Apple reaping higher profits from each iPhone X sold than iPhone 8, analysis claims

Posted:
in iPhone edited November 2017
Despite the expense of technologies like a 5.8-inch, edge-to-edge OLED display and a 3D facial recognition camera, the iPhone X is actually more profitable per-device than the iPhone 8, according to a research estimate published on Monday.




The 64-gigabyte iPhone X costs about $357.50 to make, giving Apple a 64 percent profit margin on a $999 pricetag, TechInsights said. The figure is based on a parts calculation during a teardown.

An equivalent iPhone 8 sells for $699, but is said to have a margin of 59 percent.

The discrepancy is significant because unlike the iPhone X, the iPhone 8 is relatively modest evolution of the iPhone 7. It does include a number of changes -- like Qi wireless charging, an A11 Bionic processor, and some camera and display upgrades -- but it otherwise shares the same form factor, and continues to use LCD instead of OLED, plus Touch ID instead of Face ID. The switch to a glass back was made to support wireless charging.

The X's OLED display and linked parts are estimated to cost about $65.50, versus $36 for the 4.7-inch LCD assembly on the iPhone 8. Another pricey item is the X's stainless steel chassis, said to be worth $36 versus just $21.50 for the frame on the iPhone 8.

The use of stainless steel is one separator of prices with the Apple Watch Series 3 -- while LTE models with aluminum and Ion-X glass start at $399, choosing steel and sapphire instantly raises prices by $200.

Unaccounted for in the TechInsights research are expenses in research, development, manufacturing, and marketing.
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Comments

  • Reply 1 of 21
    wood1208wood1208 Posts: 2,542member
    I just want edge to edge LCD iPhone 8S with face-id. Cheaper and no OLED burn-in issue.
    racerhomieSpamSandwich
  • Reply 2 of 21
    or labor. but labor costs are unimportant, right?
    netmageSpamSandwich
  • Reply 3 of 21
    I had been thinking that the X must have much better margins, but then when I saw the margins forecast for the current quarter, I was surprised that they weren’t higher. Still, given that so many of the products are brand new (including a couple that have been announced for this quarter and not even released yet), the margins are excellent and only going to get better as some of the component prices come down. 
  • Reply 4 of 21
    NY1822NY1822 Posts: 621member
    funny how last month there was articles saying they were making less profit than on the 8

    https://www.google.com/amp/s/9to5mac.com/2017/09/18/iphone-x-costs-profit/amp/

    says components cost $581 in 64Gb X
    edited November 2017
  • Reply 5 of 21
    netroxnetrox Posts: 1,049member
    Of course, Apple HAS to make it more expensive to keep the demand from being too high. If they set it to the price of iPhone 8, you can be sure there's no way it can meet their demands on time. 
  • Reply 6 of 21
    People outside Apple or anyone who’s not part of the acquisition of parts and materiels to build the iPhone are basically speculating on the cost. Apple’s volume alone is pure guess for anyone without inside information. That volume gives Apple an advantage in price bulk discounts from vendors. 

    I guess tech tech bloggers can say so many wrong jig things over and over and still has a job. I guess sometimes me has to feed the appetite of “bad Apple news” of the haters. 

    I just wish wish I had more money when the stock was lower. 
    cornchipRayz2016
  • Reply 7 of 21
    macxpressmacxpress Posts: 5,172member
    NY1822 said:
    funny how last month there was articles saying they were making less profit than on the 8

    https://www.google.com/amp/s/9to5mac.com/2017/09/18/iphone-x-costs-profit/amp/

    says components cost $581 in 64Gb X
    Just goes to show that these people don't have a damn clue. They can estimate all they want. They really don't know in the end what Apple is paying for components. 
    watto_cobranetmage
  • Reply 8 of 21
    notoakie said:
    or labor. but labor costs are unimportant, right?
    Right. Humans breed like crazy. It keeps the cost down low due to the economies of scale.
  • Reply 9 of 21
    macxpress said:
    NY1822 said:
    funny how last month there was articles saying they were making less profit than on the 8

