iPhone 5s demand healthy, margins for 5s and 5c higher than iPhone 5, analyst says
Apple's new flagship iPhone 5s and mid-range iPhone 5c contribute more value to Cupertino's profit margins than their predecessor, the iPhone 5, according to one Wall Street analyst.
iPhone 5s and 5c margin relative to iPhone 5 | Source: Deutsche Bank and IHS
A report provided to AppleInsider Monday by Chris Whitmore of Deutsche Bank suggests that Apple's new iPhones may yield higher margins than the previous generation, with the 16-gigabyte iPhone 5c providing a 50-basis-point, or 0.5-percent, bump and the 16-gigabyte iPhone 5s driving a full 1 percent increase as compared to the same capacity iPhone 5. As a result, Whitmore said he expects the handsets to be "very beneficial" to Apple's bottom line, despite the currently limited supply of the iPhone 5s.
Whitmore has based the margin profiles of the devices off of third-party teardown data from IHS, which pegs the iPhone 5s bill of materials, or BOM, at $199 versus $207 for the iPhone 5, even with the addition of the new Touch ID fingerprint sensor and redesigned, sapphire crystal home button. Whitmore noted that "the incremental cost for the fingerprint sensor is entirely offset by cost improvements across most other categories," notably a $3 drop in the cost of the Retina display and a $5 decrease for the Sony camera module.
The iPhone 5c comes with a significantly improved $174 BOM, according to the analysis, a 16 percent drop from the iPhone 5. The decrease is attributed largely to the iPhone 5c's plastic rear housing, which contributes $13 to the difference. Lower prices for the camera and processor, which are unchanged from the iPhone 5, bring a further $7 and $4.50 reduction, respectively.
There seems to be some disagreement from competing analysts about exactly how much it costs Apple to make the new iPhones. A similar report from UBS, obtained by The Wall Street Journal, put the BOMs at $213 and $156, respectively, for the iPhone 5s and 5c. UBS believes profit margins for the two devices to be between 45 to 55 percent, a difference partly attributable to higher manufacturing costs, which include freight in UBS's calculation.
iPhone 5s out-of-stock percentage in the U.S., U.K., and Australia | Source: Deutsche Bank
A point which seems universally accepted, however, is that demand for the iPhone 5s remains strong, despite sharp constraints on supply. Whitmore checked 20 Apple retail stores in the United States, the United Kingdom, and Australia, and responses indicate that iPhone 5s units are selling out nearly as fast as they arrive. Stores are advising customers to call ahead to check stock, and to shop early in the morning in order to have the best chance to find their device in stock.
According to the report, one customer service representative advised Whitmore that "demand's been so high [for the iPhone 5s] that we run out of stock in about 30 minutes." Online channel checks returned similar results for the iPhone 5s, with lead times from Apple and its major U.S. carrier partners at approximately 38, 21, and 24 days for the gold, space gray and silver models, respectively.
iPhone 5c units, conversely, continue to show immediate availability in all channels, both brick-and-mortar and online, with all colors and storage capacities well represented. Whitmore noted that some Apple retail associates reported customers upgrading from iPhone 4 or 4s units were often willing to upgrade to the iPhone 5c rather than wait for availability of the iPhone 5s, saying "the 5C is quite good and a lot of customers who can't get the 5s haven't minded upgrading to a 5c."
Whitmore believes that the lean inventory of the iPhone 5s, which was released alongside the iPhone 5c to record-breaking opening weekend sales just 10 days ago, combined with the rumored October iPad refresh that is expected to bring a redesigned iPad 5, positions Apple "to deliver a strong holiday quarter."
iPhone 5s and 5c margin relative to iPhone 5 | Source: Deutsche Bank and IHS
A report provided to AppleInsider Monday by Chris Whitmore of Deutsche Bank suggests that Apple's new iPhones may yield higher margins than the previous generation, with the 16-gigabyte iPhone 5c providing a 50-basis-point, or 0.5-percent, bump and the 16-gigabyte iPhone 5s driving a full 1 percent increase as compared to the same capacity iPhone 5. As a result, Whitmore said he expects the handsets to be "very beneficial" to Apple's bottom line, despite the currently limited supply of the iPhone 5s.
Whitmore has based the margin profiles of the devices off of third-party teardown data from IHS, which pegs the iPhone 5s bill of materials, or BOM, at $199 versus $207 for the iPhone 5, even with the addition of the new Touch ID fingerprint sensor and redesigned, sapphire crystal home button. Whitmore noted that "the incremental cost for the fingerprint sensor is entirely offset by cost improvements across most other categories," notably a $3 drop in the cost of the Retina display and a $5 decrease for the Sony camera module.
The iPhone 5c comes with a significantly improved $174 BOM, according to the analysis, a 16 percent drop from the iPhone 5. The decrease is attributed largely to the iPhone 5c's plastic rear housing, which contributes $13 to the difference. Lower prices for the camera and processor, which are unchanged from the iPhone 5, bring a further $7 and $4.50 reduction, respectively.
