Apple has been known for its massive profits among smartphone makers and even though it’s not even the top phone maker, it has managed to remain more profitable than Samsung and Huawei which recently toppled it as the second largest smartphone maker in the world. In 2015 alone, Apple’s share of the smartphone market’s profit stood at about 92 percent which first led us to ask why and how that was. Well the answer is in the materials used and for how much they eventually put up a unit for sale and as a student of basic business, one would know that the more you produce, the lower the cost is likely to be per unit of any device.
But Apple’s latest iPhones have more expensive parts compared to say the iPhone 6 series. Research firm IHS Markit says a 64GB 4.7 inch iPhone 8 costs about $247.51 to make and this is up about $11 for a 32GB iPhone 7. In fact without adding manufacturing costs, it actually costs Apple $288.08 to make the iPhone 8 the research firm said.
The cost of making the iPhone 8 increased compared to last year
After $7.36 in basic manufacturing costs are added, Apple’s total cost to make the iPhone 8 Plus rises to $295.44, $17.78 higher than that of the iPhone 7 Plus. IHS Markit also estimates that the iPhone 8 bill of materials is $247.51, or $9.57 higher than the Phone 7 at the time of release. The unsubsidized price for a 64GB iPhone 8 starts at $699, which is $50 more than the starting price for the iPhone 7 at launch. The iPhone 8 Plus starts at $799, which is $30 higher than that of the iPhone 7 Plus at launch.
Apple though has pegged the iPhone’s starting price at $699 and if you consider that the iPhone 7 started at $649 last year. Let me add that the manufacturing cost of about $247.51 for the iPhone does not include software and other logistics involved in manufacturing and after all what’s an iPhone without the iOS software right? There’s also the cost of design and development involved but we don’t know what that translates too to eventually justify the $699 starting price tag for the iPhone 8. There’s also the cost of components like camera which they say costs about $32.50 per unit. Storage costs about $6 per unit while the A11 Bionic processor costs about $5 more per unit.
This would then mean that the $1,000 iPhone X’s materials will cost much higher by the time researchers can place their hands on it. It’s an edge-to-edge device that comes with superior chassis to the iPhone 8. The iPhone X will hit stores in November and is expected to be in strong demand because of its features.
The iPhone though is Apple’s flagship product and it represents about two-thirds of its business. However, its contribution to the company’s revenue continues to fall and this has led the leadership of the phone maker to turn some of its investment to services like the App Store, Apple Music, Apple Pay, Apple TV and iTunes among others.
The thing about such component breakdowns is that Apple says many of them are not accurate even though it hasn’t come out with figures to support its own claim.
Paul Balo is the founder of TechBooky and a highly skilled wireless communications professional with a strong background in cloud computing, offering extensive experience in designing, implementing, and managing wireless communication systems.
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