    https://www.google.com/amp/s/9to5mac.com/2017/09/18/iphone-x-costs-profit/amp/

    says components cost $581 in 64Gb X
    Just goes to show that these people don't have a damn clue. They can estimate all they want. They really don't know in the end what Apple is paying for components. 
    There's no way they could know unless they have access to Apple's internal books. I think these people are just liars. They've been told many times before they can't rely on that sort of third-party information but they deliberately continue to mislead hesitant investors.
    cornchipwatto_cobranetmage
  • Reply 10 of 21
    Ummmm...

    Even if the margins were the same or slightly lower than the 8, Apple would still make more profit.  Did I miss something?

    News Alert: Apple makes more profit on the $1200 phone than the $800 phone.
    Next up, Apple makes more profit on a Mac Pro than a Mac Mini.

     This can’t be allowed!  Android wouldn’t do this to us!  Journalists/analysts should have licenses that can be revoked for being dumb or lying.
    cornchipradarthekatwatto_cobranetmage
  • Reply 11 of 21
    robjnrobjn Posts: 263member
    “costs about $357.50 to make”

    Nope, that’s just a guess at the cost of component parts - it costs more to actually engineer and assemble. Then you have to package, distribute, advertise, retail, etc

    Actually it was reported last month that the OLED screen cost Apple well over $100, now these people say about $65. The guesses are all over the place!
    cornchipwatto_cobranetmageSpamSandwich
  • Reply 12 of 21
    netrox said:
    Of course, Apple HAS to make it more expensive to keep the demand from being too high. If they set it to the price of iPhone 8, you can be sure there's no way it can meet their demands on time. 
    You have a warped view of economics. Pricing an item for sale high as to reduce demand is not normal economics. Go back to Econ 101. 
    watto_cobramuthuk_vanalingam
  • Reply 13 of 21
    radarthekatradarthekat Posts: 3,394moderator
    siretman said:
    netrox said:
    Of course, Apple HAS to make it more expensive to keep the demand from being too high. If they set it to the price of iPhone 8, you can be sure there's no way it can meet their demands on time. 
    You have a warped view of economics. Pricing an item for sale high as to reduce demand is not normal economics. Go back to Econ 101. 
    Actually, when there exists a limited number of some item and there is projected to be demand that exceeds the supply, this type of thinking makes perfect sense.  There’s even a name for it.  It’s called a Dutch Auction.  Not saying that is analogous to what Apple is doing with iPhone X pricing, but you made a broad claim that isn’t supported.  What Apple might possibly be doing with iPhone X pricing is they might have projected the number of units that can expect to build over, say, nine months, and set a price for the X relative to the 8 and 8+ to attempt to sell every X while also having the 8 series represent a significant percentage of sales.  Priced lower there might be a risk that too many opt forthe X, pushing back de.ivery dates to unreasonable dates while the 8 series sits on shelves.  In other words, they may be using price to create distinct market segments for each phone.  Not saying they are, but just expanding the thoughts to illustrate a circumstance where it might actually be logical to price an item high to reduce demand, knowing you can later lower the price when supply catches up; after all, Apple will most certainly lower the price of the X when it becomes the outgoing model, replaced by a new flagship.  
    netmage
  • Reply 14 of 21
    GeorgeBMacGeorgeBMac Posts: 10,262member
    As a former cost accountant who made these determinations for a living, I can only laugh at an outsider making these determinations.  Typically, its a general accountant or financial analyst throwing numbers together for a presentation -- and, while the numbers "add up" they seldom represent reality.

    A true and accurate determination of Gross Margin is rooted in the detail.  And, that detail is simply not available to an outsider.

    In addition, it is not black and white:  What you include as cost is, to a large extent, a judgement call. 
    For instance:  if you were calculating the operating cost of a car, would you include the insurance premium?  There is simply no one correct answer to that question -- you could argue it either way.   But, when making comparisons (such as iPhone vs Galaxy), consistency is critical.

