Apple build costs for 256GB iPhone XS Max estimated at $453 [u]

Posted:
in iPhone edited September 2018
The new 256GB iPhone XS Max is comprised of roughly $443 worth of parts according to the latest report out of TechInsights, merely $47 more than the build cost of last years 64GB iPhone X.


Source: iFixIt


Apple managed to trim the fat on its bill of materials for this year's iPhones, increasing the margin for profit, TechInsights suggests in its analysis.

The iPhone XS Max 256GB -- likely one of the most popular configurations -- runs about $443 for parts and assembly. A large chunk of that cost goes to the large 6.5-inch display, which TechInsights estimates at $90.50, more than $12 more dear than the 5.8-inch display on last year's iPhone X.

Along with a more costly display, the updated A12 processor, gigabit-class LTE modem, larger battery, additional memory and a "significant increase" in the cost of non-electronic components swelled the final tally. According to the firm, iPhone XS Max has a larger, heavier housing than that of the iPhone X, while the new handset's internal frame increases process costs related to spot welds, inserts and other internal structures.

Apple is selling the 256GB iPhone XS Max, which AppleInsider reviewed this week, for $1,249.

As usual, BOM reports should be taken with a hefty grain of salt. The analyses are merely estimates based largely on current market values of critical components and is unlikely to reflect Apple's actual cost. TechInsights itself notes the figures are at time based on assumptions.
All cost estimates provided here are compiled using information available to us at the time of the initial teardown. Some assumptions have been made where concrete data is not yet available. We will continue to gather and refine this costing data throughout our ongoing deep-dive teardown process and analysis. While we do not expect drastic cost changes, we do expect some adjustments.
Apple CEO Tim Cook chimed in on supply chain "guesstimators" years ago, saying he has never seen a BOM estimate that was close to accurate.

Updated to reflect a change in Tech Insight's estimates regarding display components. The company previously said Apple removed parts associated with the phone's 3D Touch system, but further investigation found that to not be the case.
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Comments

  • Reply 1 of 26
    Apple should have at least spent a couple of more dollars per unit on a larger battery. Apple is always providing the smallest capacity battery out of all flagship smartphones. Apple's greed in this case makes little sense to me and I'm an Apple shareholder. Is that L-shaped battery too expensive for Apple to increase the capacity? I've seen a tear-down of the latest iPhone and it's a tight fit. How do the Android smartphone manufacturers manage to fit in much larger batteries? Sorry, but I think it's just stupid for Apple to short consumers with low battery capacity. I think it gives those Android flagships too much of an advantage.
  • Reply 2 of 26
    I've never understood the reason for reprinting these COGS estimates.  They aren't accurate, or even fairly representative of Apple's true costs.  Nor do they have any bearing on what Apple charges for the iPhone.  Apple charges based on utility (value) not the cost of manufacture, and I'm happy with that.

    As for the size of the battery.  Size is a contributor to battery life but isn't as important as the power management controller and the iPhone's settings.  Besides if you are draining your iPhone's battery before the day is done you need to get a life.
    Solichristopher126LukeCagenetmagekevin keechasmracerhomie3mike1StrangeDays
  • Reply 3 of 26
    $443 is a preposterous estimate for the build cost of a 256 GB iPhone Xs Max. These kinds of estimates are almost always much lower than what is, based on the reporting we get from Apple, reasonably possible.

