Apple spends an estimated $247.51 on iPhone 8 parts, $288.08 on iPhone 8 Plus
Apple CEO Tim Cook has repeatedly dismissed bill of material estimates as incorrect, but that's not stopping research firm IHS Markit to share its latest findings with industry analysts. This year, the firm estimates Apple spends $247.51 on the components that comprise one 4.7-inch iPhone 8 with 64GB of storage.
The estimate, which only accounts for hardware, not manufacturing, software and R&D, represents about 35 percent of iPhone 8's $699 sale price, reports Bloomberg. That figure is nearly identical to last year's iPhone 7, which carried an estimated $237.94 BOM, but came equipped with 32GB of flash memory.
The larger 5.5-inch iPhone 8 Plus boasts a BOM of $288.08, up from $270.88 with the iPhone 7 Plus, according to IHS. Along with a larger screen, the additional spend can be attributed to a revamped dual-camera array that costs $32.50. Like the iPhone 7 Plus, the iPhone 8 Plus incorporates an optical image stabilization system for only one rear camera -- the wide angle module. Apple's upcoming iPhone X features OIS on both wide and telephoto lensers.
Aside from a bump in storage and camera equipment, Apple made improvements to the handset's processing capabilities with the all new A11 Bionic system-on-chip.
Unveiled at a special media event earlier this month, Apple's iPhone 8 with A11 Bionic is an applications processor powerhouse that blows away its mobile chip forebears, and even matches low-end MacBook Pro models in certain benchmarks. Notably, the SoC is Apple's first to boast an in-house designed GPU.
The extra processing horsepower runs a $5 premium over last year's A10 Fusion SoC, which the firm pegged at $26.90.
As usual, the display and mechanical enclosures top the list as iPhone 8's most expensive components. This year Apple introduced True Tone display technology to iPhone, as well as a glass backing to enable inductive charging.
The IHS estimates should be taken with a healthy dose of skepticism. Cook has in the past denounced supply chain guesstimates, saying he has never seen a breakdown "that's even close to accurate."
The estimate, which only accounts for hardware, not manufacturing, software and R&D, represents about 35 percent of iPhone 8's $699 sale price, reports Bloomberg. That figure is nearly identical to last year's iPhone 7, which carried an estimated $237.94 BOM, but came equipped with 32GB of flash memory.
The larger 5.5-inch iPhone 8 Plus boasts a BOM of $288.08, up from $270.88 with the iPhone 7 Plus, according to IHS. Along with a larger screen, the additional spend can be attributed to a revamped dual-camera array that costs $32.50. Like the iPhone 7 Plus, the iPhone 8 Plus incorporates an optical image stabilization system for only one rear camera -- the wide angle module. Apple's upcoming iPhone X features OIS on both wide and telephoto lensers.
Aside from a bump in storage and camera equipment, Apple made improvements to the handset's processing capabilities with the all new A11 Bionic system-on-chip.
Unveiled at a special media event earlier this month, Apple's iPhone 8 with A11 Bionic is an applications processor powerhouse that blows away its mobile chip forebears, and even matches low-end MacBook Pro models in certain benchmarks. Notably, the SoC is Apple's first to boast an in-house designed GPU.
The extra processing horsepower runs a $5 premium over last year's A10 Fusion SoC, which the firm pegged at $26.90.
As usual, the display and mechanical enclosures top the list as iPhone 8's most expensive components. This year Apple introduced True Tone display technology to iPhone, as well as a glass backing to enable inductive charging.
The IHS estimates should be taken with a healthy dose of skepticism. Cook has in the past denounced supply chain guesstimates, saying he has never seen a breakdown "that's even close to accurate."
Comments
now, let’s include assembly and shipping costs, packaging, duty, fedex to send it here, design and development, stock people, rent and so much more. Their margins are high because they sell a lot of phones. If their sales are 50%, the margins will fall.
As for me, I feel very lucky that some spent a billion dollars to develop a 800.00 phone for me and gives me free updates, free cloud account, very few reasons to ask for support, and a product which is always improving in so many ways without raising the price too much.
Compared to a PC, this phone is a bargin at twice the price.
Meanwhile, Intel’s latest generation Kaby Lake processors range in price from $42 to $350. That is a 31% premium above the A11 on the low end and a 993% premium on the top. The A11 is built on TSMC’s 10nm process, while Kaby Lake is 14nm.
Piece is rather neutral, saying margins are equal for Apple as the higher price covers the more expensive parts.
But:
Most of the benefit from Apple products stems from its ecosystem rather than its hardware. Macs and MacBooks are clear examples of that: Most of their hardware is off-the-shelf non-Apple stuff that any third rate vendor can stuff into a box. But, the Apple ecosystem makes that hardware great.
... And, ecosystems cost money to build and to maintain. But nobody wants to talk about that part.
Kevin: "What does it cost to make and what do you sell it for?"
Apple: "$245.51 to manufacture, sells for $699"
Mark: "and how many have you sold?"
Apple: "we project sales of about 200 - 300 million units this year"
Damon: "Ok, I'll give you $100,000 for 10% of your company"
R&D is never a factor in the cost BOM. Software would be if it was purchased from a third party. Not sure if Apple would put a cost on each install of iOS though. They may treat its development as a standalone cost somewhere else in the balance sheet or roll into R&D expenses.
What is the need for this component cost breakdown for Apple products? Is this also done with Chinese products? I remember when Nokia was the prime manufacturer of cellphones. Don't tell me they were breaking down all the component costs of Nokia's whole cellphone line which comprised of many dozens of models. I'd swear that someone is trying to deliberately target Apple to show they're charging more money than they should be. What's so unusual about a company charging more money than the component costs?
Imagine if humans were valued by the cost of their organic components. They'd all be worth about $30 and not the millions of dollars some people make. I just don't get why Apple is always being targeted for component cost breakdowns. You'd almost think Apple was forcing people in need to pay for their products, but that's certainly not the case. Most consumers don't look at a product as individual parts because that's not how they're using the product. It's used as a whole and that's what they're paying for. This goes for all companies and not just Apple. I'm saying if they're going to tear down all products from all companies for component costs then that's fair enough. Stop targeting just one company. Let all companies be fair game for the critics.
Even though Apple is accused of ripping off consumers, Wall Street still isn't happy with Apple's profit margins and they've said that many times. So what's going on here? Does Wall Street want Apple to make more than excessive profit margins or not? Is every company making high-profit margins being accused of taking unfair advantage of consumers?
It's probably more like 45% for iPhones. The math doesn't work for it to be 50% unless we believe that the aggregate gross margin for iPads, Macs and Other Products is in single digits.
Speaking as a (former) manager of cost accounting:
Both are correct!
Gross Margin is typically calculated based on "variable, direct costs" that remain constant on a unit basis.
BUT, that only holds true within a given range of volume:
If you change volume substantially, then the assumptions behind those costs change as well. A good example is the price of raw materials: if you buy substantially less then you could lose a volume discount and the cost/unit increases. Or, another trickier example is the the cost of first line supervision that changes with volume but tends to change in chunks and steps instead of being tightly tied to unit volume.