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Apple iPhone may see 50% gross margin

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.

by MacNN Staff




  1. Guest

    Joined: Dec 1969


    misguided calculations

    Hardware costs do not take into account the 2.5 years of development, future advertising and technical support.

  1. purpleshorts

    Joined: Dec 1969


    beyond calculations

    Even if iSuppli allowed for r&d, advertising, and other costs, I have a gut feeling that somehow they miss the point.

    I guess I object to the iSuppli idea that the parts ARE the whole. Shakespeare - only words? Bach - only notes? If I let them dissect my beloved pet, would I find out why I like it (or would I just have cat guts everywhere!?). For me, the component view does not fit my conception Apple's products.

    I can see why it makes sense to quantify such things, but really, if the product is cool enough... who cares?

    BTW, the idea of the iSuppli company strikes me as puzzling. Who would pay them to tear apart products and give component analysis? I mean, Who is their customer? Seems an odd business. Can anyone explain?

  1. ZinkDifferent

    Joined: Dec 1969



    Will gladly pay for such findings, in order to contiue providing inaccurate predictions and forecasts - but having such data lends them an air of importance.

    I agree with purpleshorts - they miss the point, almost as much as those whining that existing smartphones already do everything the iPhone does -- "it's the software, stupid", which can't be quantified in the same manner.

    But nice to know what kinds of margins Apple has on the phone, which are similar to the margins had on Macs a long time ago.


    Joined: Dec 1969



    Since when was the retail price announced at $499 and $599? Oh thats right, it was not!

    When you buy a phone under contract the price of the phone gets subsidized. So in effect, that FREE phone deal you see is not free, its slowly paid off as part of the contract. This is is also why you have to sign a contract to get the deal. Try buying that same free phone under a 1 year contract, odds are that free phone will cost $50 to $100.

    Given the contract price of the iPhone the subsidy could be anywhere from $200 to $400. Remember, as clearly stated, the iPhone sells for $499 and $599 WITH a 2-year contract. If you buy it outright add at least $200.

    So lets make a conservative assumption that $200 is the subsidy. In effect then the iPhones retail for $699 and $799. This effectively means that Cingular is buying the phones from Apple at $699 and $799 and in turn sells it to the customer at the subsidized prices. This is how Cellular companies have worked for years.

  1. lamewing

    Joined: Dec 1969


    iphone compared to asia

    I hate to be a naysayer, but the iPhone, which will not ship til June, is already behind the curve of east Asian cell phones. When it hits Asia in 2008 it will be a dinosaur.

    The device has many nice features, but focusing on the cell phone aspect is really not the wisest solution. This might work if Apple only wants to market it here, but it won't have much of a chnage in Korea and Japan, as it is already outclassed.

    It might do better if it were classed as the new Newton/mini computer and not a phone.....and Cingular/AT&T...ick.


    Joined: Dec 1969


    Ya but...

    By 2008 the iPhone may not be as we know it. iPhone, like iPod, will come out with a few varieties. Dont get me wrong, there are some awesome phone out there not available in the US.

    Also, many as saying what you have stated - based on an article written recently which polled some people in the Asia markets. The average person will not want or need an iPhone in its current version. This, like most smart phones, is a niche product. The hope is that it will spread and by then there will be a version of the iPhone out there that most will like. The iPhone is NOT a phone, its more than that - its a blessing to some like me, but a downfall for those who just want a phone. There are also a lot more cell users in Asia markets, they will sell more iPhones in Asian that the US but market penetration will be lower. Its all in the numbers, which at this point is a guessing game,

    Most also seen to complain about the price. I am buying two and wont think twice about it! Its what I have been looking for and look forward to the other varieties that hit the market in 2008-09.

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