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Home > News > Lower costs, higher profits for Apple with 3G iPhone

Lower costs, higher profits for Apple with 3G iPhone

John Walko
EE Times Europe
(06/26/2008 5:31 AM EDT)

 

Lower costs, higher profits
LONDON — A preliminary guesstimate by market research group iSuppli suggests the Bill of Materials (BOM) and assembly costs of the latest 8Gbyte 3G iPhone from Apple will be $173, making the device one of the most profitable ever for the company.

The second generation iPhone will hit the streets on July 11. The market research group says it would follow up this preliminary estimate with an actual teardown.

"At a hardware BOM and manufacturing cost of $173, the new iPhone is significantly less expensive to produce than the first-generation product, despite major improvements in the product's functionality and unique usability, due to the addition of 3G communications," , said Jagdish Rebello, director and principal analyst for iSuppli, in a statement.

"The original 8Gbyte iPhone carried a cost of $226 after component price reductions; giving the new product a 23 percent hardware cost reduction due to component price declines."

Carriers are expected to pay a subsidy of about $300 for each iPhone, depending on the territory.

Rebello notes that Apple is making a significant departure in its pricing strategy with the 3G version of the handset. "The original 2G phone was sold at an unsubsidized price of $499. However, at a retail price of $199 for the low-end 8Gbyte version of the new 3G model, wireless communications service carriers will be selling the product at a subsidized rate, using a common business model for the mobile-handset market."

In terms of margin, based on its teardown analyses, iSuppli suggests Apple' s iPod and iPhone products are typically priced about 50 percent above that of their BOM and manufacturing costs.

Typical BOM cost estimates include $22.80 for the 8Gbyte NAND flash memory, $20 for both the touch screen and display, $13.50 for the application processor, $15 for the HSDPA baseband chipset, and $3.50 for the GPS capability.


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