“Apple’s newest iPhone costs less than previous models to make, but it could also generate the smallest amount of profit per phone, according to estimates by the research firm IHS,” Joon Ian Wong writes for Quartz.
“The researchers took apart the iPhone SE, which was launched Mar. 21, and found that the costs of materials and manufacturing came up to $160 for iPhone SE with 16GB of storage, the smallest capacity available,” Wong writes. “It retails for $399. That’s a difference of $239. The iPhone 6, by contrast, costs $200.10 to make and sold for $649 at launch. That’s a difference of $448.90.”
“Although the absolute number of dollars Apple could stand to earn from selling an iPhone SE is lower than for its other models, Apple is betting that many buyers will get the more expensive 64GB model, not the entry-level 16GB one,” Wong writes. “That adds $89 in extra potential profit (or a 37% increase over the 16GB model) to Apple’s coffers per phone, says IHS.”
Read more in the full article here.
MacDailyNews Take: Any fragmandroid phone peddler would kill for that type of profit. Actually, they’d kill for any profit whatsoever.
SEE ALSO:
How Apple sucks the profit out of mobile phones – February 14, 2016
Apple’s iPhone can soon reap 100 percent of world’s smartphone profits – November 17, 2015
Apple’s iPhone owns 94% of smartphone industry’s profits – November 16, 2015
How many times has Tim Cook said that he’d never read an estimate of iPhone cost that was accurate. This article is complete rubbish.
Actually, the article makes a very valid and strong point.
Guessing the manufacturing cost is never accurate, and nobody expects those companies to provide accurate numbers. However, as inaccurate as they may be, they provide meaningful and valuable information for investors and others who follow the industry. Most importantly, they can observe trends, and they can provide comparison between various manufacturers and models.
It makes complete sense that an iPhone that retails for $400 will have a significantly lower margin than the model that starts at $650, when most of the innards are the same.
“iPhone SE could be Apple’s least profitable iPhone ever”
But could be apple’s biggest bomb ever drop for all the copy cats companies.
Not sure about the bomb part with ‘competitors’ having never left the 4in phone market like Apple did for a generation or two.
I would say margins are higher, if not as high as Apple’s average.
Does anyone remember that a few quarters ago annal ists were predictions drops in iPhone sales based on reported supply chain excess parts sales/ inventories…?
Apple probably ‘over bought’ those some with the SE in plan…and also probably negotiated great deals for new buys of already discounted older tech parts, in mass quantities, with india in mind.
Predictions= Predicting.
Apple’s “least profitable” iPhone is worth far more than the most profitable of its competitor’s products. This sounds like a “don’t throw me in that briar patch” situation.
It could be a best seller too.
OR, it could be the most profitable. Components already on hand – minimal R&D, etc.. Analysts just don’t know Jack about this but they love making noise.
Exactly. One should NEVER include “could” in a headline.
iPhone SE has no new tech., similar to the AppleTV. There is almost zero risk for Apple in producing this type of device.
Cost of materials & cost of manufacturing … Nice, but what happened to cost of warehousing, cost of shipping, cost of advertising, cost of marketing, and cost of selling, or does all of that come free? Then of course there’s also cost of product loss which no one seems concerned about.
Cost of doing business must have radically changed since I went to school. 😳
Yes, yes, yes. These ‘cost’ numbers are consistently ignorant numbers from people who do NOT comprehend business.
– R&D costs? Oops, they left that out.
– Marketing costs? Oops, they left that out.
– Shipping costs? Oops, they left that out.
. . . Ad nauseam.
If we could rely on people seeing past these ignorant numbers and compensating for their inaccuracy, then no big deal. But we know very well that people outside of business systems are going to believe these bogus, incomplete and inaccurate numbers to have some relevance in reality. The result is the usual cognitive dissonance and corrupt human perception.
Agreed. Plus nobody has any idea how much Apple pays for their components. It’s safe to assume they get a great deal though, consisting the volumes they must be ordering and their ability to play manufacturers off against each other.
Clearly, one reason for the iPhone SE is penetration into the lower cost smartphone market. This explains the lower profit percentage. But as MDN wisely points out, this is still significant profit, isn’t it! ISN’T IT!!!
(And yes tech journalists, do the meaningful math for your readers please! Quoting raw cost versus sale price numbers is worthless without turning them into percentages for comparison. No surprise that typical WallNut Street daily report numbers are just as worthless, providing no percentages from which to draw actual meaning. Hello!). (o_0)
To my knowledge, this is Apple’s first foray (since Steve returned) into INCREASING MARKET SHARE at the expense of large profit margins. Pundits have been harping on that very thing for years, and now? — crickets
Coherence is not something I expect from pundits, analysts, journalists…. Not these days anyway. But we can keep on wishing, dreaming and making a loud stink about it so that maybe someone will figure out how to do their job well, with quality and professionalism. It could happen!
Given that it will massively increase the take up of Apple Pay in a lot of countries the headline profit doesn’t even come close to painting the entire picture. It’s a money making machine.
I think this is a one-off dead end interim phone like the the 5c. The annual upgrade plan is not available for this phone, meaning Apple sees trade-in at trade-up time not to be viable. I recently went to Apple store and left without two of them when I determined I had to pay without an upgrade path when I’m pretty sure I want options for iPhone 7/s when available.
btw the Apple stores are as awful as I remember them. I did buy two other phones and the purchase path was ridiculously complex and conducted in a noisy public environment that was a pickpockets delight as well as a password grabbers delight. Forget the FBI, Cook should worry about how these stores turn people off, almost universally.