Apple’s iPhone margins likely closer to 20-percent than 50-percent

“Analysts are beginning to question earlier reported Bill of Materials costs on Apple’s iPhone and are suggesting that the gross margins Apple will achieve may be much lower than predicted, and nearer the mid to high 20 percent range than the estimated 50 percent. In particular, there are debates about the cost of the display and related touch screen technology,” John Walko reports for EE Times Europe.

Walko repots, “For instance , DisplaySearch (Austin, TX.) suggests the cost to Apple of the display approaches $60, almost twice that of other estimates due to the 3.5-in 320 – 480 display and the nature of the touch screen technology. According to DisplaySearch Apple has followed its normal trend of eschewing the use of off-the-shelf displays for its innovative designs. The market research group stresses the narrow bezel around the display, as well as the thinness of the device, indicate that a standard display product would not meet Apple’s aggressive design requirements.”

Walko repots, “John Jacobs, Director of Notebook Market Research at the company, notes that Steve Jobs, in his keynote address at MacWorld, said Apple has filed for more than 200 patents for technologies in the iPhone. ‘Such innovation does not occur without cost. Although Apple and its key component suppliers may choose to amortize the cost of these advanced technologies over a large number of units, our analysis indicates that Apple’s BOM (bill of materials) cost, including integration, is well above $300 for the 4 GB model. After the costs associated with building, shipping, marketing and selling the iPhone are included, we expect that margins will be closer to Apple’s typical mid to high 20 percent range.'”

Full article here.

Related article:
Apple to see near 50% gross margin on each iPhone sale? – January 18, 2007

17 Comments

  1. “According to DisplaySearch Apple has followed its normal trend of eschewing the use of off-the-shelf displays for its innovative designs. “

    Duh! I’m going to go down to the auto parts store and innovate myself a car. I imagine it’ll turn out a lot like a Microsoft product.

  2. The 20% figure and the 50% figure are measuring two different things. MDN’s is trying to obscure and slant things by implying that the original estimate was off by possibly 30%. The original article clearly stated that it was calculating the cost of materials and that the margins it was estimating was for those materials and obviously not for other business costs. This new report shows an increase of around $30 to $40 in cost which changes the margin to close to 40%. You have to add additional costs, which the original article clearly did not do, to get to the 20% that this article states.

    In other words, the original article may have incorrectly estimated the margin by maybe 10%, the rest of the article is a red herring.

  3. realist: do you know how to read?

    MDN’s title comes straight out of the text of the article. They didn’t even include a take. So your gripe is with EEtimes Europe – I guess they’ve become Apple fanboys in your unreal eyes.

  4. Either way (include the “other costs” or not), Apple’s profit on the iPhone is 20-30%. That’s inline with other Apple products. Considering this profit pays for past, present, and future iPhone R&D, that’s reasonable.

  5. No Zeke, if you were making a Microsoft car you’d go down to the auto parts store buy one of everything and then reinvent the car by making a copy of each part and selling it to consumers as state-of-the-art.

  6. The 20% figure and the 50% figure are measuring two different things. MDN’s is trying to obscure and slant things by implying that the original estimate was off by possibly 30%.

    499 x say, 48% = 239.50
    499 x say, 28% = 139.70 –> off by 58%

  7. Riddle me this, iPhoners…

    If I’m more likely to go to Matt Darey’s MySpace page, and stream the excellent Upfront Trance, Disk 1 to my computer that doesn’t happen to have those songs on it, than to actually take the time to rip it again, then, logically, I would do so from an iPhone as well. Actually, more so with the iPhone because I have more limited storage. So I’d just bookmark that page and stream it, right?

    Right.

    I think someone called this the Celestial Jukebox.
    Oh so many years ago.

    -c

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