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Teardown Reveals iPhone 6 Costs $200–$247 to Build

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The iPhone 6 sells at between $649 and $849 (USD) unlocked, but it costs Apple between $200 and $247 only to build, while the iPhone 6 Plus bill of materials starts at $216, and ends at $263 for the 128 GB model, in parts and labour (estimated at between $4 and $4.50 per device), according to a report from IHS shared with Re/code.

Ihs teardown

Although the BOM surpasses that of the iPhone 5s, Apple’s gross margins reach 70% for the high-end models, IHS says: the company charges $100 to $200 more for iPhones with higher internal storage, but in fact the company is spending only $47 more on the 128 GB version, if we compare it to the 16 GB model. By contrast, the gross margin on the iPhone 5 and the iPhone 5s was 69%.

“They seem to be configured and priced to encourage you to buy the models with the higher memory,” said Andrew Rassweiler, the IHS analyst who supervised the teardown. He estimates that Apple is paying a price of about 42 cents per gigabyte on the flash memory, which is supplied by numerous companies, including Micron and SK Hynix.

So what’s the most costly component? Well, it’s the touch screen provided by LG Display and Japan Display, which costs $45 on the iPhone 6 and $52.50 on the iPhone 6 Plus. Last year the bill was $41 for the 4-inch size.

As the Chipworks analysis reveals, Apple’s A8 chip was manufactured by TSMC using a 20 nm process. The A8 and the co-processor handling data from the iPhone’s sensors are estimated to cost $20, while the NFC chip manufactured by NXP and the NFC booster (the groundbreaking NFC antenna mentioned during the event) is supplied by AMS AG. These are estimated to cost $22 for both phones.

The teardown also revealed that the iPhone 6 units sport two accelerometers and a barometric sensor provided by Bosh, while the list of other suppliers had already been revealed by the iFixit teardown.

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  • Lakh Jhajj

    I am not surprised at all. Look at the profit margin Apple makes of iPhones. We all know the actual price but still most of us are ok to pay the Apple TAX!

  • Rio

    This does not take into account Assembly, Manufacturing, and most importantly the countless hours spent on R&D.

    Apple also has to pay for the R&D for all the free software you get along with the industry leading customer service.

  • Al

    Will somebody tell this moron (Arik Hesseldahl) that … well … he’s a moron!

    You don’t figure out gross margin by cost of materials and (presumed) labor alone! There’s…
    – packaging
    – shipping
    – distribution
    – more shipping
    – the large team of Apple employees who worked on development of the new design, the hardware, and iOS.
    – retail employees
    – website design & functionality
    – graphic design
    – photoshoots
    – advertising
    – marketing
    – retail markup to cover cost of retail stores and employees, as well as expected individual store profit
    … and that’s just off the top of my head!

    Yes, the iPhone is a luxury-priced item, but people who pout and cry because they believe this untrue crap about seriously being gouged, need to give their head a shake. Don’t let yourself be as big of an idiot as these clowns who make incredibly stupid claims.

  • Readmore

    I wouldn’t call him a moron.
    You’re just describing something closer to net profit than gross margin.

  • Al

    Nope. Net profit is an end dollar result. Gross margin (which is the topic) is a percentage which involves cost of goods sold. Since Apple is pretty close to a full end-to-end retailer/manufacturer, cost of goods sold carries a very broad scope.

  • iFone

    So you’re telling me I could have built this phone for $250? Well, I overpaid.

  • Tim

    As others have stated, it’s not take the full cost into account. On every iphone I’ve had (besides the 2g), I’ve always ended up with a second free iphone due to good product support and warranty. I’m not sure if that speaks well to build quality, but something has always gone wrong in the first year and I’ve ended up with a free device that not only address the warranty problem, but gets rid of any scuffs I may have incurred in the first ten months or so. 😉 It was also nice to have my expanding iphone 5 battery replaced a year out of warranty. I liked my Nexus 5, but I also like not having to ship my communication device to some place for weeks if something should go wrong. Point being, the real margins Apple makes on the device are significantly smaller than just dollar sum of the components.