There seems to be some disagreement from competing analysts about exactly how much it costs Apple to make the new iPhones. A similar report from UBS, obtained by The Wall Street Journal, put the BOMs at $213 and $156, respectively, for the iPhone 5s and 5c. UBS believes profit margins for the two devices to be between 45 to 55 percent, a difference partly attributable to higher manufacturing costs, which include freight in UBS's calculation.
iPhone 5s out-of-stock percentage in the U.S., U.K., and Australia | Source: Deutsche Bank
A point which seems universally accepted, however, is that demand for the iPhone 5s remains strong, despite sharp constraints on supply. Whitmore checked 20 Apple retail stores in the United States, the United Kingdom, and Australia, and responses indicate that iPhone 5s units are selling out nearly as fast as they arrive. Stores are advising customers to call ahead to check stock, and to shop early in the morning in order to have the best chance to find their device in stock.
According to the report, one customer service representative advised Whitmore that "demand's been so high [for the iPhone 5s] that we run out of stock in about 30 minutes." Online channel checks returned similar results for the iPhone 5s, with lead times from Apple and its major U.S. carrier partners at approximately 38, 21, and 24 days for the gold, space gray and silver models, respectively.
iPhone 5c units, conversely, continue to show immediate availability in all channels, both brick-and-mortar and online, with all colors and storage capacities well represented. Whitmore noted that some Apple retail associates reported customers upgrading from iPhone 4 or 4s units were often willing to upgrade to the iPhone 5c rather than wait for availability of the iPhone 5s, saying "the 5C is quite good and a lot of customers who can't get the 5s haven't minded upgrading to a 5c."
Whitmore believes that the lean inventory of the iPhone 5s, which was released alongside the iPhone 5c to record-breaking opening weekend sales just 10 days ago, combined with the rumored October iPad refresh that is expected to bring a redesigned iPad 5, positions Apple "to deliver a strong holiday quarter."
Comments
/s
Apple should invite all the analysts and have a tea break.
And present a small paper, at the end of that happy-tea-party, that says...
That one takes the cake!
Anyhoo, supposedly the jump to the 32GB model only costs Apple $20. And $29 for the 64GB chips. Though I hear the smallest storage is mostly sold, and that is indeed what I see around me, possibly because some telco's only sell the 16GB version
I'm not sure how you can get margins from estimated BOM. 5C might be cheaper to manufacture than the 5 was but there are marketing costs around the 5C that a cheaper 5 would not have had. The shameful thing is media outlets equating these BOM estimates as the total cost of the phone, implying huge markups by Apple. Even CNBC did this without explaining that these estimates don't include any R&D, administrative costs , free software, etc. Of course CNBC should know better, but headlines like that make for good click bait.
The chart clearly says "contribution margin". Contribution Margin is simply Price Minus Variable Cost. They've expressed this as a percentage, so it's (Price-Variable Cost)/Price.
You do that too? I always have the 'better half's cast off' … so this Christmas i'll have an iPhone 5 at last
Exactly. 'Contribution Margin' may be the easiest number to calculate - and is even easier than gross margin. There's no need to consider R&D, software, admin costs, etc as Rogifan suggests.
Interesting is the fact that the iPhone 5S and 5C generate more revenue for Apple, which is good. But never mix revenue and profit...
Notice the title of this article carefully. I'm starting to think the 5C has not sold well at all.
I'm starting to think the 5C has not sold well at all.
Compared to what?
You do that too? I always have the 'better half's cast off' … so this Christmas i'll have an iPhone 5 at last
Good attitude! I love it!
How in the world can we know? People are just assuming because its in stock that means its not selling. But maybe the 5C wasn't intended to be a phone that sells out right away. Maybe it's intended to be a phone that has steady sales throughout the year. I don't remember all this concern about how well the iPhone 4S was selling after the iPhone 5 was announced.
The 4s wasn't marketed as a new phone.
How in the world can we know? People are just assuming because its in stock that means its not selling. But maybe the 5C wasn't intended to be a phone that sells out right away. Maybe it's intended to be a phone that has steady sales throughout the year. I don't remember all this concern about how well the iPhone 4S was selling after the iPhone 5 was announced.
I don't know how many times this has to be explained......one more time with feeling....
The market is looking at sales during the launch weekend of 9 million units, a huge increase from prior launches. The big question is, how many were actually sold to consumers. The range seems to be 6.5 million to 9 million units. You've got some analysts swearing the number is 6.5 million and others who seem to think it's closer to 9.
Just to be crystal clear, if it really is 6.5 million, then adding in the 4S sales last time, Apple isn't growing and the stock will be in bad shape; conversely, if it really is 9 million, things look good. If you look at where the stock is trading, it didn't get much of a bounce, so my gut tells me that the market is questioning the number, but I suspect we'll be waiting until 3Q results until there is clarity.
Based on what?
The lowest estimates for the 5C are around 2 M units. Keeping in mind that the 5C is essentially last year's phone (with a few minor improvements and a new case). How many previous generation phones have ever sold 2 M in one weekend?
Heck, other than the iPhones and one or two Galaxy models, I don't think even any newest generation phones sold that many.
Your post is an example of the kind of ridiculous unrealistic expectations that Apple has to deal with.
I'm in the fortunate situation where I use my upgrade this year, then use my daughters upgrade next year, so on and so forth. She's 13 so it's a great deal for us both :-)