    Another example -- perhaps more relevant to the iPhone is employee education:   if it is directly related to product then it could be deemed a direct expense of manufacturing.  If it is however an education subsidy for attending college it could be considered overhead and not impact Gross Margin at all.

    An outsider simply does not have access to the detail necessary to make valid determinations of Gross Margin.
  • Reply 15 of 21
    foggyhillfoggyhill Posts: 4,767member
    siretman said:
    netrox said:
    Of course, Apple HAS to make it more expensive to keep the demand from being too high. If they set it to the price of iPhone 8, you can be sure there's no way it can meet their demands on time. 
    You have a warped view of economics. Pricing an item for sale high as to reduce demand is not normal economics. Go back to Econ 101. 
    Actually, when there exists a limited number of some item and there is projected to be demand that exceeds the supply, this type of thinking makes perfect sense.  There’s even a name for it.  It’s called a Dutch Auction.  Not saying that is analogous to what Apple is doing with iPhone X pricing, but you made a broad claim that isn’t supported.  What Apple might possibly be doing with iPhone X pricing is they might have projected the number of units that can expect to build over, say, nine months, and set a price for the X relative to the 8 and 8+ to attempt to sell every X while also having the 8 series represent a significant percentage of sales.  Priced lower there might be a risk that too many opt forthe X, pushing back de.ivery dates to unreasonable dates while the 8 series sits on shelves.  In other words, they may be using price to create distinct market segments for each phone.  Not saying they are, but just expanding the thoughts to illustrate a circumstance where it might actually be logical to price an item high to reduce demand, knowing you can later lower the price when supply catches up; after all, Apple will most certainly lower the price of the X when it becomes the outgoing model, replaced by a new flagship.  
    Pricing high enough to make sure demand matches your actual supply does make sense if you have a good gauge of how it will come out during the year.
    Apple never really changes its prices after release so you'd have to both have a very good idea of supply for a whole year ahead and be sure that demand wouldn't outstrip it. Quite a dicy move.

    Price it too low and you depress 8 sales and can't serve X sales and leave opening for competition.
    price too high, depress initial and late X sales, people think you're gouging, leave opening for the competition.

    With a desirable product, and a public that usually is faithful to the brand, skewing on the high end of the safe pricing zone is probably best.
    You're leaving a bit of money on the table (causing your not maxing out the supply for the whole year), but insure your product can be delivered within a reasonable time frame.



    netmagemuthuk_vanalingam
  • Reply 16 of 21
    ben20ben20 Posts: 126member
    You have to factor in the R&D/ tooling/etc.  costs, this kind of margin calculation is not correct.
  • Reply 17 of 21
    No SHIT! Really???
  • Reply 18 of 21
    robjn said:
    “costs about $357.50 to make”

    Nope, that’s just a guess at the cost of component parts - it costs more to actually engineer and assemble. Then you have to package, distribute, advertise, retail, etc

    Actually it was reported last month that the OLED screen cost Apple well over $100, now these people say about $65. The guesses are all over the place!
    Nobody knows nuthin’ and it’s always been that way!
  • Reply 19 of 21
    badmonkbadmonk Posts: 992member
    plus more iPhone X buyers will chunk out more $ for AppleCare i suspect.  i am day 2 on my X and for the first time, i am going to get AppleCare cuz i’m afraid my little beauty is going to get dropped.  
  • Reply 20 of 21
    GeorgeBMacGeorgeBMac Posts: 10,262member
    robjn said:
    “costs about $357.50 to make”

    Nope, that’s just a guess at the cost of component parts - it costs more to actually engineer and assemble. Then you have to package, distribute, advertise, retail, etc

    Actually it was reported last month that the OLED screen cost Apple well over $100, now these people say about $65. The guesses are all over the place!
    Nobody knows nuthin’ and it’s always been that way!
    Apple knows.  Or, I hope they know.   But the guys on the outside Don't Know Nothin'.
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