“Research firm IHS Markit recently published its preliminary bill of materials analysis for Apple’s new flagship $1,100 iPhone XS Max, estimating that the 64 GB version of the smartphone costs about $390 to build,” Trefis Team writes via Forbes. “Although this makes the XS Max the most expensive smartphone Apple has built to date, we believe the device could have thicker margins compared to Apple’s 2017 flagship iPhone X, proving meaningfully accretive to Apple’s margins.”

“While Apple has previously dismissed the bill of material analysis as being an inaccurate representation of the cost it incurs in producing its smartphones, we believe that year-over-year comparisons from the same research firm can at least provide a sense of how Apple’s gross margins could trend. Last year’s iPhone X was priced at $1,000 and had a preliminary bill of materials estimate of $370, per IHS,” Trefis writes. “However, the XS Max only sees $20 in incremental costs, despite its price starting at $1,100. This implies that component costs as a percentage of the device’s retail price would stand at 35%, compared to about 37% for the iPhone X and 36% for the iPhone 8 Plus.”

“Gross profits on the $1,250 model with 256 GB of memory – which we believe will be the most popular premium iPhone – are likely to be higher still, since the incremental costs of the additional memory are well below the premium that Apple charges for the devices. According to Bloomberg, the 256 GB version costs just about $42 more to build compared to the 64 GB version, although it retails for $150 more,” Trefis writes. “The top tier 512 GB device, which is priced at $1,400 (a $200 premium over the 256 GB model) is likely to be even more lucrative, as the incremental material costs are estimated to stand at just $66 over the 256 GB model.”

Read more in the full article here.

MacDailyNews Take: We agree that 256Gb is the sweet spot for iPhone Xs and iPhone Xs Max.

As for BOM, these costs do not factor in R&D (creating the world’s most powerful – by far – smartphone chip doesn’t come free), packaging, or marketing/promotions, to name just three additional costs.

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Apple shaves cost from displays in newest iPhones – TechInsights – September 25, 2018