The REAL cost of Apple's iPhone 4S

[3GScottishUser]

The Daily Mail has published an interesting breakdown of the costs of an Apple iPhone 4S. Of course the same could be said of most high end smartphones but the information is interesting.

"It might have underwhelmed the devotees, but sales of Apple’s iPhone 4S topped four million in just three days following last month’s launch, and it’s still the must-have smartphone this winter. Of course, those sleek looks don’t come cheap. Or do they..?

Out of contract, the iPhone 4S will cost you £499, but we can reveal that the nuts, bolts and high-end circuitry inside cost far less – see below for the total.

Expert analysts from technology firm iSuppli have prised open the pristine casing and totted up the cost of each component.

Some are reassuringly expensive – the touchscreen and display unit cost £23 – but others are less confidence-inspiring.

Next time you’re cursing the battery life, remember it’s only worth £3.68."


Read more: http://www.dailymail.co.uk/home/moslive/article-2059829/Apples-iPhone-4S-price-How-really-costs-make.html#ixzz1daIbWMNR

1177

Diagram of parts and labour costs of the iPhone 4S (Above)

[miffed]

The Daily mail costs 55p on a weekday - wonder how much the ink and paper comes in at ?

Robbing *******s !

[3GScottishUser]

To be fair they have not taken account of the VAT content of the retail price or the import tax imposed as it comes from China which is outwith the EU. That probably accounts for about £100.

On the other hand with millions being manufactured I suspect the component cost will be significantly lower than those stated. The flash memory for example was quoted as costing Apple £11.98 yet I can buy Class 4 Flash on an SDHC Card retail including delivery for around the same price. I think Apple will be paying a lot less when they are buying the raw memory chip in millions.

[Hands0n]

Headline grabbing is one thing. Dealing in the facts and actualities is another. I have no grind against the DM, in fact am a frequent reader. But it is reasonable to expect their technology correspondents to be working on a strict agenda, that being sensationalism and economies with the truth.

Yes, at the factory component level prices do seem very cheap. But as we know, of all things, the retail price is very different. Look how Levi (the jean company) lobbied the EU to ensure that their prices were not cut, that the RRPs were maintained. You try and by an authentic pair of 501s for much less than £50. Yet these are, in raw material terms, worth not much more than £4 or £5. The rest is cool hard profit.

So, why does it become such a cardinal sin for Apple to try and make a profit on their branded product? And that is what we're dealing with here, a premium brand name as much as any other. That will inevitably lead to the expected brand protection behaviours, the premium pricing (look the brand damage that happened to Burberry brand when it became "chav").

Then look at absolutely every single major well established mobile phone maker to date, they all charge retail way over their raw material or factory gate costs. Is this news?

[Ben]

The second one costs £112.89.

The first one cost millions.

It's a similar story when you look at any of the handsets of course. But Apple being at the top end price-wise makes for a more interesting teardown. I've seen comparisons with other handsets and the iPhone fairs up alright.

[3GScottishUser]

I don't think it's any surprise that Apple like any other manufacturer makes a profit on their products. That is what they are in business to do after all.

What is becoming common is negative reporting about Apple's pricing. I am guessing it's on the back of the huge profits they have been reporting.

People like success stories and Apple has had very little negative comment aside from some minor technical glitches with their iPhones.

Maybe it's overdue for the press to be questioning the cost of Apple products? Apple can sit on their hands but woe betide them if they ignore clims of overpricing and get labelled as a rip-off. Remember Gerald Ratner who had a huge business one day and nothing the next! Unlikely to happen to Apple of course but when you hit the top of the pile there is only one way to go and front runners always attract attention.

The boys from Cupertino need to watch the press carefully and ensure their brand is not damaged.

[DaveC]

What I fail to work out is why the 32GB is £100 more than the 16GB and the 64GB £100 more again. I'm sure that it does not cost therm anything like that.

[miffed]

Just in the interest of balance

http://www.isuppli.com/Teardowns/News/Pages/Samsung-Galaxy-Tab-Carries-$205-Bill-of-Materials-iSuppli-Teardown-Reveals.aspx
Remember how much these things were at launch ? £599 ?

And they can't even factor the cost of R&D in as they just copied Apple !

[Hands0n]

I don't think it's any surprise that Apple like any other manufacturer makes a profit on their products. That is what they are in business to do after all.

What is becoming common is negative reporting about Apple's pricing. I am guessing it's on the back of the huge profits they have been reporting.

People like success stories and Apple has had very little negative comment aside from some minor technical glitches with their iPhones.

Maybe it's overdue for the press to be questioning the cost of Apple products? Apple can sit on their hands but woe betide them if they ignore clims of overpricing and get labelled as a rip-off. Remember Gerald Ratner who had a huge business one day and nothing the next! Unlikely to happen to Apple of course but when you hit the top of the pile there is only one way to go and front runners always attract attention.

The boys from Cupertino need to watch the press carefully and ensure their brand is not damaged.

Hang on, thats not quite right.

Negative reporting on Apple has been going on since day one. A read of all the anti-Apple rhetoric ranges from "I hate Apple", or "I hate Steve Jobs" as if that is any kind of justification for what diatribe they offer next. It is all tribalism, based on nothing other than personal allegiance for whatever reason, little of it of any technical or financial merit. So this is nothing new, nothing newsworthy as such.