  • artikas

    I think it was just a poor choice of wording. Instead of saying that its ~$200 to build he should have made clear that its ~$200 in manufacturing material. No need to call him a moron.

  • Al

    You’re referencing a tiny excerpt from the article, so what you are suggesting is irrelevant. Throughout the article, he’s making a pretty clear (and grossly inaccurate) summation of what the gross profit is on the iPhone.

  • Readmore

    What lies between gross margin and net income is OPEX. Unfortunately you list a bunch of ‘missing’ OPEX items with a few GMIs. You basically listed all the costs which by definition gives you your net income (or net margin).

    I’m going to dumb it down a bit; you can’t include retail employees or marketing costs and call it a gross margin.
    These are items that are taken into account in order to obtain your net margin.

    Apple’s level of vertical integration is mostly irrelevant to what is considered COGS. It doesn’t matter if Apple owns every step of the way.

  • Yujiza

    I can understand where some of you are coming from in terms of actual cost of the unit; especially when there are devices out there with processors and ram surpassing Apple for less, but do remember you are paying for the support of the unit, and software behind it.

    The only thing that irks me most if the price hike for more memory inside the unit. It’s 2014, 16GB doesn’t cut it. It’s as if they’re forcing their online cloud on you. Anyway, it kills me when I see SD cards selling 64GB for less than $60 for Android phones, and it’s $110 hike per 16GB jump for Apple.

  • Al

    You can look at it that way if you want, but to stay on topic, the article is talking about the cost to create a product and what it sells for. What I have listed is the items in COGS and, in literal terms, these ARE valid. Yes, it is also part of OPEX, but everything is. You can’t just say it’s part of OPEX so it doesn’t count. OPEX is a different perspective with a much broader scope (the entire company). We’re talking about analyzing based on two different perspectives.

  • Readmore

    The article explicitly talks about gross margins after standard and manufacturing costs (which is a gross margin item).
    As I’ve stated before, that’s not at all what you’re talking about.

    You’re still confusing gross margins and net margins. You can definitely say ‘OPEX doesn’t count’ when you’re talking about gross margin. In fact, you have to!

    Anyways this is corporate finance or P/L accounting 101. Let’s call it a day.

  • shento

    Great article Istvan.Some readers don’t know that a BOM isn’t supposed to reflect manufacturing, disrtibution, etc. It’s a Bill of MATERIALS for a reason. Thanks for posting. I would have been interested to know the number of layers used in the circuit board, but c’est le vie.

  • Thanks for reading and chiming in!

  • Al

    The intent of the article was to reflect gross margin. You can’t do that if you just refer to BOM.

  • Al

    The obvious focus of the article, through its own statement, and resale comparisons, is to reflect gross margin, as well as to vilify Apple for the apparent profit it brings in from each phone. The context needs to be considered when discussing this. Therefore

    Gross margin of a sold product is based on the landed cost of a product that’s retailing 101 (one of the courses I took at Humber while studying marketing). The landed cost accounts for every little bit of expense that goes into getting that product made and to the retailer, plus a markup for the wholesaler. These costs included EVERYTHING involved in making the product, right down to the electricity to power the machines (if they didn’t, the wholesaler would then obviously lose money). I (and others) have only touched on some of these costs. A few other things would be the cost of tooling new machinery, training, testing, housing (and feeding?) the employees in the Foxconn city ($4 a phone labour… how short-sighted can this Hesseldahl moron be).

    In the scope of the article, since the direct comparison is made to retail selling price, and because gross margin is noted purely on materials and specific time-to-build labour cost alone, the article is making an incorrect assumption and is, therefore, beyond flawed, if not intentionally malicious.

  • probably costs a quarter of that when they order 10,000,000 of them!

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