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Ever wonder how much it costs Apple to make an iPhone? The answer may surprise you!
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Introduction
In this article, we are going to take a look at how much it costs Apple to make an iPhone. We will also look at how much the iPhone costs Apple to make in comparison to other smartphones on the market.
It is no secret that Apple is one of the most successful companies in the world. The Cupertino-based tech giant has a market capitalization of over $1 trillion and is one of the most valuable brands in the world. In 2018, Apple posted revenue of $265.6 billion and net income of $60.0 billion.
The iPhone is Apple’s most important product and it is also the company’s biggest source of revenue and profit. In the fiscal year 2018, Apple sold 217 million iPhones and generated $156.7 billion in revenue from iPhone sales, accounting for 59% of the company’s total revenue.
So, how much does it cost Apple to make an iPhone? Let’s take a look.
The cost of materials
The cost of materials for the iPhone 7 Plus is $236.14, according to a new teardown analysis from IHS Markit. That’s $36.89 more than it cost to build the smaller iPhone 7, which carries aBill of Materials (BOM) of $199.25.
The iPhone 7 Plus’s higher price tag is due in part to its use of 3D Touch and its larger display, as well as its dual rear-facing cameras, which are among the most expensive components in the handset. The iPhone 7 Plus also includes more NAND flash storage than the smaller iPhone 7 model — 128GB vs. 32GB — and that additional capacity costs Apple an extra $19.60 per handset.
Screen
provide information about the screen
The cost of the screen is one of the most expensive parts of the iPhone. The screen is a 4.7-inch retina HD display. It has a resolution of 1334×750 and a pixel density of 326ppi. It is made with Gorilla Glass, which is a type of strengthened glass that is resistant to scratches and shattering. The cost of the screen is estimated to be $28 per unit.
Battery
The cost of the battery is one of the biggest expense items when it comes to manufacturing an iPhone. The battery alone can cost up to $15 per phone, and with Apple selling over 200 million iPhones per year, that battery cost really starts to add up! But it’s not just the cost of the battery itself that contributes to the final price of the phone—it’s also the cost of all the necessary components and labor required to put it all together.
Processor
One of the most important—and expensive—components in the iPhone is the processor. The processor, which is also known as the central processing unit (CPU), is responsible for carrying out instructions from programs. Apple’s iPhone processors are some of the most powerful on the market. The company’s A11 Bionic chip, which is found in the iPhone 8, iPhone 8 Plus, and iPhone X, is among the fastest mobile processors available.
Apple doesn’t release the exact price it pays for its processors, but estimates from research firms peg the cost at around $10 to $15 per chip. That means that Apple is likely spending between $10 and $30 on processors for each iPhone it sells.
Camera
The 8-megapixel iSight camera has 1.5µ pixels. Apple says it has improved the sensor, which uses backside illumination, by 33% and the ƒ/2.2 aperture by 25%. Apple has also added phase detection autofocus to the iPhone 6s, which is faster and more accurate than the Contrast detection autofocus used in earlier models, according to the company. In addition, the new iPhone supports Retina Flash, which uses the display as a True Tone flash when taking a selfie.
To put all of these numbers in perspective, consider that each 1.5µ pixel is about one-tenth the width of a human hair.
Housing
The cost of the iPhone’s housing is estimated to be around $18.50. This includes the cost of the aluminum chassis, as well as the front and back glass panels.
The cost of labor
Labor makes up about 4 percent of the cost of an iPhone, according to IHS Markit analyst Jeff Lin. The research firm estimated that the labor costs for the iPhone 7 Plus, Apple’s most expensive model, is $5.50. For the iPhone 7, it’s $5.15.
China
Apple’s iPhone has been assembled in China since its inception in 2007, but the company has never revealed how much it costs to produce the devices there. A new report from research firm IHS Markit, however, gives us our best estimate yet.
According to IHS Markit, it costs Apple an estimated $247.51 to manufacture a single iPhone 7 with 32GB of storage. That’s about $10 more than it cost to build last year’s iPhone 6S, and about $40 less than the starting price of the new device.
Of course, those costs don’t include other important factors like marketing, shipping, and software development. But they do give us a good idea of how much it actually costs Apple to produce its most important product.
And while $247.51 may seem like a lot of money for a phone, it’s important to remember that Apple sells its phones for significantly more than it costs to manufacture them. The company is able to do this because it has built up a massive ecosystem of apps and services that keep customers locked into its ecosystem and coming back for more.
