updated 09:55 am EST, Thu January 18, 2007
iPhone garners 50% margin
Each Apple iPhone sold when the device ships in June will generate nearly a 50 percent gross margin for the Cupertino-based company and partner Cingular Wireless, offering both companies a generous profit while allowing plenty of room for price cuts, according to a preliminary functional Bill of Materials (BoM) estimate created by iSuppli. "iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 49.3 percent margin on each unit sold at the $499 retail price," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. "Meanwhile, the 8GB Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 46.9 percent margin at the $599 retail price." iSuppli notes that while it has a high degree of confidence in its conclusions, the figures are considered preliminary until the firm performs an actual physical teardown and analysis of the iPhone.
"With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, PhD, director and principal analyst with iSuppli.
iSuppli developed its preliminary functional BoM estimate based on an analysis of the capacity and features of the Apple iPhone, combined with information from materials from Apple, company sources and third-party publications. The company also utilized data from its Mobile Handset Cost Model and Design Forecast Tool. The estimate differs from iSuppli's typical teardown analysis of electronic equipment because iSuppli's teardowns involve the actual physical dissection of electronic equipment in order to make first-hand observations of equipment content and design.