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How much does it cost Apple to make the iPhone 4?

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June 30, 2010

The iPhone 4 - costs the same to build as it does to buy

The iPhone 4 - costs the same to build as it does to buy

Ever wondered how much it costs Apple to actually build its devices? Well, it might surprise some to hear that it seems to be around the same price at which they are sold, though of course this doesn’t stop Apple from making a hefty profit. A recent “teardown” of the 16GB iPhone 4 by research firm iSuppli suggested that each device costs about US$187 to produce, with previous generations falling generally between $170 and $180.

With the 16GB iPhone 4 selling for US$199, that means the company just about breaks even, although of course it still makes a packet from the AppStore and the fees paid by suppliers like AT&T to stock the device.

Interestingly, it seems as though many of the components that grant cutting-edge benefits are rather cheap, with the most expensive being Apple’s “retina display” at a cost of US$28.50 per unit. Elsewhere, the internal A4 processor from Samsung costs around $10.75 per unit, a gyroscope chip about $2.60 and the accelerometer just $0.65. Oh, and if you didn’t already realize, that metal strip around the outside is the phone’s antenna.

Despite the fact that these costs don’t take into account labor, advertising, shipping or patent licenses, the iPhone still represented a massive 40 percent of Apple’s profits according to last quarter’s figures. With upgrades appearing quite regularly since the initial release to provide new features and correct faults and “omissions", we wouldn’t expect this to change any time soon.

Via Businessweek

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6 Comments

You do realize that the $199 price tag is what you pay when you also sign the two year contract with AT&T right? I mean seriously, that's the whole reason you wait for an upgrade. The phones probably cost closer to 500-600 dollars but AT&T loads that into your contract because you are locked in for two years. That's why there is a breach of contract penalty because they need to recoup the cost of the phone. Besides that there is the obvious fact that if they were only making $3 a phone that would not cover all the other overhead that is not included in the price of the parts. That would be a pretty horrible business plan. I thought all of this was common knowledge.

bdsterne
30th June, 2010 @ 05:06 pm PDT

I would very much like to buy an iphone for that price... you should get better informations before posting such a stupid comparison.. that's a price for a phone with a contract with any given company... In Portugal, the iphone 16gb (mine) costs around 250euros with a contract, but the same phone in the original box by apple costs around 600euros...

miguelcoomans
1st July, 2010 @ 07:06 am PDT

This article is very misleading. Please read the following quote, also from the research firm Isuppli.

"Apple’s recent introduction of its latest iPhone perfectly illustrates the company's route to corporate dominance--which is to generate huge profit by selling high-margin, high-value-added hardware, with the iPhone's Average Selling Price at a whopping $600.

The company makes the majority of its profit on sales of hardware"an approach that defies the often-cited route to success used by many technology companies of selling hardware at low margins and cashing in on revenue generated by high-profit software.

As shown by iSuppli's Teardown Analysis service, Apple commands hardware gross margins in the range of 50 percent on the iPhone, compared to 20 percent to 40 percent for competitive products. "

Personally I refuse to believe the Iphone is a narrow margin item. They charge $30 for a rubber band to protect the Iphone for example. The Iphone accounts for 40 percent of Apple profit..

foghorn
1st July, 2010 @ 07:37 am PDT

The other posters have said it. I'll just add that Apple is one of the most profitable companies in the world - they do crazy deals with suppliers. Goes to show that design and branding are so important. Porsche is another company with a similar approach.

Hogey74
17th March, 2011 @ 10:42 am PDT

Now Apple, through AT&T, is trying desperately to unload the leftover stock of 8gig iPhone 3GS for $49.

Translation; "This is the phone we made too many of and not enough people wanted!"

Facebook User
17th March, 2011 @ 11:51 pm PDT

The 16 GB CDMA iPhone4 retails for $650, not $199. For the $199 price you enter into a 2-year contract and 24 months of a $30-a-month data plan (costing $720 for data for the two-year term, so over 2 years it costs $919).

William H Lanteigne
5th August, 2011 @ 02:08 pm PDT
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