updated 12:33 pm EDT, Tue September 24, 2013
Apple increases profits by sharing parts
New teardowns of the iPhone 5s and 5c conducted by IHS iSuppli suggest that Apple lowered its iPhone production costs with the new hardware. Apple is estimated to be spending at least $191 in components to build a 16GB 5s, and $210 on a 64GB model. Assembly costs roughly $8 per phone, putting the expense of building a 5s between $199 and $218. By contrast, the iPhone 5 is estimated to have cost Apple at least $205 to build.
Although Apple sells a 16GB 5s for $199 on contract, that price is heavily subsidized by carriers, who recoup the costs in monthly fees. The same model sells for $649 unlocked, earning Apple a substantial profit margin before factoring in aspects like marketing and research and development.
Display parts are estimated to be the most expensive part of an iPhone, amounting to $41 per unit. IHS speculates that Sharp, Japan Display, and LG Display are among the core suppliers; significantly, Apple has an investment in Sharp.
The total cost of producing an iPhone 5c is said to range between $173 and $183, depending on if it's 16 or 32GB. That price includes $7 for assembly. IHS analyst Andrew Rassweiler claims that aside from the 5s having an A7 processor, Touch ID sensor, and less power-hungry RAM, the 5s and 5c are "basically the same" inside. The similarity extends to radio frequency chips, which Apple appears to have concentrated efforts on. "Apple seems to be spending a lot of time and money combining RF chips," notes Rassweiler. "Where other phone companies would be using whatever chips its various vendors sell off-the-shelf, Apple seems to be pushing its RF suppliers to do things they don't do for anyone else."
He points out that whereas the iPhone 5 supported just five LTE bands, both the 5s and 5c can handle as many as 13. The RF unit used in the new phones is thought to cost about $32, and like other similarities, save Apple money because it doesn't have to buy separate parts.
The 5s' A7 processor is said to be worth $19, while the 5c's year-old A6 is $13. The special memory in the 5s is LPDDR3 format, meant "to support the higher-end processor," according to Rassweiler. The 5c uses older LPDDR2 chips. Suppliers are noted to include SK Hynix, Elpida, and Samsung, the last of whom also builds the A6 and A7.