Apple turning comparatively low profit on iPhone SE despite cheaper parts, analyst says
In spite of recyling many parts from other iPhones, Apple's profit margin on the iPhone SE is relatively low next to the high-end iPhone 6s, a new analyst estimate suggests.
Based on a recent Chipworks teardown, Apple's bill of materials is probably about $260, RBC Capital Markets analyst Amit Daryanani argued in a memo obtained by AppleInsider. Given an entry retail cost of $399, that would indicate a profit margin of roughly 35 percent, lower than the mid-40s estimated for the iPhone 6s or the now-defunct 5s.
The SE's bill of materials is about 22 percent cheaper than the 6s, Daryanani noted. The analyst suggested that Apple likely renegotiated prices with its suppliers, taking advantage of excess parts inventory generated for the 6s.
In the Chipworks teardown, markings showed the sample phone's A9 chip was manufactured by TSMC around August or September of last year -- presumably for the 6s, not the SE. Many other parts are also identical to those in the 6 and 6s, such as modem and audio hardware.
The SE also uses the same display as the 5s, and similarly old Broadcom touchscreen chips.
"While most of the components in iPhone SE were previously used in either iPhone 6/6s or 5s, we think the prices for the same components have likely come down by >10% reflecting better scale and importantly price concessions from component providers, especially considering some of the components were likely from excess capacity for 6s," Daryanani wrote.
RBC is maintaining an "outperform" rating for Apple stock, along with a $130 price target. It's thought that the SE could generate $6.8 billion in revenue for Apple during calendar 2016.
Based on a recent Chipworks teardown, Apple's bill of materials is probably about $260, RBC Capital Markets analyst Amit Daryanani argued in a memo obtained by AppleInsider. Given an entry retail cost of $399, that would indicate a profit margin of roughly 35 percent, lower than the mid-40s estimated for the iPhone 6s or the now-defunct 5s.
The SE's bill of materials is about 22 percent cheaper than the 6s, Daryanani noted. The analyst suggested that Apple likely renegotiated prices with its suppliers, taking advantage of excess parts inventory generated for the 6s.
In the Chipworks teardown, markings showed the sample phone's A9 chip was manufactured by TSMC around August or September of last year -- presumably for the 6s, not the SE. Many other parts are also identical to those in the 6 and 6s, such as modem and audio hardware.
The SE also uses the same display as the 5s, and similarly old Broadcom touchscreen chips.
"While most of the components in iPhone SE were previously used in either iPhone 6/6s or 5s, we think the prices for the same components have likely come down by >10% reflecting better scale and importantly price concessions from component providers, especially considering some of the components were likely from excess capacity for 6s," Daryanani wrote.
RBC is maintaining an "outperform" rating for Apple stock, along with a $130 price target. It's thought that the SE could generate $6.8 billion in revenue for Apple during calendar 2016.
Comments
This means the parts will be cheaper to produce! And the phone is cheaper to develop. And production start-up is cheaper!
Analysts don't understand manufacturing.
The SE will have very good profit margin!
Apple does a fairly straight-forward update to its 4" iPhone and it will generate $7 billion in incremental revenue, and $2.8 billion in incremental profits, per year for that phone's lifecycle, which will likely be two years, when it'll be replaced with an update.
Tesla won't ship the first Model 3 for 18 months, will take two years after that to deliver all those pre-orders, and 180,000, at an average price (Musk estimates many buyers will add options) of $42,000, nets out to $7.56 billion. One year of revenues for Apple's least expensive iPhone, and Tesla will be hard-pressed to make much profit at all on those cars.
The Apple manufacturing and supply chain is as good as it gets. A nearly automated money printing machine.
The development of a new phone takes at least a year to 18 months. Apple knew a long time ago that they would use the A9 in the SE. The idea that they decided to put it in because they made too many for the 6s is nonsense!
The manufacturing date on one chip in one phone is irrelevant, these parts do not necessary move through inventory on a 'first out - first in" basis.
PROFITS
analysts know nothing except how to trash Apple's share price.
The article doesn't mention the $100 price differential between the 16GB and 64GB models. There is a large difference in the profit margin on the two.
While there will be some cannibalism from 6s model sales, most of the purchases of the SE will be from customers that would not buy the larger models. All of the profit from the SE would have been unrealized profit for Apple.
Q: How can he know what Apple is paying for the parts?
A: He doesn't.
"that would indicate a profit margin of roughly 35 percent, lower than the mid-40s estimated for the iPhone 6s"
Just what the stock market needs, another so-called Apple analyst guesstimating, conjecturing and making stuff up to support a completely unverifiable conclusion to justify a job... doing what exactly? Gossiping.
I can see the SE staying around until it hits the $199 mark in the US, which means they might even keep it around 3 years in the US, until their next 4" phone depreciates to a similar level.
For the first time, Apple is able to offer a high quality product for the same price as a cheap Android device, and that's an important milestone for expanding market share, without compromising their stated principles.
Apple would only create the 6se if it could make the same or GREATER profit than the 5s.
An item by item comparison of the components used by the iPhone 5S (16 GB) and iPhone 6 (16 GB) has the iPhone SE (16 GB) costing about $5 less than the iPhone 5S (16 GB).
The most expensive iPhone 6, the 128 GB model, doesn't cost $260 to construct.
Also, virtually all of Apples parts are custom in one way or another, so there's not always a cost benefit to using older parts since they are not off-the-shelf. For example, it may actually be less expensive to use the better camera that is already being produced en masse than to keep the older camera around just for this product.