Apple expected to achieve manufacturing margins of 70% with iPhone 4S
Analyst Chris Whitmore with Deutsche Bank believes Apple achieves a bill-of-materials cost of $170 for the 16GB iPhone 4S, and $220 for the 32GB model. For the new 8GB iPhone 4, he thinks Apple's materials cost is about $140.
"This suggests manufacturing margins on the iPhone 4S are 71-73% (vs. ~38% for iPod touch) and should support attractive corporate margins for AAPL for multiple quarters," Whitmore wrote in a note to investors on Monday.
Apple also achieves a greater dollar subsidy from its carrier partners for iPhone purchases. The 16GB iPhone 4S subsidy is estimated to be $450, while most competing devices are estimated to garner less than $350.
Those subsidies allow Apple to reach a $199 price for the 16GB iPhone 4S with a new two-year service contract. That's in line with competing 3G devices, and about $60 less expensive than 4G phones like the Samsung Galaxy S II ($229 with contract), Droid Bionic ($299) and HTC Thunderbolt ($249).
"We expect customers who do the math to opt for the iPhone," he said of the price of the iPhone 4S, along with monthly service fees. "In addition, those who don't do the math will likely reach for the lower upfront acquisition cost of the 4S compared vs. these Droids."
Preorders for the iPhone 4S began last Friday, with carrier AT&T announcing that day that it sold 200,000 handsets in the first 12 hours. That makes it the most successful iPhone launch ever for the carrier, which is the second largest in terms of subscribers in the U.S.
The initial iPhone 4S stock was quickly depleted by early Saturday morning. Customers who now order Apple's next smartphone are now quoted an estimated shipping time of one to two weeks.
Whitmore believes the iPhone 4S will keep Apple the "smartphone gold standard," and will allow it to keep the largest share of smartphone sales versus other hardware vendors. Deutsche Bank has reiterated its "buy" rating for AAPL stock, along with a price target of $530.
62 Comments
Wow, I know Apple tend to make around 30-35% margin usually, but 70%....... Does make me feel that Apple just shafted me on my £499 aquisition for a 16gb iPhone 4S. \
Oh well, as only Apple makes the iPhone and that's the platform I want I guess I should not complain too much I am afterall paying for it.
All good for Apple's stock ... Oh but that never seems to reflect reality does it?
I also feel they charge to much for the device. Average selling price of the iPhone is north of 600$ if I'm not mistaken.
Say it costs Apple 200$ to get it from nothing, to a customer. Thats 400$ profit on a 600$ device. They are making gold. Simple as that.
But the price is set for what people pay. If they feel that the price is keeping people away, they have ALOT of margin to bite from.
It's not Starbucks fault a cup of coffee is 5 dollars. It's yours.
So Apple is going for the cheapskate market? Will that have any impact on app sales?
To use an analogy often seen in pharmaceuticals - the second one costs $200 to make, the first one, with research, prototypes, testing and development most likely costs several orders of magnitude more :-)
Don't get me wrong, I'm sure Apple's making a fine profit on every single unit sold, but to say they make $400 out of a $600 sales price is ignoring all the other costs of bringing a product to market - personally I'd really to like to see one of the other manufactures experience a similar demand for a single product, I suspect it'd highlight just what a good job Mr Cook did of supply chain management way before he was CEO ;-)
Regards,
Ryan