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  • iSuppli: iPhone 4 Pretty Inexpensive to Produce



    Between iFixit's teardown of the iPhone 4 and iSuppli's subsequent analysis of the components, we're finally gaining some fairly telling insight as to how much it costs to physically produce a fourth generation iPhone. As you might expect, it isn't overtly expensive to manufacture Apple's updated smartphone.

    As it turns out, the iPhone 4 costs approximately $200 to manufacture - $187.51 to be as close to "exact" as possible, according to iSuppli. Kevin Keller, who helped orchestrate the iSuppli analysis, tells Businessweek that "over the years, the iPhone has generally tended to hover in the $170-to -$180 cost range because Apple seems to be trying to hit some kind of budget." So, given Apple's penchant for buying in bulk - and not your Costco or Sam's Club definition of buying in bulk - Cupertino has managed to procure millions of little parts in a relatively "inexpensive bundle."

    Keeping iPhone-part prices low helps Apple wring higher profit from its bestselling product, which made up 40 percent of revenue last quarter.
    For the break down, iSuppli used a 16-gigabyte version of the iPhone 4. It should be noted, however, that the $187.51 cost of production estimate does not take into account some of the latent but still costly elements of iPhone production - like labor, advertising, shipping, etc. Not surprisingly, Apple isn't formally commenting on the findings and estimates presented by iSuppli.

    Apple is currently peddling the 16-gigabyte iPhone 4 for $199, with the 32-gigabyte model going for $299 (with 2 year contract required). As Paul reported this morning on MMi, Apple says 1.7 Million iPhone 4s sold during launch weekend.

    Image via iFixit
    This article was originally published in forum thread: iSuppli: iPhone 4 Pretty Inexpensive to Produce started by Michael Essany View original post
    Comments 38 Comments
    1. snuckols's Avatar
      snuckols -
      Why do all of you focus in on the cost of the equipment only? What about research and development? Of yeah, advertising during primtime television on all major networks is very cheap... Now I'm sure apple is probably making somewhere in the neighborhood of 35-40% profit on each phone sold, but I personally have NO problem with a company that manufactures and sells a quality product, earning a good profit margin for their product.
    1. adp's Avatar
      adp -
      That's not too bad. But why don't they release the cost of their $29 bumper cases? Here's what I think...

      Cost to produce iPhone 4 Bumper cases: $0.29 (recycled rubber)
      Cost to consumer: $29.99

      Profit: 1000%
    1. remz08's Avatar
      remz08 -
      Quote Originally Posted by adp View Post
      That's not too bad. But why don't they release the cost of their $29 bumper cases? Here's what I think...

      Cost to produce iPhone 4 Bumper cases: $0.29 (recycled rubber)
      Cost to consumer: $29.99

      Profit: 99%
      That would actually be over a 1000% Increase... a 99% profit would mean that they made $.28
    1. adp's Avatar
      adp -
      True lol...

      Well that's even higher
    1. mytran80's Avatar
      mytran80 -
      Don't forget to add the 1 year warranty for replacements and repair cost over the long term , that would definitely effect apples profits
    1. Landslideclothing's Avatar
      Landslideclothing -
      AT&T buys the phones at full retail price ($499 for 16GB model and $599 for 32GB) and will make money by tying you down to a 2 year contract with data fees. In essence, they will make the difference back on the phone in 6 months on your service alone, and profits exponentially with the data service.
      I'm sure when AT&T and Apple were in negotiations, Apple wanted a residual from the data, and AT&T disputed this, hence paying the full price of the handset.
      It would have been ideal for Apple to make a percentage of the data sales, while AT&T gave us a better price break on the handset (close to $120-$140 on the phone) however, AT&T's greed overcame the negotiations.
      This is only theory, but makes logical sense.
    1. mestapho's Avatar
      mestapho -
      Most electronics (AV at least) MSRP are 40-60% over the dealers invoice.
    1. sziklassy's Avatar
      sziklassy -
      Not surprising. Mine went through the wash 24 hours after getting it. Apple replaced it for $100.
    1. mikerlx's Avatar
      mikerlx -
      $187 to make the iphone? What if apple secretly owns all the manufacturers that produce most of the parts to make the phone altogether? How many companies do you know that can sell every product they make in 24-72 hours? I bet its a 70% profit on each phone.
    1. mvhurlburt's Avatar
      mvhurlburt -
      Eh not too bad considering AT&T is the only working 3G for an iPhone unwind be going anywhere soon so suddenly that two year contract doesn't seem too bad at roughly $13 above cost!
    1. tudtran's Avatar
      tudtran -
      Apple is making a healthy profit.
    1. adamnur's Avatar
      adamnur -
      I seriously thought the buyers of Apple products would be more business-savvy than this thread would show lol.
    1. x6411's Avatar
      x6411 -
      Quote Originally Posted by scgmilan View Post
      you are a retarded. you get taxed on the sales price not on what at&t pays.

