Apple’s $199 iPhone 5 Costs $207 to Make
So how did they come up with $207?
- Display & touchscreen: $44.00
- Wireless substructure: $34.00
- Mechanical & electro-mechanical parts: $33.00
- Memory: $20.85
- Camera: $18.00
- Processor: $17.50
- Power management: $8.50
- Box contents: $7.00
- User interface and sensors: $6.50
- BT/WLAN: $5.00
- Battery: $4.50
- Assembly cost: $8.00 (yes, $8.00)
The bliss that comes with owning Apple’s latest product: Priceless.
Okay, that last bit’s a stretch. In fact, Apple’s 16-gigabyte iPhone 5 – which, according to the above tally from research firm IHS iSuppli, costs roughly $207 for parts and assembly – retails for a cool $199.
Does that mean Apple is losing money on the device? Hardly.
Apple has actually priced its 16GB model at an eye-watering $649. As noted in the fine print, the advertised $199 price point “requires [a] new two-year service contract” from a third-party provider such as Verizon or AT&T . In other words, either carriers are footing the rest of the bill for each iPhone, or customers who aren’t activating new contracts will. (Read More:What Are the Next Cool Smartphone Features?)
(Hence why iPhone launches are typically viewed as a “profit-draining proposition” for carriers. )
In turn, even factoring in other marketing, overhead and production costs, Apple should be well in the black on each iPhone 5 it sells. Consider that iSuppli estimates the cost of its 32GB model, which retails for $749, at just $10 more per device, or about $217, to manufacture. And the top-end 64GB model, which goes for $849, costs the company an estimated $238 to make. (Read More:Apple's iPhone 5 Sales Could Add Half a Point to GDP)
It’s also true that the bill of materials for the iPhone has climbed with this iteration of the device; the low-end iPhone 4S, for example, cost just $188 (excluding assembly). Still, it’s little wonder Apple shares have punched to fresh highs as the company reports that its latest device is its fastest-selling ever. The cash machine keeps clanging in Cupertino.
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