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iPhone Estimated to Cost Apple $220 |
A lot of us don’t have enough extra cash laying around to throw at a new iPhone much less enough to get one just to take apart, but that doesn’t mean I wouldn’t like to. Luckily others do have that kind of bank and are willing to take some pictures and share what they find.
A company called Portelligent makes a living out of taking apart gadgets, seeing what they are made out of and trying to figure out who made it and for how much. The company did just this with Apple’s iPhone after its release and through some educated sleuthing found out some pretty interesting stuff.
According to Portelligent the estimated cost to make the 4GB iPhone, minus the costs of the final assembly of the parts, is about $200, giving Apple a $299 margin. They estimate just $20 more for the 8GB version for a cost of $220 on a mobile gadget that retails for $599. The most expensive single part turned out to be the touchscreen for which the iPhone is most known. “This screen is like nothing I’ve ever seen before,” said David Carey, Portelligent’s CEO.
As far as the source for parts, the company had to make a some educated guesses but matched a German company called Balda up with the touch screen, and Samsung with the main processor and Flash memory.
Source: BusinessWeek
[Photo Courtesy: iFixit.com]
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I know that the writer, and readers of this know more about business than to believe that that the only cost associated with a product is the cost of its parts. Here’s the actual costs:
1. R&D (this is a BIG one for new products - 1st gen) It takes a lot of people a lot of time to develop a product like this.
2. Advertising - Fortunately for Apple…the media did most of their advertising for them. They just had to make a few announcements, and launch a few commercials. However, commercials & air time still cost money…a lot of it.
3. Cost of parts - Here’s your $200 per phone
4. Cost of assembly - You have to pay workers, overhead, and machinery costs to manufacture a product (if you sub this out to a third party…you have to pay them for their machinery costs, overhead, and workers). Even if your paying a Korean $10 a day, it still isn’t cheap.
5. Shipping - You have a finished product packaged, and sitting at the end of an assembly line in Malaysia. You have to get it to the US, and then to the retail outlets. Call UPS and tell them you want to ship 1 million 1 lb. boxes from Malaysia to the US, then you need to have them distributed to 2000 locations over the US…see how much it would cost. (Yes, they would laugh at you, but you get the point)
So $200 a phone is an excrutiatingly misleading number to estimate Apple’s profit-per-phone. Thanks to this fantastic company - Portelligent - we now know the cost of the parts…which is pretty much useless information…unless you are in the industry of manufacturing electronics.
I know you have to pay for the peoples salaries who spent two years making this product, and what about the amazing new technology!…Idiots!
Wakerider30,
I don’t think this article saying you’re paying 300-400 bucks more than what you’re supposed to be paying. All it’s saying is that the parts cost about $200, and I believe almost everyone with a high school diploma can get that point. So, thanks for being super-serious.
If the cost of the iPhone is $220, then the $499-$599 price is about right. There is a general rule of thirds for consumer products: one third to manufacture, one third to market and distribute and one third for profit margin. If you can make one third of cost to consumer delivery, you are lucky. This rule is the primary reason most manufacturing is done off-shore.
Do the numbers yourself: say to yourself you wish to build a widget that will be delivered to you by a subcontract manufacturer for $x cost. Then start to calculate all your other costs to get the thing in your customer’s hands. It will turn out to be about thirty percent of what you need to charge to make it worth your while to build and sell it.