Apple iPhone - At what cost?
InfoPackets reports in this article:
[snippet]
The PlayStation 3 actually retails for less than its total worth. (Source: infopackets.com)
Not the iPhone.
In fact, recent reports suggest that Apple is collecting an impressive profit from its device. Research firm iSuppli is telling the media that the iPhone actually sells for double its production costs, a staggering mark-up that would make it one of the largest profit margins in cell phone history. (Source: washingtonpost.com)
According to iSuppli, the most expensive iPhone model, that which sells for $599, actually costs Apple just $265.83. Such estimates were made by the firm after it tore open an iPhone in order to appraise the parts within. (Source: bloomberg.com)
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see the link above for the full article and links to the sources. Guess I'll stick with my company supplied blackberry for a while.
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MacManX on Jul 13, 2007
They have to make money on it somehow.
Besides the supply costs, you also have to consider the research & development costs, the manufacturing costs, and the marketing costs.
Most of Apple's margin goes towards covering research and development costs, but besides the iPhone being "one of the largest profit margins in cell phone history", it's also one of the most heavily marketed phones in cell phone history.
seanhussey on Jul 13, 2007
Exactly. The parts may only cost $265.83, but the drive to get those parts to work in such a way as to become an iPhone (and then telling the world about it) is a different story.
iqon on Jul 13, 2007
Apple spent money telling the world about the iPhone?
KatieK on Jul 13, 2007
Here's a place where you can see all $268.83 of those parts:
http://www.willitblend.com/videos.aspx?type=unsafe&video=iphone
You just have to look very quickly.
katylava on Jul 13, 2007
ditto to the R&D points. apple seems to invest a lot more in R&D than other cell phone manufacturers. this is, of course, just a guess based on it's awesomeness.
iconmaster on Jul 13, 2007
The iSuppli breakdowns are interesting but they don't tell the whole story. Apple's been working on the iPhone for years. Somehow you have to pay the salaries of all the hardware and software engineers that developed and tested it, and still make a profit.
Is it a very healthy profit? Probably it is. But it's not the 50% profit margin that the iSuppli report suggests.
eleanorjlh on Jul 13, 2007
The PS3 gets sold at a loss because Sony gets money from every licensed Playstation game; Apple doesn't have much revenue further down the chain, so they need to make money on the iPhone.
seanhussey on Jul 13, 2007
And, frankly, I don't think they would have sold as many PS3 systems at even the break-even price, nevermind at a profit.
I'm so glad that Nintendo is wiping the floor with the XBox360 and PS3. I think they get it. For me, gaming is about fun, and the Wii is fun. Please, game makers, concentrate on fun instead of having the best head-shot-splatter rendering in the business.
lparziale on Jul 13, 2007
What the heck is wrong with a profit? After the dust settles, the phone price will drop and those that do not like to "pay the higher margin" can get their new device.
Oh and lest we forget, we can always walk into an Applt store for support and help. Try that with Sprint!
seanhussey on Jul 13, 2007
Good point on profit. Let's not forget, the only thing a business MUST do is make money. Anything else is gravy.
katylava on Jul 13, 2007
true dat lparziale.
bdelisio on Jul 13, 2007
This is exactly the same argument the US government is making against the pharmaceutical companies for overcharging on prescription medication. The gov't is in favor of lowering prescription drug costs, so it is charging the pharmas with price gouging.
The argument goes like this:
It only costs 3ยข to produce a tablet, therefore the pharmas should only charge those who can pay, a nominal fee. The poor, who cannot afford to pay for their medication, should receive it for free.
Well... if I follow the govt's logic in the prescription medication case and apply it to the iPhone, then every member of my family and I are each entitled to a FREE iPhone with unlimited service. FOREVER!
eleanorjlh on Jul 13, 2007
Pharmaceuticals are a life-saving necessity though; you can't really say that about an iPhone.
iqon on Jul 13, 2007
Wow certainly not the response I was expecting. The initial responses sound like I was knocking the profit (dare I say a bit of rabid Apple fanboy/girl in the mix?).
As a capitalist I am all for profit. Especially profit on non-essential items. Supply and Demand baby! I think Apple blew it by not charging more. The cell phone market is very fickle and you must strike while the iron is hot.
The success of the iPhone is good news for the consumer, it makes other manufactures improve their product or cut the cost. The same way Apple has forced Microsoft to improve.
SmockLady on Jul 20, 2007
Well, if I had the money I'd buy one. I like it. I'm a gadget freak still pining for an iPod to take on my morning walk/run (and of course to help drown out the 6 children during the witching hours of the day). Yes, yes, one of those video things to help intertain the 3 year old at our many doctor appts for the almost 6 year old (she has CP).
ZsaZsa on Jul 20, 2007
I understand from a former Nokia executive that the US is the only country that charges less than the cost of the phone and way too much for the service. He says that in Japan, the phone is expensive but the service is cheap.
bdelisio on Jul 20, 2007
Rumor has it...
A new version of the iPhone is already on its way. Due out before the holidays.