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iPhone X Costs Apple $370 in Materials: IHS Markit (ihsmarkit.com)
Engineers at marketing research firm IHS Markit cracked open the base version iPhone X, which Apple is selling at $999, this week. After preliminary physical dissection, the firm estimated that the iPhone X carries a bill of materials of $370. From their findings: With a starting price of $999, the iPhone X is $50 more than the previous most expensive iPhone, the 8 Plus 256 GB. As another point of comparison, Samsung's Galaxy S8 with 64 GB of NAND memory has a BOM of $302 and retails at around $720. "Typically, Apple utilizes a staggered pricing strategy between various models to give consumers a tradeoff between larger and smaller displays and standard and high-density storage," said Wayne Lam, principal analyst for mobile devices and networks at IHS Markit. "With the iPhone X, however, Apple appears to have set an aspirational starting price that suggests its flagship is intended for an even more premium class of smartphones." The teardown of the iPhone X revealed that its IR camera is supplied by Sony/Foxconn while the silicon is provided by ST Microelectronics. The flood illuminator is an IR emitter from Texas Instruments that's assembled on top of an application-specific integrated circuit (ASIC) and single-photon avalanche diode (SPAD) detector from ST Microelectronics. Finisar and Philips manufacture the dot projector. IHS Markit puts the rollup BOM cost for the TrueDepth sensor cluster at $16.70.
When he arrives at the customer's house, he inspects the faucet, installs a new rubber gasket, and gives the customer a bill for $100.
"This is outrageous," says the customer. "I demand an itemized bill."
The plumber quickly writes up an itemized bill:
Rubber Gasket: $0.50
Knowing where to put it: $99.50
Apple is a company that wants to make money. They also need to do things like, you know, pay people, rent/own/lease buildings/stores, pay for electricity, pay for marketing, bandwidth, servers, turn a profit, that sort of thing. It's almost as if they are selling phones in a capitalist society where they can set a price and people can choose to buy it or not. Gasp, they are selling their top of the line phone for significantly more than the parts required to make it cost!
I work at a software company. We don't even sell a physical thing, people just pay us for some bits they download. We must be doing an OK job because people keep paying us, it's like our software provides value for them to do work.
That's the essence of all economics. If you trace the components back to their source, its a few cents worth of sand, aluminum oxide and other ores and petroleum. Everything else is labor, licensing fees and debt service.
And taxes. So one could accurately say that an iPhone X costs $1000. Paid to Apple Jersey. Net profit for Apple USA: $0.
Have gnu, will travel.
Markups like this, in all kinds of industries, are not uncommon, and quite frankly, are to be expected.
It is foolish to expect that a provider of a product will sell a product in retail for as low as they can and still make what they think will be a respectable profit when they can make far more by selling it for the most that they can that people are still willing to buy it for.
Is Apple being greedy? Of course they are... but it's their product, and they have absolutely every right to dictate how much they want the end user to pay for it.
File under 'M' for 'Manic ranting'
And of course assembly, quality assurance, engineering, shipping, etc... are all free. What greedy bastards, how dare they make money off of a product people want to buy.
the iphone 7 cost $5 to put together according to apples own estimates.
When you cant win, ad hominem.
People who get upset over margins have never ever run a business.
Dan Ariely, an economist, also has a similar story to share:
As I mention in the video, what's really interesting is that this locksmith was penalized for getting better at his profession. He was tipped better when he was an apprentice and it took him longer to pick a lock, even though he would often break the lock! Now that it takes him only a moment, his customers complain that he is overcharging and they don't tip him. What this reveals is that consumers don't value goods and services solely by their utility, benefit from the service, but also a sense of fairness relating to how much effort was exerted.
Emphasis is mine.
Engineering and writing software are also negligible costs. The stores also operate rent-free because the mall landlords offer free rent for the prestige of having an Apple store, and there are no appreciable costs for sales/marketing, health benefits, salaries, testing hardware/software, etc. Apple employees work for free!
Yeah, exactly! Give me all those random parts in a box, and I'll put it together for you!
A mash-up of components without software and without online services would be as useful as a rock.