Apple has been continuously hosed down with "... negative comment ..." from way before the iPhone. Their products have always been slated by the anti-Apple crowd, of which there is a huge following. Some of the comment is quite accurate, but the good stuff is lost in the constant wailing and whinging. Every step of the way Apple has faced this rent-a-mob.

Not for a moment can you compare Apple with Ratner, and that "Ratner moment" in history. You will not find a single Apple executive of any seniority or influence state that their product is "crap" (Gerald's fateful adjective).

So, Apple has survived the criticism levelled at it so far, every single step of the way they have faced it. And as their balance sheet illustrates so very clearly, they are doing all the right things up to this point. Whether or not they can continue to be as successful without their core visionary remains to be seen. But I cannot find myself concurring with anything much of the above.

Apple thrive on publicity, and any publicity seems to do them no harm. The press are irrelevant, the power of word of mouth is supreme, as is brand reputation. No news media is going to be able to ruin Apple's brand rep by the words of their contributors.

No more so Apple as Levi, as I previously mentioned, or any other leading "brand label" that you care to mention.

[miffed]

Not for a moment can you compare Apple with Ratner, and that "Ratner moment" in history. You will not find a single Apple executive of any seniority or influence state that their product is "crap" (Gerald's fateful adjective).



Actually I do recall Steve Jobs actually saying the complete opposite ! i.e. "We refuse to sell crap"

This is the crux of the issue , Whereas your average PC manufacturer will do what amounts to bunging a load of top notch components in a carrier bag and selling it to you , Apple actually ensure they are all put together in the best product & experience possible.

[Wilt]

Companies like to make money, wow.



Shocking.

[DBMandrake]

I have a big issue with iSuppli pulling gear apart working out what it "costs" to make hardware on a per unit basis based on raw component costs, and concluding that retail price minus cost equals profit, and that if the retail price is more than (say) manufacturing cost + 30% that the manufacturer is somehow ripping people off.

Anybody who has run a business knows this is a load of nonsense! The raw material cost and unit by unit assembly cost is only the tip of the iceberg.

How did this product come to be before it was manufactured and sold ? That's right, a couple of years or more of extensive R&D and prototyping. Those hardware engineers, especially of the calibre of Johny Ive don't come for peanuts. Even though a specific model of phone probably has about 2 years work done to develop it, the basis of the technology, especially the OS has taken years of continuous work to refine. That's a lot of man hours. All up there will be hundreds of well paid engineers at least involved in the design and testing of iPhone's and iOS.

Then you have (in the US) employee healthcare packages to pay for on top of wages, administrative costs, (not everyone at a company is an engineer or designer...) marketing costs, warehouse costs, shipping costs, you have to build in a margin for swallowing the cost of warranty replacements, a margin to keep x amount of replacement devices in warehouse store up to 3 years after the model is obsolete, (for Applecare coverage) re-tooling costs every time you design a new model that needs new parts of assembly techniques, lawsuit costs - both defending yourself against other lawsuits and initiating them to protect your own rights, the cost of having a worldwide retail presence, the list goes on and on.

Look at most high tech mass market products and the actual raw component cost is a surprisingly small percentage of the retail price, because all these other things have to be taken into consideration. Any company who sold their products at manufacturing cost + a small retail markup would be out of business before you can say "wow, that was naive" ;)

[3GScottishUser]

Actually I do recall Steve Jobs actually saying the complete opposite ! i.e. "We refuse to sell crap"

This is the crux of the issue , Whereas your average PC manufacturer will do what amounts to bunging a load of top notch components in a carrier bag and selling it to you , Apple actually ensure they are all put together in the best product & experience possible.

It's the cost of the shiny case that is my major issue. Yes I could be prepared to pay a premium for a nicer housing that will last longer and feel better but it surely shouldn't make it twice or even three times the cost of a comparable device with the same key components? The user experience is also worth some extra but that is subjective. I had to spend a while the other day attempting to copy and paste an image from a website into a word document on a new Mac. It's not really as straightforward as one would imagine!

[Ben]

The user experience is also worth some extra but that is subjective. I had to spend a while the other day attempting to copy and paste an image from a website into a word document on a new Mac. It's not really as straightforward as one would imagine!
Just drag it. I just did it then with your avatar :p

We'll never convince you that Apple products are worth the extra. Unless you're prepared to actually buy some of their kit and live with it I don't think you'll ever get the advantages that its customers perceive. It's tricky I know. But I guarantee Apple customers aren't just in it for the brand, and don't just fork out more for Apple products because they're incredibly stupid or somehow hypnotised.

[Hands0n]

Really, Ben has it in one. Lack of real knowledge of how the OS works causes people to come up with all manner of objections to OS X. But that is just the OS. These conversations keep confusing and mixing up hardware and OS in a near desperate attempt to validate the negatives expressed about either or both.

I switch daily and constantly between Windows and OS X and can tell you which is the easier to operate. Yes, it took a [short] while to adjust to the new OS, and I am still learning new "stuff" almost weekly. The functionality in OS X (and iOS for that matter) is head and shoulders over other desktop OS. But, again as Ben rightly says, you have to give the OS a chance, to take the time to learn to use it, to get to know its functionality and quirks (they've all got them).

Why am I bothering defending a manufacturer's product? Simply because this is a public forum and the negative anti-Apple-anything opinion is just wrong, wrong, wrong.