7:30 PM The Cupertino giant will make nearly $100 on every 32GB iPhone 4S it sells, which explains why it wasn't eager to overhaul its hardware

Sarah Thomas, Director, Women in Comms

October 5, 2011

2 Min Read
Apple's Margin Machine

7:30 PM -- Apple Inc. (Nasdaq: AAPL)'s lack of significant hardware updates on the iPhone 4S was a strategic move that lets the company bring in $96 per 32GB phone it sells. (See iPhone 5: Apple Can Have 4G But Not the World and Apple's Latest Is a Faster 3G 'Worldphone'.)

Device teardown experts at UBM TechInsights say the iPhone 4S’s bill of materials (BOM) is similar to the iPhone 4 model launched last year, estimating that the 32GB version costs around $203 to build. So, when Apple sells an iPhone 4S for $299, $96 will be pure profit.

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Above is a look at just the costs of the iPhone 4 and 4S broken out, but click here for a larger chart to see what's changed in the new iPhone 4S.

Table 1: Apple iPhone 4 (GSM) & iPhone 4S Estimated BOM

iPhone 4 8GB (GSM)

iPhone 4S 32 GB

Display & Touchscreen

$31

$31

Processor

$15

$26

Memory

$15

$38

Baseband & Cellular Radios

$16

$24

Camera

$14

$18

Battery

$5

$5

Connectivity

$4

$5

Other

$56

$56

Total

$156

$203

Source: UBM TechInsights





Even though Apple disappointed a lot of people who got sucked up in the iPhone 5 hype, its incremental approach makes a lot of sense. For one thing, sourcing already available parts to previous generations should help ensure there aren’t any delays, and David Carey, TechInsight’s VP of technical intelligence, says using long-yield components will keep costs down for Apple to achieve economies of scale on parts it's already invested engineering in.

“They are slow to reduce retail price, but try and stay current on innovation curve consistent with flat cost to produce,” Carey explains.

Jeff Brown, VP of business intelligence at TechInsights, adds that Apple also eliminates SKUs to help keep costs down, as it did by making the iPhone 3G S free and now only offering the 8GB iPhone 4. More consumers will upgrade to iPhone 4S for the expanded memory and new features, but Apple will still reach more price-sensitive users as well.

“It’s cost effective to address a large available market for consumers from high-end bleeding edge to the technology holdout,” Carey says.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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