What it costs Apple to build the iPhone 6/6 Plus

Discussion in 'iPhone 6' started by Rafagon, Sep 23, 2014.

  1. Rafagon

    Rafagon Genius
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    Here's an article revealing what it costs Apple to build the various incarnations of the iPhone 6 and iPhone 6 Plus.

    The article mentions that Andrew Rassweiler, who works for the research firm IHS (the firm that is bringing us these cost estimates), stated: “They seem to be configured and priced to encourage you to buy the models with the higher memory." Thanks, Sherlock.

    Apple's significant profit margins on their higher-capacity iPhones are nothing new: Here's the Bill of Materials for the iPhone 5s.

    Our very own system administrator here at eiC, Chris Meinck, recently remarked that Apple has taken "two steps forward, one step back" due to the many improvements of the iPhone 6 and 6 Plus which are somewhat offset by the company's choice to keep the 16GB-capacity model as the entry model at the lowest price, instead of offering a 32GB-capacity device to fill this role.
     
  2. Rafagon

    Rafagon Genius
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  3. WallyG

    WallyG New Member

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    It would be interesting to see the total cost to build if they included engineering costs i.e. Design/Production/Q&R, plus Marketing Sales, Overhead, Lawyers...
     
  4. Bennyboy

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    Labor: 4 dollars and a Twinkie.
     
  5. ricks2gtouch

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    I was just going to mention that when I saw the thread title. Plus you have to add support.
     
  6. raqball

    raqball Evangelist
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    The image posted is misleading...

    That's the cost to make the actual iPhone but there are many, many, many other things that cost $$$

    R&D along software come to mind..

    You get the software and updates for free but can you imagine how much it costs Apple to develop it?
     
  7. Rafagon

    Rafagon Genius
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    One user on one forum suggested that you could multiply the Bill of Materials (the number in the image above) by two and that would more or less include all that other stuff you mentioned. That sounds close enough.

    Whatever the grand total is, even if you decide to include the salaries of the janitors who sweep and/or mop the floors at the Foxconn factory where the phones are assembled, it would appear that Apple is happily enjoying a very nice, healthy, juicy profit.
     
  8. raqball

    raqball Evangelist
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    Sure they make a profit, and a rather nice one at that but their profit gets even higher as you go up in storage options..

    There is no way the 64GB should be $100 more and the 128GB should be $200 more than the 16GB storage option.. Heck even if it went in $50 increments they'd still make a nice profit..

    It is what it is and iPhone sales are the main reason that Apple is worth what? 14.7 bazillion dollars?
     
  9. Europa

    Europa Moderator
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    Agreed. The actual cost of the parts isn't really surprising when you factor in the other costs.
     
  10. iP5

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    This should be a reasonable guess at the cost to develop iOS 8.

    link 1 calculates a line of code at $3.98 ea. (Apple should beat this given economies of scale and negotiating power.)
    I measured 4 lines of C at 71 bytes (most other programming languages consume more space)
    I'll assume iOS 8 is about 2.5GB uncompressed, since an update requires about 4.6GB of space. link 2
    I'll assume iOS 8 is about 30% in new and removed code, 750MB
    cost from above statements estimates iOS 8 at $176.3 million.

    link 3 reports that Apple sells 100 million iPhones every 8 months.
    I'll assume 16 months between each major release of iOS, or 200 million phones.

    the software cost then is $0.88/phone.
    maybe I'm an order of magnitude off, but that would still peg the software cost at under $10/phone. and for further perspective, keep in mind that $10/phone in R&D equates to $2 billion. (the last thing Apple is, is stupid)

    in future, when they forget to include a line for R&D, we can pencil it in at $1-$10 (closer to $1)

    link 1. http://www.yegor256.com/2014/04/11/cost-of-loc.html
    link 2. http://www.businessinsider.com/heres-why-ios-8-requires-46-gb-of-space-2014-9
    link 3. http://www.forbes.com/sites/markrogowsky/2014/03/25/without-much-fanfare-apple-has-sold-its-500-millionth-iphone/
     
  11. raqball

    raqball Evangelist
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    You forgot to add the cost of building the spaceship! :p

    Seriously though, is it not the point of business to make a profit? Apple is not the only company doing this but everyone always levitates to their production costs..

    My son has a Galaxy S5. This phone was $650 which is the exact same price as the iPhone 6. His S5 is plastic and I'd assume costs less to build.

    I don't have an issue with the price of iPhones as they are on par with other manufacturers. For the same cost Apple gives you premium components whereas others toss cheap plastic into the mix..
     
  12. liberated

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    Apple will charge what they feel most people are willing to pay, it has very little to do with the cost of materials/labor.
     
  13. raqball

    raqball Evangelist
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    I read an article today that said Apple spent $6 billion on R&D this year alone...
     
  14. iP5

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    yes, there is a $6B charge to R&D in their balance sheet (link below). unfortunately this is according to how their accountants define R&D. having worked the financial side of a manufacturer, I have seen first hand claims in the 3%-5% of revenue range, where the reality was closer to zero in "R&D". for example, Apple can investigate a business process to reduce the time spent cleaning toilets in the spaceship. even if the net result is deferred to future determination, the effort can be booked to R&D so long as its properly documented. tax wise, R&D is a tax reducing entry.

    https://www.google.ca/finance?fstype=ii&q=NASDAQ:AAPL
     
  15. Europa

    Europa Moderator
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    In your opinion, what would be a fair profit margin on the iPhone?
     
  16. liberated

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    What's fair? Honestly I don't know, I do know what I'm willing to pay (probably more than most) because I happen to be a fan. It's the capitalist country we live in, a fair price is not an objective measure. I'm not aware of any laws regulating prices for mobile devices, until then it is a matter of opinion. I guess I can say that if most people that want it can afford it then it is a fair price? Does that make sense?
     
    #16 liberated, Oct 29, 2014
    Last edited: Oct 29, 2014
  17. silvermoon

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    Fair is completely subjective. As a consumer, it comes down to what you are willing to pay. There is an average price that people are willing to pay and most prices are based off this number. There is a saying "if it's too good to be true, then it probably is".
     
  18. liberated

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    I agree
     
  19. raqball

    raqball Evangelist
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    My only issue with Apple is they are falling behind the competition in a few areas.. I'd be fine with spending $20 more on the phone if needed to get it up to the competition.
    1. RAM: Come on Apple 1GB? Most flagship phones have a minimum of 2GB and some high end phones have 3GB
    2. Screen: 750p on the iPhone 6. Most flagship phones are sporting 1080p screens
    3. 16GB: Flagships in 2014 almost all have the low end storage option at 32GB except Apple.
    Would you be willing to pay a little more for Apple to upgrade these specs? I would..
     
  20. silvermoon

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    Yes. I would be willing to pay more but I believe the iPhone is already reasonably priced. You are talking about another couple hundred dollars for upgraded specs. That puts the phone at about $900 retail. I don't know if I would be willing to pay that.
     

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