The new iPhone 4S has a lot of new hardware in it that is multiple times more powerful than the iPhone 4.
Have you ever thought to yourself, "How much money does Apple make on these things"? That's a good question. With a contract, an up-to-date iPhone costs as little as $199. The unlocked, off-contract iPhone costs as little as $649. The models go up in price depending on the memory that you select: $299/32GB, $399/64GB – $749/32GB unlocked, $849/64GB unlocked.
Many of you will be thinking, "What a rip off, I can buy a computer for that price." While your statement would be very true and hard to argue against, Apple is known for their tough prices. But with a mere smartphone costing almost $1000, it sure makes us wonder just how much money it costs for Apple to build these smartphones. Well that's what we're going to cover today.
The hard number crunching shows that the iPhone 4S costs 49¢ more to make than the iPhone 4. Yes, with an improved 8 megapixel camera, dual core A5 processor, dual core GPU, and dual radio antenna, the iPhone 4S is significantly identical in pricing to the iPhone 4. But how much does it cost to build, exactly?
The chart shows the prices that Apple pays to build each iPhone 4S. The base model iPhone 4S costs $196 total to build, the 32GB model costs $215 total to build, and the 64GB model costs $254 total to build. These are the prices of the estimated bill of materials per device (BOM). The NAND flash memory is usually the most expensive individual part of the device. The individual parts that make up the foundation of the iPhone 4S are notably cheap. That's because Apple buys in bulk at factory direct prices. But, once Apple gets their hands on the devices – they install their iOS 5 operating system and do what every company does; make money. Another part of the pricing has to do with licensing, so that will add to what you pay too, just as a monthly cellular bill will.
So Apple can build a 64GB iPhone 4S for 70% less than you pay for the unlocked version. That's a huge
margin. The fact that people buy these devices for such astounding prices illuminates how Apple has earned their respect in build quality and customer satisfaction; but that, my friends, is all part of the job. To bring a product to the market at such amazingly high prices (even though it's built at 30% of the retail price), the only way that someone would ever dish out that kind of money is if they were sure that the product they were getting was absolutely flawless. Apple has earned a good name in designing products. They offer quality customer support along with long-lasting materials in their devices (when handled properly, of course). So is that the reason why we pay so much for these devices?
We can look further at how Apple's marketing works. Their commercials are so simple. It gives us a humble feeling that the device will simplify our lives. People try the devices and love them, they show their friends, they tell their work colleagues, they spread the word without Apple ever having to lift a finger. Apple has it made; they've earned a good name and now their customers advertise for them.
So, the iPhone 4S is only costs half of a dollar more to make than the iPhone 4; about $196. With all of those improvements in hardware, that's pretty jaw-dropping. Do you think Apple is a master of marketing? Share in the comments below!