India
In India, assembly workers at Foxconn and Wistron are paid just US$0.70 (Rs. 52) an hour. The workers toil for 10-12 hours a day, seven days a week, often in cramped and dangerous conditions.
The assembling of an iPhone requires hundreds of different components. Most of these are manufactured in China, where theworkers are paid just $1.50 (Rs. 110) an hour – less than half of what their counterparts in India make.
Apple refused to reveal how much it costs to make an iPhone when its share price fell sharply after the company announced lower-than-expected sales for the festive season quarter in January 2019. But analysts at US investment bank Barclays peg the cost at around $410 (Rs. 30,000).
Assuming that figure is accurate, it would mean that Apple makes a gross profit of around $190 (Rs. 14,000) on each iPhone sold in India. That’s a margin of 46%.
While Apple might be making big profits on each iPhone sold in India, it is important to remember that sales here make up just a tiny fraction of its global business. In its most recent financial year, the company sold 215 million iPhones globally. Of these, only 2% were sold in India – 4 million units in total.
The cost of shipping
The cost of shipping an iPhone varies depending on the model and where it is being shipped. For example, it costs $5.99 to ship an iPhone 6s from the United States to Canada, but it costs $15.99 to ship an iPhone 6s Plus from the United States to Canada.
The cost of marketing
The cost of marketing an iPhone is significant, but it’s difficult to say exactly how much because Apple doesn’t release that information. Marketing expenses can vary greatly from one product launch to another, and they also depend on the specific marketing strategies and tactics used. For example, a highly anticipated launch like the iPhone X might require a more extensive and expensive marketing campaign than a less anticipated launch like the iPhone 8.
Apple is known for its effective and often iconic marketing, which likely adds a premium to the cost of each iPhone. In 2016, Forbes estimated that Apple spent $1.8 billion on advertising, which was more than any other company in the world. This number doesn’t include indirect marketing costs like paying celebrities to use or endorse products, or the cost of sponsoring events. It’s also worth noting that Apple’s marketing expenses are spread out over many different products, so the cost of marketing the iPhone is just a small piece of Apple’s overall marketing budget.
The cost of research and development
Apple’s Research and Development (R&D) spending is one of the company’s largest line items on its income statement. In 2019, Apple spent $30.5 billion, or about 6% of its revenue, on R&D. That was up from $11.6 billion, or 4.3% of revenue, in 2010.
Apple has been willing to spend more on R&D in recent years as it seeks to develop new products and keep its existing ones fresh. The company has also been hiring more engineers and other R&D professionals. In 2019, Apple had 47,534 employees in its “other” category, which includes R&D workers, up from 25,606 in 2010.
The cost of R&D can vary greatly from year to year and even quarter to quarter depending on what new products are in development and how far along they are in the process. For example, the cost of developing a completely new product like the iPhone 12 would be higher than the cost of developing an update to an existing product like the iPhone 11.
The cost of profit
Profit is what’s left of revenue after all other expenses are paid. For publicly traded companies, it’s what attracts investors and drives share prices. For Apple, it’s been exceeding expectations for years. In its most recently reported quarter, Apple enjoyed a 21.5 percent profit margin on $37.5 billion in net sales. That’s $8.1 billion in profit, more than any other publicly traded company in the United States.
To get a sense of how Apple pulls this off, we turned to IHS Markit, a firm that teardowns devices and analyzes their components to estimate manufacturing costs. (IHS Markit also produces some of the information in our annual iPhone buyers guide.) We asked the company to examine the iPhone 7 Plus, which starts at $769 and can cost as much as $969 with storage upgrades and other options, to see how much it costs to manufacture and what kind of margin Apple is making on each unit sold.
IHS Markit estimates that the iPhone 7 Plus costs Apple $219 to manufacture. That doesn’t include other expenses like marketing, shipping, and software development costs, which are accounted for elsewhere in Apple’s financial reports. But it does include the cost of all the components that make up the phone, along with assembly and test expenses. That means the bill of materials for a single iPhone 7 Plus comes out to about $34 more than the smaller iPhone 7—the display is obviously a big factor here—but it probably doesn’t cost much more to assemble them into a working phone.
Conclusion
The total cost to Apple for one iPhone 6s Plus is $236. This includes the cost of materials, manufacturing, and shipping. Retail price for the iPhone 6s Plus is $749, meaning Apple’s markup is approximately 68%.