      You think when you buy a car you are getting unlawfully taxed too?
      lol
    1. whereswaldo's Avatar
      whereswaldo -
      with contract, apple is only making $13 off a 16GB, unless they get some of the money from the contracts
    1. unison999's Avatar
      unison999 -
      Quote Originally Posted by whereswaldo View Post
      with contract, apple is only making $13 off a 16GB, unless they get some of the money from the contracts
      Not only does AT&T pay them for every phone with contract sold, Apple get a percentage of the AT&T's take on each of the customer with iPhone service. So yeah Apple is making a lot of money off of each iPhone owners. That $13 per phone you can just put it as change going towards the cost of everything else other than the cost of the supply. $22,100,000 chunk of change and it is just from 1st day of sale (1.7 million estimated).
    1. n00neimp0rtant's Avatar
      n00neimp0rtant -
      Anyone who says "well then they should be selling it for like $200 then without a contract" should be handed a perfectly-assembled iPhone but with not a byte of data on it. No software, no media, no kernal...nothing.

      Cause that's what the device costs, right? (Apple actually pulls volunteers off the streets to write all their software for no more payment than a smile, a pat on the back, and a well-wishing from Jobs. If you didn't already know that.)
    1. arkon's Avatar
      arkon -
      some ppl in europe thinks, that americans are stupid.... ;-)

      first of all, if you buy a phone with a 2 year contract, you get the phone cheaper, because u sign a 2 year contract! So if the phone costs with no contract 899$, you get it for 199$ if u sign a contract for 2 years and. If you want a contract for one year you get the device for 299$.

      Just for example. In europe u have to choice at some mobile providers, to do exactly this.(just one year, but pay more)

      So there`s an option to buy the phone without a contract, with no sim-lock. Then here in switzerland u have to pay about 800$ for the iPhone 3GS (I converted it for you..)

      So what does the iPhone 4 Sim-Free really cost? Not 199$ or 299$.
      I got the information from a local dealer, u can find it on there website(digitec online shop).

      iPhone 4, 16GB, black, Sim-free, 1249.- Swiss Francs (1154$)
      iPhone 4, 32GB, black, Sim-free, 1399.- Swiss Francs (1292$)

      But there some local costs, u have to get rid of "Mwst"(tax) and "suisa"(special tax for mp3 player devices)

      iPhone 4, 16GB, black, Sim-free, 1125.- Swiss Francs (1039$)
      iPhone 4, 32GB, black, Sim-free, 1250.- Swiss Francs (1154$)

      Then the hardware dealer wants also to earn some money. I think about to 25-30%. So Apple sells to device to my calculation for about 730$, sim-free. With sim locked devices there are some special contracts with the providers and apple.

      The real production cost is about 250$ to 300$ with all the engineering, promotion and many things more. Then they sell it to their contract partners like AT&T for 500-600$ would be realistic in my opinion.(maybe cheaper, but apple gets some money from the contract u have with AT&T) Thats why the sim-free device is anyway much more expensive.
    1. hermitsethi's Avatar
      hermitsethi -
      Yes but iam sure they are spending 10,0000,000000 $ on software development which is something we love about them!!!!

      So you can have the cheap Iphone from China also but you wont have the great IOS4 on it...

      You choose