Apple's cool 50% margin on iPhone to generate the iCash

Alex Zaharov-Reutt
Friday, 19 January 2007 12:35

Your IT - Mobility

Although only a preliminary analysis, as iSuppli have no iPhone to hand to disassemble, as they have done with many other electronics devices, it looks like Apple will be basking in great profits – as usual.

Apple may only have only ever had a few percentage points of the PC market, but Apple certainly know how to make money. Of course, in the mp3 market, Apple’s dominance has seen the iPod become a huge cash cow, as important to Apple is Windows and Office is to Microsoft.

iSuppli have previously dismantled Xbox 360s, older iPods and other consumer electronics devices in an attempt to figure out the true manufacturing costs, and while they have no iPhone to hand to do the same thing, their extensive experience in the industry and wide knowledge of component pricing has enabled them to issue a preliminary analysis of the ‘Bill of Materials’ (BoM) estimate of the iPhone’s true cost.

Of course, it comes as no surprise whatsoever to discover that iSuppli think the iPhone will generate a fantastic profit margin for Apple, ensuring Steve Jobs remains not only a hero to his loyal customers and fans, but to his loyal shareholders – despite the dodgy options scandal that refuses to go away.

According to Andrew Rassweiler, iSuppli’s teardown services manager and senior analyst:“iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price. Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price.”

You can visit iSuppli’s website to see their report and a table that breaks down the preliminary functional BoM estimate of the 4Gbyte and 8Gbyte versions of the Apple iPhone.

iSuppli say that despite not having a iPhone to disassemble, that although they have “a high degree of confidence in its conclusions, these figures are considered preliminary until we perform an actual physical teardown and analysis of the iPhone”.

iSuppli say that Apple achieved margins of 45% and more in their other products, including the iMac and the iPod nano. However they also caution that Apple are “facing extensive competition in the music-phone market [and] the company may need to cut into its margins to reduce pricing in the future”.

So what else did iSuppli say? Read onto page 2 for the conclusion...