Mikey Campbell
Though Apple CEO Tim Cook famously dismissed bill of material estimates from supply chain "guesstimators," market research firms continue to pump out calculations, with the latest figures claiming Apple spends a total of $224.80 on iPhone 7 hardware.
Tallying up individual component prices in a recent iPhone 7 teardown, IHS Markit says a 32GB iPhone 7 bears material costs of $219.80. Adding on "basic manufacturing" costs, the total rises to $224.80. The firm has yet to tear down an iPhone 7 Plus, but estimates the BOM cost to be $36.89 higher than last year's iPhone 6s Plus.
"Total BOM 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," said Andrew Rassweiler, IHS senior director of cost benchmarking services. "All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past."
On a per-component basis, Apple's decision to double NAND flash storage allotments to 32GB, 128GB and 256GB is one of the main contributors to higher overall costs. Together with 2GB of Samsung SDRAM, the new 32GB NAND chip is estimated to cost $16.40.
In addition, the new jet black color option adds time to the manufacturing process, and thus cost to the final build price, but could be worth the extra boost in consumer demand, IHS said. After warning potential buyers of initially constrained supply, Apple last week announced all jet black iPhone preorders were sold out.
As usual, the display is iPhone 7's most expensive component at a price of $43, while the baseband chip — Intel version — comes in at $33.90. Apple's in-house designed, TSMC produced A10 Fusion system-on-chip is estimated to cost $26.90. The phone's camera modules, a 12-megapixel rear shooter with optical image stabilization and a 7-megapixel front-facing version, cost a combined $19.90.
The Taptic Engine and other electro-mechanical components come in at $16.70, while iPhone's aluminum enclosure and associated hardware are pegged at $18.20.
Compared to iPhone 6s BOM and manufacturing estimates, this year's model is $13.30 more dire for Apple. With retail pricing unchanged from 2015, the BOM bump is expected to cut into Apple's margins.
The estimates should be taken with a healthy grain of salt, however, as Cook panned supply chain research as a guessing game. During a quarterly investors conference call last year, the Apple chief said he has never seen a breakdown "that's even close to accurate." Almost all estimates fail to take R&D, marketing and other expenses into account.
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13 Comments
According to Apple quarterly earnings report, its profit margin is somewhat lower than 40%. With iPhone 7 selling for $649, it is not hard to calculate the component cost is somewhere around $259.
Why is it so important for everyone to find out the cost of components for Apple products? Are they also doing this for other consumer companies' products? I would think those things need only be known by the internal bean counters at Apple. Why should it matter to anyone else? Apple is likely making high-quantity deals that could easily throw off accurate component cost counts by third-party snoopers. I may be missing something but it just seems like a waste of time because I don't see what good it does for outsiders to know what component costs are especially if they're not accurate.
The article and the whole concept of BOM costs misses a main point -- a point which makes the BOM cost debate meaningless:
It only looks at the cost of hardware. Yet, Apple provides 3 things with each IPhone:
1) Hardware
2) An OS -- which is continually kept up to date for years following the sale and provides not only an up to date OS but high quality security as well.
3) Apple infrastructure such as ICloud, Facetime, Messaging, Productivity Apps such as Numbers, Keynote, etc, etc, etc
In addition, Apple provides quality support behind each phone.
Focusing only on hardware not only misses some of the largest costs that make an IPhone a quality product -- But it also feeds right into the Samsung vs Apple debate. That is: Samsung sells hardware gadgets and thrives when people compare its hardware to Apple's hardware. Although Apple typically wins even the hardware comparison, it ignores those critical elements that set Apple apart from its competition.
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