    Apple, of course, doesn’t report what it costs to build various iPhone models. But based on what Apple does report, we can get a ballpark idea of what the average cost of sales for iPhones (in, e.g., a given quarter) is. Looking at the holiday quarter for 2017, when the iPhone X was released, we can say with some confidence that the minimum the average cost of sales for iPhones (including, e.g., iPhone SEs and older models that were still available) could have been was around $450. The math doesn’t work otherwise. The cost of iPhone X models was surely meaningfully higher than that average.
    edited September 2018 netmage
  • Reply 4 of 26
    Didn't AppleInsider just, like in the last week do an article where the author went on at length about how, because you can't know the true cost of the componants when they are all custom and sold at unknown discount, articles like this were pointless?
    LukeCagechasm
  • Reply 5 of 26
    rob53rob53 Posts: 2,099member
    “where concrete data is not YET available.” Apple never gives concrete data of hardware costs of their devices so not sure why this guy even said that. Of course, none of the guesses include patent licensing or all the other costs associated with producing devices. The only this with know is what apple reports quarterly on their profit margin. 
    LukeCageanton zuykov
  • Reply 6 of 26
    It's not rocket science to estimate the true cost of iPhone Xs Max. Apple's gross margin is about 34%. The price of the iPhone is $1250. Therefore, a reasonable estimate of the cost of each iPhone is 1250 * 66% = $825. 
    netmagechasmmuthuk_vanalingam
  • Reply 7 of 26
    SoliSoli Posts: 9,327member
    DAalseth said:
    Didn't AppleInsider just, like in the last week do an article where the author went on at length about how, because you can't know the true cost of the componants when they are all custom and sold at unknown discount, articles like this were pointless?
    If they did, it doesn't change that this is tech news some people want to read. They did make sure they added "according to the latest report out of TechInsights," "As usual, BOM reports should be taken with a hefty grain of salt. The analyses are merely estimates based largely on current market values of critical components and is unlikely to reflect Apple's actual cost. TechInsights itself notes the figures are at time based on assumptions," and "Apple CEO Tim Cook chimed in on supply chain 'guesstimators' years ago, saying he has never seen a BOM estimate that was close to accurate."

    In fact, I only skimmed the article reply to your post. I really just came here for the forum member replies but these estimates are useless.
  • Reply 8 of 26
    There still the cost of the parts.  There are also costs in licensing fees for each phone.  There are labor costs.  Packaging costs. Production line costs. R&D costs.  Whatever else!!!  One thing is for sure,  Apple is at least getting their 30% plus any added taxes they have to pay out gets passed to you.  

    Corporations don’t pay taxes.  You the customer are the ones that end up paying.  So anyone saying they don’t pay enough,  OK, really all you’re doing is taxing yourself even more.  

    Apple has no need to race to the bottom in profits.  Android has been marketed as the cheap OS.  That was when Google was selling their Nexus phones.  But as they try to turn them self’s more into Apple and sell high cost Pixel phones and other pixel devices.  People still don’t want to spend the money and buy it.

    when Apple is close to 90% of the Smartphone profits, and Samsung makes most of the rest, which us still a fraction of Apple, that leave everyone else fighting over scraps.  They just hope to break even, maybe make a little profit and not lose sales.  Google wins no matter what.  You go out of business, not a big deal as there are many others to take your place.  They can’t even make money after the sale.  Samesung keeps trying, but it’s Googles services everyone wants and they have to be front and center in Android devices.

    in the end it comes down to what people are willing to pay for your product!!!   There is a reason why a few people will buy a bunch of a new Game Console and then turn around and sell them at double the price, making a huge profit.  I’d rather just wait and get it at retail price while others just have to have it NOW.  Supply and Demand.  You go to sell something, do you want to get as much money as you can for it or just sell at a fixed price, your costs and a  10% markup as to not rip people off as you would feel bad?

    dewmeanton zuykovcommand_f
  • Reply 9 of 26
    How many times does Tim Cook have to say these BOM estimates are bogus before rumor sites will stop publishing them?
  • Reply 10 of 26
    I understand the metric, but it's a bit misleading...

    As an example, for Toyota to do mid-model update to the Toyota Camry takes about 300 man years of engineering. 
    edited September 2018 Soli
  • Reply 11 of 26
    MplsPMplsP Posts: 1,719member
    Would have been $543 if they had used a Qualcomm modem!

    I agree with others - these estimates are little more than some pundit waving their hands. The other thing that is completely unknown and invisible is the R&D costs. Not only is Apple designing a new phone, but they are designing custom chips. I'm sure the amount of money they put in R&D is huge. Of course that gets amortized across every unit they sell, but we all keep expecting them to come out with a better model next year, so those costs are going to continue. 
  • Reply 12 of 26
    Came here to state how utterly false BOM's are especially when it comes to Apple, but Gregg Thurman, DAalseth, Carnegie, Jbdragon and others have done job pointing that out. 
  • Reply 13 of 26
    MplsP said:
    Would have been $543 if they had used a Qualcomm modem!
    Actually it is estimated the Intel modem costs slightly more.
  • Reply 14 of 26

    Awesome, so I spend $443 on the parts and assemble them on my own and then I can install iOS, since iOS is free!! I'm sure it will be authenticated without any issues and that FaceID will magically begin to work!

