06/16/2008, 1:55pm, EDT
Monday, June 16th
iPhone 3G costs only $100 to manufacture
The iPhone 3G carries a lower price, but it also costs about half as much to make, according to a report in the EETimes. The report says tests by teardown specialist Portelligent put the bill of materials for the new model as low as $100. That should help offset the 3G’s lower $199 price point. Portelligent estimates that based on materials alone, Apple’s gross profit on the iPhone 3G totals about $99, compared to $229 for the previous version. Apparently, Apple is counting on sales volume to make up the difference and Apple may also be receiving a payut for each carrier activation, although the revenue sharing plan with carriers, as with the original device, is no longer in place.
Portelligent says the cost savings comes from a variety of areas, including a touch screen assembly which, at roughly $30, cost half that of the original iPhone. Additional costs associated with the 3G upgrade were more than offset by savings in memory, improvements in engineering and other areas, according to the EETimes.
The report also says the iPhone 3G uses the HSDPA version of W-CDMA, supporting a minimum of 1.5 Mbits per second, up to a maximum of 7.5Mbits/s. Will Strauss, President of Tempe, Az. based Forward Concepts, told the publication he believes Apple is using an infineon baseband and RF transceiver and a Samsung Applications processor, based on sources he would not name. Strauss says the the new iPhone uses a GPS chip from Infineon with technology licensed from the startup Global Locate, now owned by Broadcom.
"Gen2 iPhone pricing is aggressive enough that it made me think Apple's really taking the gloves off on this one," said said David Carey, president of Portelligent. "They are probably not as worried about iPhone hardware profits as they are about getting a piece of the action on service revenues and getting more Macs in homes and offices all around the globe,” he told EETimes. The iPhone 3G is scheduled to go on sale July 11th.
Filed under: iPhone, Apple
Other story tags: iPhone 3G, 3G, sales, teardown, 3G iPhone
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something fishy
So a reverse engineering firm was the first, before reviewers to get their hand on the unreleased iPhone? Somethin smells fishy. Perhaps it's a random guess?
$99 profit?
I don't think these guys understand phone subsidies (hmm, analysts that don't know what they're talking about? shocking, I know...).
If the phone retails for $199 and is subsidized that means AT&T is paying the difference between the retail price and the wholesale price and making up that subsidy through service fees. I don't know what the wholesale price is but it's fair to assume it's close to the penalty you pay to get out of your contract ($175 I believe) - which puts the wholesale price closer to $350-400. If the manufacturing costs are really ~$99 vs. $229 for the previous one that means apple could be making more profit per unit than before.
As for the loss of the revenue sharing I'd bet apple sells enough new subscriptions to mobile me to more than make up the difference. .mac was essentially marketed & limited to mac users, while mobile me aims for the much larger (and rapidly growing) market of iPhone users, many of whom are not mac owners and wouldn't have purchased .mac.
Article full of fowl smel
The article smells of feces as info seems to have been pulled out of someones @r$e.
Original iPhone was determined to have parts cost of about $220. It would be absurd (although not completely inconceivable) to expect this one to be less than half that.
What makes the article a lot less believable is the assumption that Apple is not getting even the nominal subsidy every single other handset manufacturer is getting (about $150 to $200 per unit). With AT&T charging a lot more per month than for other phones, the subsidy has been estimated (by some reputable analysts) to be higher, on the order of $350 to $500, depending on the model and market.
Let's wait for some more legitimate estimates out there.
hello...
Apparently you have forgotten the value of innovation.
Not this again...
The 'innovation' is never included when assessing manufacturing cost. The article above specifies parts cost, although usually, we see parts, labour and freight into the distribution channels. It is impossible to quantify R&D expenses, and they are usually an integral part of a company's operating expenditures (which includes, marketing, facilities maintenance, accounting, administration, legal, etc, etc.). Therefore, when we calculate profit, we use manufacturing (and packaging) cost and deduct it from the wholesale price.
If Apple receives some $550 per phone from AT&T, and it cost them some $100 to make it, that means that with 20 million iPhones sold in the next year, that would bring them $9 Billion dollars in profit (more than their total profits so far). As I said, cash cow.
Classic Blunder...
So, Apple makes $99? Hardly, if they sell the phone to AT&T for $450. These guys need to learn what they are talking about.
what is the point of this
How about a breakdown of the cost of your jeans. There's about 25 cents of material. At the normal slave labor rates clothing companies pay, that adds about 25 cents more to the cost. So even with shipping, they make, oh, $45 on a pair of $50 jeans?
more crap
yet more utter crap from "tear down" companies that apparently think that if I have $100 to spend I can go and buy a bunch of parts off the shelf and built a fully functional iPhone 3G. What about assembly costs? And R&D? Hello? Does that stuff not cost something? And I guess software development grows free on the trees in the courtyard at One Infinite Loop as well.
I swear, I can't stand these stupid parts breakdowns. They just don't paint an even remotely accurate picture of the cost of making something as advanced as the iPhone.
Hardware costs have value
There is certainly valuable information to be gained from a tear down and parts assessment. True, it does not indicate the full cost of developing the device, manufacturing and shipping, but it does give some idea for a starting point.
It seems like some of you fail to recall that Apple will no longer receive a percentage of subscriber revenue, the trade off being the subsidized device. That simple fact explains everything in this article, including the precise observation that the real goal is to get more devices in more people's hands, whether they're phone, ipods, computers, or Apple TV's.
It wouldn't surprise me at all to find out that the cost of parts had dropped significantly over the last 12-15 months, but that Apple based their subsidized cost agreement with AT&T on the original figures from last year.
That seems like exactly the kind of tactic a certain Mr. Jobs might employ to ensure the success, and profitability, of the handset.