ISuppli: $500 iPhone will cost $246 to make

[Shizuka]

ISuppli: $500 iPhone will cost $246 to make

ISuppli Corp has concluded—without performing a physical teardown—that Apple Inc.’s iPhone can generate 50 percent gross margins, based on a preliminary estimate of the device’s bill of materials (BoM).

The market upshot? Such a large margin ensures healthy profits per device for Apple and Cingular Wireless, which will launch the device in June, as well as providing room for future price cuts, should Apple or Cingular decide to use descending prices to broaden the base of potential customers, according to iSuppli.

ISuppli said that price cuts may become important to Apple, as some 835 different models of music phones are expected to launch worldwide this year. Fourteen models with features close to the iPhone already are shipping.

ISuppli concluded that the iPhone 4 GB model will cost about $246 to make and the 8 GB model will cost about $281. Of those costs, NAND Flash memory represents the largest individual cost ($35 and $70 for the two models, respectively), followed closely by the 3.5 inch touch screen display, which is estimated to cost $33.50 for both models.

Apple said its 4 GB model will sell for $500 when it launches in June, and its 8 GB model will cost $600.

ISuppli forecasts that more than 600 million music-enabled phones will ship this year, up 40 percent over last year. Many analysts have predicted handset shipments will exceed one billion this year, thus music-enabled devices would represent about 60 percent of the market.

Apple’s stated intention is to capture one percent of those sales, which would amount to about six million units.

ISuppli analyst Tina Teng said that major OEMs will likely develop and launch products in direct response to the iPhone.

ISuppli said it based its iPhone teardown findings on several factors: the capacity and features of the device, information on materials from Apple, “company sources” and third-party publications. iSuppli also leveraged knowledge from its teardown analysis service, which has dissected iPods, other Apple products and other devices such as music-enabled mobile phones. The analysis firm also used its Mobile Handset Cost Model and Design Forecast Tool to produce its estimates of the iPhone’s parts and manufacturing.

[stockscalper]

That is what it costs Apple to buy the phone from the Chinese manufacturer. It doesn't account for research and development costs, advertising, distribution, support, etc and all the other costs that go into a product like this.

[SmArTeStChIlD421]

hes actually really right........ht epoint of R&D is the hopes that something will come out of it.......Apple cant give their employees money they dont have so the R&D employees work for a product and then their wages are factored into the retail price as well as advertising and all of that other stuff that stockscalper mentioned

[WumpusVA]

Interesting info... I still won't buy the phone until apple shaves off about $100-$200 from the price.

[Fire14]

Originally Posted by Wumpusva

Interesting info... I still won't buy the phone until apple shaves off about $100-$200 from the price.

I don't expect that to happen too easily, look at how their iPods haven't come down in price yet. The only way is if Cingular substisizes the phone for that much.

[SmArTeStChIlD421]

now if you check out the thread labeled Cingular --> AT&T Mobile........there is a news article posted recently that says that the iPhone will probably struggle because of its lack of UMTS capability............the price will prolli go down fast

[Matt]

Remember that's gross margin, not net. Yes, they mat make $244 on the phone, but that's before paying all other costs (employee salaries, store rent, customer care, whatever.)

They'll still make plenty of money though