    Why is Apple overcharging us??


    /s

    anton zuykovspheric
  • Reply 15 of 26
    chasmchasm Posts: 1,697member
    They're bogus on one level, and not on another. How they're bogus is in the implication that the cost of materials is the only cost -- or at least that's how too many readers misinterpret it, and that's because no estimate of the other costs (like manufacturing, distribution, and most importantly the R&D and engineering that created the damn thing in the first place) could be. They're not bogus in that they are clearly referred to as the cost of materials only, and are probably not far wrong on that level alone.

    As Larry noted above, it is likely that these other costs combined with the BOM (for the sake of argument I'm assuming the BOM guesstimates are more or less correct) roughly doubles the cost. But if people knew the phone costs $825 and sells for around $1000, the reaction would be "hmm. okay, that's fair" rather than "HAIR ON FIRE FREAKOUT APPLE IS EVIL!!"
    edited September 2018
  • Reply 16 of 26
    MplsP said:
    Would have been $543 if they had used a Qualcomm modem!

    I agree with others - these estimates are little more than some pundit waving their hands. The other thing that is completely unknown and invisible is the R&D costs. Not only is Apple designing a new phone, but they are designing custom chips. I'm sure the amount of money they put in R&D is huge. Of course that gets amortized across every unit they sell, but we all keep expecting them to come out with a better model next year, so those costs are going to continue. 
    Apple reports what they spend on R&D; it’s part of the earnings report. Of course it’s not broken down by product line but you can make some assumptions. 
    In 2016, for example, Apple spent 10.39 billion on R&D. 
  • Reply 17 of 26
    larryjw said:
    It's not rocket science to estimate the true cost of iPhone Xs Max. Apple's gross margin is about 34%. The price of the iPhone is $1250. Therefore, a reasonable estimate of the cost of each iPhone is 1250 * 66% = $825. 
    I believe these build cost estimates are trying to exclude things like labour, transport, etc and are just a sum of the part costs. Although your 30 second calculation is probably just as useful as this more detailed but likely inaccurate breakdown
  • Reply 18 of 26
    mike1mike1 Posts: 1,939member
    jbdragon said:
    There still the cost of the parts.  There are also costs in licensing fees for each phone.  There are labor costs.  Packaging costs. Production line costs. R&D costs.  Whatever else!!!  One thing is for sure,  Apple is at least getting their 30% plus any added taxes they have to pay out gets passed to you.  
    BOMs only include  the cost of components, assembly, licensing (if it's a per-unit payment) and labor to manufacture.
    Expenses such as R&D and shipping of produced goods are expenses but are NOT part of the BOM.
  • Reply 19 of 26
    To me, this is, in effect FAKE NEWS!  That is:
    Even assuming that this "build cost" is accurate, it is still irrelevant and that is particularly true when it is compared to the "build cost" -- and the margin -- of a Samsung.

    By itself, build cost is a meaningless number because it excludes substantial costs incurred by Apple for each and every phone it sells that other manufacturers do not incur.    Specifically, every iPhone includes the cost 5 years of more of OS updates and the cost to install those updates as well as the cost of Apple's iCloud and support structure -- as well as apps like Numbers, Pages, Maps and Safari.

    Unless one is comparing Apples to Apples one should not make the comparison.
    You can compare the build cost, price and margin of an iPhone Xs to an iPhone 8, but not to any Android phone.
  • Reply 20 of 26
    Apple should have at least spent a couple of more dollars per unit on a larger battery. Apple is always providing the smallest capacity battery out of all flagship smartphones. Apple's greed in this case makes little sense to me and I'm an Apple shareholder. Is that L-shaped battery too expensive for Apple to increase the capacity? I've seen a tear-down of the latest iPhone and it's a tight fit. How do the Android smartphone manufacturers manage to fit in much larger batteries? Sorry, but I think it's just stupid for Apple to short consumers with low battery capacity. I think it gives those Android flagships too much of an advantage.
    I feel sorry for you that even as an investor you fail to understand the design compromises and decisions Apple makes. They don’t design the battery around “greed”. 
    GeorgeBMac
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