What about all the services included with the iPhone? Email account, iMessages, Facetime, iCloud, App store (some applications are free but Apple still has to run all the backend even if you never buy anything there).
There's also all the engineers to pay for designing the hardware, all the software developers to pay for writing iOS and all the included programs.
#DeleteFacebook
You forgot support. And the updates that will inevitably be necessary.
*Sigh* Another ass-hole who does not how the fucking market works.
The market dictates the price. If stupid morons are willing to pay $999, then that's the price. If the product doesn't sell, then a new price is set.
Apple dictates nothing.
And clearly their products are over-priced.
Today, the Internet was completely shocked to find out that Corporations sell things above cost -- what is collectively called "at a profit" in the business -- in order to sustain their infrastructure, support, and logistics of all the engineering, design, implementation, fees, certifications, and quality assurance needed to sell a product.
When Millennials were asked:
"How do companies produce these things you buy?"
they replied:
"I thought it was all magic pixie dust. What do you mean "people" have to spend months writing software for our devices? What's an Operating System? How is it different from an app?"
More News at 10. Film at 11.
A $500 meal at a fancy restaurant is made from $10 worth of food.
How many years of R&D were behind this phone. How many failed ideas tried. Redesign Because of changes in competition... plus they will only sell this phone for about a year until the next version.
The parts breakdown is more or less what will be needed for a knockoff product that will get sold next year.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Wish I had mod points. I work at a manufacturing company, our cost of materials is on average around 15%. We would sell iPhones for almost $2,500, and that would be the cost to Apple. Folks are kidding themselves if they think Apple ever even sees this price, they don't even manufacture it themselves, it's all outsourced and you can bet your ass Apple knows how much the components cost and would never expect to pay close to that little for their hardware. Then there's their cost to develop the OS, which is where all the value actually lies in the iPhone, and it's starting to look like a thousand bucks for the phone isn't that bad a deal.
Comment removed based on user account deletion
Good one, but I like this allegory better:
A locksmith is just getting started. He gets a call to a homeowner who has locked their keys in their house. He shows up, pulls out his lock pick set, spends half an hour working the lock before he gets it open. He scratches up the lock face a bit and loosens the pins so the key now rattles a bit in the tumbler. Hands the homeowner a bill for $50, which, seeing all the hard work the locksmith has done, gladly pays.
Fast forward ten years. The locksmith is now an expert at picking locks. He can do so without so much as scratching the lock face or damaging the lock in the slightest. Gets a call to a homeowner who has locked their keys in their house. Locksmith shows up, pulls out the correct tools the first time, and unlocks the door in ten seconds flat. Hands the homeowner a bill for $50, and promptly gets yelled at for having done hardly any work at all.
My Other Computer Is A Data General Nova III.
The *only* reason a profit-seeking company has to ever try and make its products more affordable is if they feel that their profits would actually go up as a result. If you have already have a massive audience that is ready to buy virtually anything you put out at almost any price, you don't have much incentive to try and price your products to draw people away from the competition, or else you market your products as so far outside of the league of your competition that there is no reason to expect them to be similarly priced.
File under 'M' for 'Manic ranting'
Also, if I had all the BOM on hand, what the fuck would I do with a bucket of stuff?
It's not self-assembled, self-shipped, self-marketed.
It little behooves the best of us to comment on the rest of us.
I'm also quite involved with manufacturing, 10-15% is a general number that is oft agreed upon in our business for SGA&P (P being profit). That is basically the markup on the cost of producing the goods.
You're kidding yourself if you think Apple doesn't wield huge bargaining power for their business. I believe Apple can purchase a finished good for under $500 if their component cost estimate of $370 is accurate.
"Action without philosophy is a lethal weapon; philosophy without action is worthless."
Miniaturization and tight integration of components isn't free.
#DeleteFacebook
I agree, but that is included in the BOM cost.
By the way, the CPU, the display and the battery are all more expensive to make on a PC compared to a phone. So is the power supply, the RAM, the storage, and obviously the keyboard. The only thing which is more expensive on the smartphone is the cellular radio, which the PC almost always lacks.