X

Only days after HTC announced an iPhone competitor at $900 comes news that the real cost of building the new 3G iPhone iony $173.

Apple’s second-generation iPhone is expected to carry an initial hardware Bill Of Materials (BOM) and manufacturing cost of US$173, according to a preliminary “virtual teardown” conducted by research group iSuppli.

On Jun. 9, Apple CEO Steve Jobs announced the release of the much-anticipated new iPhone. The new version will be available starting Jul. 11 in 22 different nations, including the United States. In advance of the iPhone release, iSuppli has performed a virtual teardown, using insights from our analysis staff to develop estimates of iPhone content, suppliers and costs. The analysis team consisted of iSuppli’s leading experts in the areas of teardown analysis, semiconductors, displays, mobile handsets, consumer electronics and wireless infrastructure.

iSuppli had planned to withhold any analysis of iPhone content and costs until it had conducted an actual physical teardown of the product. However, due to strong popular demand for information on iPhone costs and pricing, iSuppli has decided to release a preliminary analysis to the public. Once the 3G iPhone becomes available, iSuppli will perform an actual, detailed teardown of the new iPhone’s components and cost structure.

“At a hardware BOM and manufacturing cost of $173, the new iPhone is significantly less expensive to produce than the first-generation product, despite major improvements in the product’s functionality and unique usability, due to the addition of 3G communications,” said Dr. Jagdish Rebello, director and principal analyst for iSuppli. “The original 8Gbyte iPhone carried a cost of $226 after component price reductions, giving the new product a 23 percent hardware cost reduction due to component price declines.”

 

The attached figure presents iSuppli’s preliminary virtual teardown estimate of the 8Gbyte 3G iPhone’s costs. The figure doesn’t include other costs, including software development, shipping and distribution, packaging, and miscellaneous accessories included with each phone.

This year’s business model

With the second-generation iPhone, Apple is making a significant departure in its pricing strategy. “The original 2G phone was sold at an unsubsidized price of $499,” Rebello noted. “However, at a retail price of $199 for the low-end 8Gbyte version of the new 3G model, wireless communications service carriers will be selling the product at a subsidized rate, using a common business model for the mobile-handset market. The size of the subsidy paid by the wireless carriers to Apple will be about $300 per iPhone, iSuppli estimates. This means that with subsidies from carriers, Apple will be selling the 8Mbyte version of the second-generation iPhone to carriers at an effective price of about $499 per unit, the same as the original product.”

For the first version of the iPhone, Apple was given a portion of the wireless carriers’ revenue from service subscriptions. With the second-generation version, Apple is not garnering any service revenue, making it more imperative that the company cut a profit on the actual hardware through the carrier subsidies.

“Hardware is vital to Apple profits, valuation and revenue in the consumer-electronics and wireless communications realms,” Rebello said “In fact, two-thirds of Apple’s revenue from the iPod still is derived from hardware, while only one third is from the iTunes service and accessories. The second-generation iPhone is no exception.”

On the margin

Based on extensive teardown analyses of multiple products, iSuppli has observed that Apple’s iPod and iPhone products typically are priced about 50 percent more than their BOM and manufacturing costs. With the new iPhone sold at a price of $199 and the estimated subsidy of $300, Apple will achieve an even higher BOM/manufacturing margin.

Future costs

As with all electronic products, the 3G iPhone’s BOM costs will decrease over time as component prices decline. The BOM/manufacturing cost of the second-generation iPhone will decrease to $148 in 2009, down 37 percent from $173 in 2008, according to data from iSuppli’s Mobile Handset Cost Model (MHCM). “If the 3G iPhone design is unchanged, the cost will decline to $126 in 2012” said Tina Teng, wireless communications analyst at iSuppli.

ChannelNews AZ100 728x90 New 3G iPhone Only $173 BOM
MOTO 36331576 Q3 Ad Banners 728x90 2 New 3G iPhone Only $173 BOM
Westan 728x90px New 3G iPhone Only $173 BOM
AU X8 Banner 728x90 New 3G iPhone Only $173 BOM
JBL TourPro3 728x90 New 3G iPhone Only $173 BOM
250527 SAV Channel news June25 Leaderboard 728x90 1 New 3G iPhone Only $173 BOM
BEL2535 BPB024 4SQ Banners 728x90 New 3G iPhone Only $173 BOM
Marshall 728x90 1 New 3G iPhone Only $173 BOM
FA 979 HN MDF SG14 14gen 728x90 1 New 3G iPhone Only $173 BOM
appliance retailer leaderboard may 728x90 Hitachi updated New 3G iPhone Only $173 BOM
728x90 New 3G iPhone Only $173 BOM
Hisense KV BannerAd 728 90 New 3G iPhone Only $173 BOM
Uniden Channelnews SoloX July 2024 728x90 1 New 3G iPhone Only $173 BOM
Flick of a switch 728x90 1 New 3G iPhone Only $173 BOM
Px7 S3 728x90 1 New 3G iPhone Only $173 BOM
FLOODLIGHT 2024 Banner 728x90px New 3G iPhone Only $173 BOM
728 x 90 New 3G iPhone Only $173 BOM
BlueAnt 4SQM PumpAirUltra 728x90px New 3G iPhone Only $173 BOM
4Square Media Banner Ads Update at 5 July JSAU05JUL1 MR 728x90 1 New 3G iPhone Only $173 BOM
HAIER Series 600 FLW HPD Pairs 728x90 1 New 3G iPhone Only $173 BOM
Skullcandy 728x90 1 New 3G iPhone Only $173 BOM
728x90 New 3G iPhone Only $173 BOM
4Square Media Banner Ads Update at 5 July JSAU05JUL1 Buddy 728x90 1 New 3G iPhone Only $173 BOM
GOTHAM 728px x 90px New 3G iPhone Only $173 BOM
ELX DIG Crosscat Promo 728x90 Mar25 New 3G iPhone Only $173 BOM


YOU MAY ALSO LIKE