given the profit Apple makes per phone and the number of additional phones they'd sell.

Again though, the important part here is that my point is that there are other factors, like special arrangements with AT&T that's preventing this from happening. The actual cost of offering a CDMA iPhone in addition to a GSM iPhone isn't the reason.

You're calling me a jerk and complain about me hurling insults? Then you're a filthy hypocrite.

Obviously you're not very bright so I'll spell it out in big letters: AMERICA IS NOT THE ENTIRE EARTH, ITS ONLY A (small) PART OF THE GLOBAL MARKET AND 87 MILLION iS ABOUT 2% OF 4 BILLION (the size of the global GSM market, see http://3gamericas.com/).

So for a market increase of about 2% or 4% you want Apple to double their hardware and firmware development costs and risks and increase their manufacturing costs (read my post, it says "or" to cover both the possibility of adding it or having a different version).

See, I wasn't being a jerk, you are an idiot, unless you admit that the above is a really bad business idea and you just want a CDMA iPhone because you want one. Or do you see a potential CDMA market on Mars?

IMHO I don't think it would run as well on the Verizon network and Apple knows that. If you search youtube for the iPhone 3Gs vs Palm Pre vs Blackberry Storm, you will see the speed differences when opening pages thru their built in browsers. Yes, I realize that the iPhone may have faster components, but the Blackberry Storm loads pages as if it were on he EDGE network, its horrible. The Palm Pre is just milli seconds behind the iPhone 3Gs.

But obviously, I'm just pulling this out of my ass, but I don't think it would work as well perhaps and thats not something Apple wants to deal with.

The numbers he used are all publicly available; they seem correct to me. I think really he was wondering who gets the extra. AT&T? Apple? If both, in what proportion? It's not really important but I guess a bit interesting in terms of seeing how good a deal Apple got out of AT&T (i.e., just how much is AT&T paying Apple for the iPhone?).

Haha! Probably paying $499 for the phone and thats exactly how much I payed for it this year because I wasn't eligible. Now when next year rolls around I won't be "eligible" then either because I payed $499 and not $699. So, essentially the phone has been completely paid for and ATT makes profit off my $180 monthly bill.


That would suck. Obviously if ATT gets a deal on these phones off of Apple's $699 price, then that means ATT has less money to recoup from us when next year rolls around. How much you want to bet ATT doesn't care?

The problem is, you're wrong. It doesn't matter how small of a percentage of the market that CDMA makes up, just the USA customers alone (where we can more easily predict the device's popularity) would easily justify the expense of making it. The profit just from selling 10-15 million in the USA would be $400 (profit per phone) times 10,000,000 = $4,000,000,000. The additional costs incurred by development and manufacturing of a second phone would not approach that cost.

Not that it matters, since the contract with ATT does not allow it, but there's no arguing the business case for it, ignoring that contract.

Why would anyone think that any of the profit goes to Apple? There is no revenue sharing anymore, so what money you pay that goes to ATT stays with ATT, obviously.

Doesn't care? Of course they care! They love it! That's called a BUSINESS MODEL. You buy something and you sign a contract. You honor the contract, they make money.

Duh!

It's not obvious. Show me the proof that AT&T pays Apple $600 per iPhone and not more. Don't get me wrong, I don't care who's making the most profit here; AT&T are free to charge whatever they want.

Even if Apple made a plant in the US, all the parts will come from Asia anyway.

No shit. I was being sarcastic.

It's not being hypocritical to point out that you're acting like a jerk when you're hurling unwarranted insults.


There you go again....anyway, it doesn't matter if CDMA and Verizon represent .0000001% of the global market. It has nothing to do with whether or not Apple could develop CDMA for a cost that would yield a profit. As cameronj points out, roughly $4 Billion could be made...of course you'd have to minus out the amount for developing, the CDMA iPhone as well as other associated costs, and minus out the number of people who would've switched anyway, but that still leaves a HUGE margin for profit.


It's funny because in every single one of my posts, I state that Apple could have reasons relating to their relationship with AT&T for not doing this. So no, I'm not saying that I want Apple to do this. I'll repeat it again, the thought that they could not sell a CDMA iPhone for a direct profit is not the reason why Apple isn't doing it.


I don't want a CDMA iPhone. I can't stand Verizon, and I'm really happy with AT&T. Now, if you'd like to explain why it would cost more to sell a CDMA iPhone than what Apple would earn from those 87 million Verizon subscribers who want an iPhone but don't or can't switch to AT&T, then maybe you'd come across as less of a jerk, but I don't think you can (either rationalize your position, or not act like a jerk).

Maybe they don't want to develop a product for a service with no long term future?

Its quite possible, but CDMA will be around for many years to come. Even though Verizon is claiming to start LTE shortly itll be years before it has the coverage that CDMA2000 currently has, in that time CDMA and CDMA2000 will still be used heavily. Then there is the issue with LTE chips that small and power efficient enough to be used in phones; that looks like itll be several more years before those are feasible.

There is plenty for Apple to make a bundle on CDMA-based iPhones, but I dont think it has anything to do with what could they do, but instead with their business model which seems to require a carrier lock in.