A teardown by IHS Markit suggest Apple sells the new iPhone for nearly three times its manufacturing cost ©Apple
A teardown by IHS Markit suggest Apple sells the new iPhone for nearly three times its manufacturing cost ©Apple

New iPhone more expensive to manufacture

27 September 2016

The new iPhone 7 costs Apple an estimated $224.80 to manufacture, say researchers.

To manufacture, the new iPhone is $24.70 more expensive than the 6 and $9.20 more than the 6 Plus.

The figure is the result of a teardown of the base model 32GB capacity phone conducted by analytics company IHS Markit. At the time of writing, this model retailed in the US for $649, making Apple's estimated mark-up 2.9 times the cost of production.

In a provisional estimate, IHS Markit said the cost of components for this model came to $219.80, with manufacturing costs of $5.

IHS Markit has not yet conducted a teardown of the larger iPhone 7 Plus, but estimates its production cost to be $36.89 higher than the 7's, based on the cost difference between the last generation’s 6 and 6 Plus models. 

Andrew Rassweiler, senior director of cost benchmarking services for IHS Markit, said: “Total [bill of materials] costs for the iPhone 7 are more in line with what we have seen in teardowns of recent flagship phones from Apple’s main competitor, Samsung, in that the costs are higher than in previous iPhone teardown analyses.” 

However, he added: “All other things being equal, Apple still makes more margin from hardware than Samsung.”

IHS Markit estimated the cost of production for the 32GB Samsung Galaxy S7 to be $255.05. Samsung’s US website lists the price as $669.99. 

Apple’s latest handset also doubles the base level of storage, from 16GB to 32GB. IHS Markit described the increase as a “big jump” from a cost perspective.

“Despite significant cost erosion in [flash memory] over the last year, this increase in the overall memory cost definitely puts pressure on the bill of materials costs, and therefore margins, from Apple’s perspective,” said Rassweiler. 

Estimated production costs of iPhones by IHS/IHS Markit: 

  • 4 $178.45 
  • 4S $196
  • 5 $197
  • 5S $199.00
  • 6 $200.00
  • 6 Plus $ 215.60
  • SE $160
  • 7 $224.80

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