“David Carey, Portelligent’s CEO, did something that few others in the country did after buying an iPhone: He took it apart,” Arik Hesseldahl reports for BusinessWeek.
“Portelligent estimates that the cost of the materials used in the iPhone add up to about $200 for the 4-gigabyte version, which sells for $499 and about $220 for the 8-gigabyte version, which sells for $599. Their estimate doesn’t include costs of final assembly, but it does give some insight into the gross margin on the device. Historically Apple’s gross margins have run ball park of 50% plus or minus a few points,” Hesseldahl reports.
Hesseldahl reports, “The most expensive component on the phone, Carey says, is the touch screen, for which Apple tapped a little-known German concern called Balda… Another big winner is Samsung, which supplied the main microprocessor chip. It was stamped with an Apple logo, but with a serial number that matches closely a chip that Samsung sells… based on a core design that is owned by the British chip technology licensing firm ARM Holdings (ARMHY)… At least one other ARM-based chip, from NXP Semiconductor, the former chip division of Royal Philips Electronics, shows up in the iPhone… Three chips are involved in [power management]: one from Philips, one from Texas Instruments (TXN), and one from Linear Technology (LLTC).”
“Handling various aspects of the wireless communications on the iPhone, from connection of AT&T’s wireless voice and data network to local Wi-Fi networks, are components from Infineon (IFX), Skyworks (SWKS), RF Micro Devices (RFMD), and Marvell Technology Group (MRVL),” Hesseldahl reports.
More details, including which component makers made it into Apple’s iPhone, in the full article here.Full article here.
[Thanks to MacDailyNews Reader “Linux Guy And Mac Prodigal Son” for the heads up.]
Time to buy shares of Balda.
And M$ loses money on every XBOX360 sold, right?
Many companies involved. I’m surprised Intel and/or Texas Instruments chips are not part of iPhone.
These initial breakdown estimates are rarely correct.
Remember the HUGE profit Apple was supposed to be making on Apple tv, turns out they barely break even on the device.
@C1:
What’s the correct symbol?
JB Name ONE console maker in the past 20 years that did not lose money on every console sold, or maybe you just don’t understand how the console market works? Consoles, regardless of manufacturer (Nintendo, Sony, Microsoft, and the other small players) ALWAYS sell the console at a loss to make it back up in videogame sales. That’s the way it’s always been. You’ve been living under a rock all these years?
@AJ
google in in google’s financial website.
@Big Mac Attack — according to the article, TI chips along with those from Philips and Linear Technology are part of the iPhone’s power managment circuitry. Reading the article really began to give me an idea of just how much power is inside the iPhone.
BTW, did anyone else notice how heavy the iPhone seems for its size? I’m not saying it’s heavy, it just feels very dense… densely packed with power, I guess!
@ AJ
“BAD”, Balda AG
Not to mention the past 2 years of R & D with no money being made on the phone then.
Who paid the saleries of all those engineers designing the phone?
Just love that they think the only cost in these products is the electronics.
Ohh thats right, there is this software thingy that runs the phone. Place a cost on that interface!
@ Pete
No one ever said that Apple would make a ‘huge profit’ on Apple TV. It’s a market that’s not quite ready to take off. Yet.
Game console market is like the inkjet and now b&w/color laser printer market is. You lose or break even on the device, and make a fortune on the content or consumables in the case of the printers. Have you not noticed you can buy a network attached full color laser printer from HP for $399 but to buy new toner its like $150 per cart (and there are 4 carts in each printer?)
Most of these figures are based on one or two average prices for components then estimates for everything else. They then don’t take into account the actual manufacturing costs for the thing, the cost of setting up the manufacturing process/factory, the cost to develop the thing, the cost to market the thing, transportation, costs to cover the servicing of the sale, the warranty and so on. They almost seem to believe that the true sale price should be the cost of materials plsu 10% or something.
@ Exposed
Nintendo makes a nice profit of $92 on every Wii.
http://ce.seekingalpha.com/article/34357
Isn’t this Balda AG?
http://finance.yahoo.com/q/bc?s=BALOF.PK
I followed through to the German website where iPhone was mentioned.
Everything Apple is going great. Why is the stinkin’ stock price going down?
Wall Street is SO illogical.
MDN MW: “sales” DUH!
Chrissy, that “estimate” is from a Japanese magazine that only took consideration of the major components, and it comes up with about a $40 profit. You can tell how just how innaccurate the $92 figure is just by adding a few more variables into the mix, and even that does not include all production and design costs that need to be considered (unless you think the Wii magically just came into existence by itself, like the iphone cost above without other costs taken into consideration)
Forgot to mention you don’t consider the above whole-sale price, if Target sells the PS3 for $1000 instead of $599 doesn’t mean the $400 of profit goes to Sony.
I laughed at this article, for the core cost quoted takes into account only the materials, not the cost of assembly, and by no means the massive investment in R&D necessary to make the iPhone possible. When you roll that up, the cost per phone is significantly higher to Apple at the outset. Over time, as Apple recoups its R&D and manufacturing costs, the profit for Apple will be much greater, and the price will come down. Given that Apple and AT&T had a very profitable weekend, I have a hunch that a significant chunk of R&D costs were erased.
It was amazing to see the lines outside the Apple and AT&T stores on Friday night. Can you think of one other product that has aroused such feelings of desire? It is testament that Apple anticipated what people want, and have even gotten people to line up for something they never thought they would need. Amazing!
The stock price zoomed up based on some iPhone sales/revenue projection. Now there’s uncertainty about the number of units actually sold this weekend. Analysts don’t know what to make of the fact that Apple didn’t sellout the first day – is it lots of supply or too little demand?
Do you have confidence that more people will snap up the iPhone in the coming months – more than so far projected? And that this will not cannibalize iPod sales – more so than projected? If so, and assuming the Mac and AppleTV parts have not changed materially from earlier projections, then you should hold on or buy up more.
The tallied costs are intended to only cover the recurring product costs.
Readers should be bright enough to know that they have to add in the non-recurring development (R&D) costs, and a portion of the sales and general admin (SGA) costs to get a true idea of Apple’s real profit per unit sold.
Balda Stock information
http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?capId=884302
Thanks, hotinplaya.
@Think
In engineering, development costs are referred to as “non-recurring” costs. They are only done once, and are amortized over the production life of the product.
The iPhone that Jobs showed at MacWorld in January cost zillions of dollars, because very few had been made, and the development costs were not widely spread. For every iPhone sold, the costs become more widely spread, and thus less per phone.
However, accounting looks at those cost differently than the recurring costs of materials.
If Apple sells 10 million, as planned, think how little development cost went into each phone sold.
@qka
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In the case of the iPhone, the development costs are NOT non-recurring–at least the software development. Apple has stated publicly that they will continue to enhance and improve the iPhone over its full life through software updates. Therefore, Apple is booking iPhone revenue over two-year period beginning with each sale. And there will be ongoing software costs as well. Otherwise, excellent points.