iPhone component price dropped $54
It costs less to make an iPhone now than when Apple showed it off in January, but not enough to cover yesterday's price cut.
The Cupertino, Calif.-based company yesterday cut the price of the 8GB iPhone from $599 to $399 and sent the 4GB version to the vet. The company initially stated that price cuts are par for the course in the technology world.
Price cuts are common, but they are usually fueled by declining component costs over time. It's tough to square the $200 price whack with anything that happened in the component world.
Andrew Rassweiler, principal teardown analyst at iSuppli, said that the manufacturing and component costs for the 8GB iPhone model came to $226.61 in July, while the 4GB model cost $24 less.
In January, the firm estimated that the parts and manufacturing of the 8GB model cost $280.83.
Thus, the iPhone does cost less to manufacture now than it did in six months earlier in January, but only by $54.22.
That leaves nearly $150 that's tough to explain away by that-sort-of-thing-happens. Component prices have gone down a bit in the eight weeks the iPhone has been out, but not that much. Think about it for a second: the component and manufacturing bill would have had to drop to $26 to suck up the cuts without impacting margins. The horrendous price cuts in the flash memory market actually slowed down during the summer.
The iSuppli figures do not include intellectual property, marketing, or R&D. But these factors typically don't impact price like component costs. These costs are amortized in a controlled fashion.
otherwise, they don't think inside of your box.
Thinking about it inside of my box. Apple is probably trying to get
more people on the iPhone bandwagon before the other
manufactures stumble out of the gate with their metoos.
You said "the component and manufacturing bill would have had
to drop to $26 to suck up the cuts without impacting margins."
I presume that figure came from the $226.61 build cost, minus
the $200 drop in the retail price. But of course you should have
started with the original $280.83 build cost, so the number you
really meant to publish was $80.83.
But this is still wrong. Profit margin refers to the difference
between the full cost of selling a product and the price received
for it, expressed as a fraction of the price.
For an iPhone sold through an Apple Store, Apple used to spend
$280.83 (according to iSuppli) to get a $599 sale.
So at the current price of $399, Apple would get the same profit
margin if the cost of the sale is $187.06. Not $26, not $80.83.
In any event, it's difficult to tell what Apple's real cost of sales
are. The iSuppli figures are not reliable, and a large part of
Apple's costs-- advertising, especially-- is not included.
. png
(I won't even comment on the complete lack of understanding of concepts such as the Laffer Curve -- that's for another article.)
when it came out two months ago? This is mind-boggling.
prices with manufacturers months ago. They probably are allowed
to re-nog. every 6 months. I think this is more like MS xbox lose
upfront but make money on the games, ringtones and data.
- Apple makes money from AT&T
- by pugster September 10, 2007 9:08 AM PDT
- I'm sure that since Apple made an exclusive deal to sell Iphone with AT&T's service, they probably make a hundred or 2 for every customer signs up for a Iphone deal. So Apple probably makes about $300-$400 for each Iphone sold.
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