Most people never want to see the inside of their iPhone. It’s the stuff of nightmares, watching that pristine slate of aluminium and glass tumble, as if in slow motion, towards a concrete floor. Will it scratch? Will it smash?
It doesn’t bear thinking about.
However, Andrew Rassweiler has broken every iteration of iPhone since the original debuted in 2007; he’s already taken apart the latest iPhone 7, estimating a manufacturing cost of $224.80 per unit.
And it’s not just iPhones, he’ll take apart your Samsung handsets too.
In fact, Rassweiler will take apart anything electrical for you. It’s his job, as director of IHS Markit’s teardown service, to meticulously dismantle electronics in order to see what components are in them.
Rassweiler has been tearing down electronics since 2002, a lot of the time for buyers who want to know more about the manufacturing costs of large procurements such as server racks, networking gear or medical equipment.
His work has given him a unique insight into how Apple operates and the company's strategy of buying high volumes of components from a reduced supplier base. A key concern for Apple, and other firms, is how quickly electronic goods depreciate, what Rasswieler calls "cost erosion", and what this means for the price of components.
“In the case of Apple I would say they’re very strict with their suppliers. They have very stringent specifications, have strong expectations of price erosion over time… and if somebody else has at any point in time, and we’ve seen it time and time again, a better product at a better price that could be a better strategic relationship, they will switch,” said Rassweiler.
Rassweiler said Apple often uses the same components across their phones, laptops and other products in order to keep their supplier base small.
“You try to re-use as many times as possible similar components, and/or leverage with a single supplier as much as possible by using them across the board,” he said.
Apple spent seven years at the top of Gartner’s supply chain ranking before it was moved to a separate “masters” category, where it still sits.
Across the electronics industry, Rassweiler said he’s seen the concept of ‘should cost’ pricing come to the fore. Having a price in mind before entering negotiations is not new, but he said manufacturers are doing this earlier and earlier in the production process.
“What companies are trying to do is get that sense of what things cost, or what they should cost before they’ve even really engaged to build the product,” he said.
Firms also come to Rassweiler’s team for an idea of how component costs will devalue over time so they can build this into price negotiations with suppliers.
“They’re building the concept of ‘should cost’ targeting early on and then following through as they go to manufacturing, to make sure that the product comes in not just at an initial budget, but over the lifetime the product might have, that they maintain cost erosion.”
He said in general his clients want “simply to understand ‘who are the vendors that our competitors are using, and what advantages do they bring technically, and then what cost advantage might those choices have for us and what can we learn from that’.”
Understanding the value of components can also help estimate the value of contracts and companies, said Rassveiler.
“So let's say you’re a financial analyst, you’re looking at components from supplier A. You now know that they sell to Apple, you have an estimate for how many millions of phones they’re going to sell… We at IHS estimate it’s a $2 part and that it’s 50% margin: a financial analyst is going to eat that up,” he said.
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