Unlike
video game consoles, phones are typically profitable to manufacture from day one and it turns out that the iPhone is no exception -- far from it, in fact. Teardown specialists at Portelligent claim that the 4GB iPhone runs Apple just $200 worth of components, while the 8GB adds an extra $20, not far off at all from
iSuppli's slightly higher estimates from January. Granted those tallies don't include the actual cost of assembling the device -- but even so, those numbers are
very far cries from the $500 and $600 asking prices at the register, leaving a healthy $299 and $379 respectively (of which an overwhelming majority are $379) for profit and miscellaneous costs. Interestingly, Portelligent's unceremonious destruction of an iPhone in the name of research revealed no further proof that
Hon Hai / Foxconn is the ODM responsible for assembling the darned thing.
Reader Comments (Page 1 of 1)
Iscariote @ Jul 2nd 2007 3:38PM
Yes hundreds of dollars of pure profit because it cost nothing to design or market the device.
Martey @ Jul 2nd 2007 3:50PM
First, product design is a fixed cost.
Second, if Apple is spending hundreds of dollars *per phone* on marketing, something is horribly wrong with them.
Harrison @ Jul 2nd 2007 3:53PM
True there are costs associated with R&D and Marketing for the device but prior to launching the product those were just overhead and fixed costs. Continuous improvements and all that aside there should still be a hefty profit margin per unit sold for Apple.
Once the advertisements are out the bag and on tv, it should technically cost them nothing extra to get the next customer into the store if that consumer was interested.
Iscariote @ Jul 2nd 2007 3:53PM
Fixed cost or not they still have to pay it. The cost of devices generally drops as time goes on, once those fixed costs are paid off.
The 1g 5gb iPod was $499 when it came out. Now you can get an 30gb iPod with a color screen, video playback, and half the thickness for half that price.
Graffitimonkie @ Jul 2nd 2007 3:58PM
Fixed costs can be spread out through their production, Apple plans on getting their units into like 1% of the World's cell phone market, or 10 Million, by the end of 2008 they're easily able to recover those fixed costs quickly if they succeed in their goals.
Graffitimonkie @ Jul 2nd 2007 3:58PM
Fixed costs can be spread out through their production, Apple plans on getting their units into like 1% of the World's cell phone market, or 10 Million, by the end of 2008 they're easily able to recover those fixed costs quickly if they succeed in their goals.
Phil Ringsmuth @ Jul 2nd 2007 5:34PM
Not very related, but when will the winner of the iPhone be posted?
Christopher Groves @ Jul 2nd 2007 5:54PM
WOW! Let's demonize Apple for making a profit! Perhaps advertising is free and middleman markups don't exist!? Oh yea, let's not forget the free Chinese labor it takes to assemble these goodies and the free boat trip over the sea to get them to us, and how about the free service from FED EX to have all of those uniforms there at 6 pm on a friday? Now let us ponder the the real crisis here.... who's been winning the relaunch phones and are there any mor to be had?
SCY @ Jul 2nd 2007 9:11PM
Who cares! is this America or Soviet Russia since when is it illegal for a company to make a profit. They could charge 10,000.00 for the phone if they want, no one would buy it but that's their decision. No one is forcing anyone to buy the phone, or perhaps they should give the phones away as an entitlement?
JK @ Jul 2nd 2007 9:40PM
You must factor in packaging and distribution (shipping) costs
Also advertising costs.
And you should also factor in the R&D cost (amortized over 2 or 3 years) on a per unit basis.
Also AT&T is getting a cut on the device.
When all is said and done you are probably looking at 50 to 60% profit for Apple. This is still huge! but your analysis overlooks the two biggest costs: R&D and promotional
dig @ Jul 2nd 2007 10:00PM
There was recently an article in PC World and they broke down the cost of Windows Vista, cost of CD = 10 cents, cost of packaging $1.50...a total of $1.60!!!!! Can you believe the profit they are making!!
Dustin @ Jul 3rd 2007 3:29AM
Something about..
laughing all the way to the bank?!?