According to a new research estimate published today by TechInsights, Apple’s iPhone X is actually more profitable per device than the iPhone 8.
The 64-gigabyte iPhone X costs about $357.50 to make, giving Apple a 64 percent profit margin on a $999 price tag. An equivalent iPhone 8 sells for $699, but is said to have a margin of 59 percent. The figures above are based on a cost-per-part calculation during a teardown of the device.
The discrepancy is significant because unlike the iPhone X, the iPhone 8 is a relatively modest evolution of the iPhone 7. The device does include a number of changes, including Qi wireless charging, an A11 Bionic processor, camera upgrades, and display upgrades. However, shares the same form factor, and continues to use LCD instead of OLED, in addition to Touch ID instead of Face ID.
The iPhone X’s OLED display and linked parts are estimated to cost about $65.50, versus $36 for the 4.7-inch LCD assembly on the iPhone 8. Another pricey item is the X’s stainless steel chassis, said to be worth $36 versus just $21.50 for the frame on the iPhone 8.
All the cost estimates by TechInsights, which are represented in USD, do not account for expenses in research, development, manufacturing, and marketing.
Update Sept. 27/18: Reuters has now “withdrawn” their story, because “because analyst firm TechInsights of Canada now says its analysis of Apple’s iPhone Xs Max parts was inaccurate and that parts were not removed from the iPhone’s display. There will be no replacement story.”
TechInsights on their mistake:
We have revised our initial estimates of the component cost of the iPhone Xs Max from $443.00 to $453.00, based on new information about the 3D touch system. Our initial review of the phone indicated that some of the 3D components that were included in last year’s iPhone X had been removed, but further investigation revealed this not to be the case. We can confirm that the iPhone Xs Max includes the same Broadcom BCM15951 3D touch controller used in the iPhone X.
This increases the Display cost from $80.50 to $90.50, for a total cost of $453.00.
[via Reuters]
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How’s anyone surprised by this? It’s significantly more expensive than any other iPhone made.
I’m completely floored by this news since Apple had stated in the past that the margins on the X are much lower than on the 8/8+. Geez, don’t tell me they lied just to make people think that Apple was taking a hit on this release! So much for them being a more ethical company … of course, having tons of money and planting lots of trees helps squash child labour reports and helps improve their overall image.
You ignored the fact that this dollar amount is merely just an estimate by a research company. For all we know, this could be completely off. You also did not considered the fact that the iPhone 8 is manufactured with matured and streamlined processes that has been in place for a while, as well as similar internal designs and placement of previous versions, which directly contributes to cutting manufacturing costs. Not to mention, other than wireless charging and a new processor, there’s not a whole lot of redesigning or research that requires Apple to spend large amounts of money on. A glass back obviously cost less than a uni-body full aluminum casing.
And than you have a brand new, completely redesigned product with higher end technologies and components, the iPhone X. But you still need someone else to tell you it might cost less, and can’t figure out yourself that it’s pretty much BS?
I was pretty much coming back to say just that. The 8 is essentially just slightly upgraded 5-6 year old r&d including the screen which hasn’t changed really since the 6. The X has been in development for at least 3 years according the Apple. Lots of new processes being implemented this generation, from stacked boards, to 2 batteries, to a 3D Touch oled screen. Then marketing costs. These numbers don’t represent apples actual cost per device or their actual real margins. It’s like saying that Tylenol actually only costs a couple pennies per pill. They had years of development and studies and trials they had to pay for before they brought it to market. All of which is why they get an exclusive patent on the drug for a bunch of years upon launch, so that they can make their money on their r&d back and establish it as a name brand.
There may be new processes, but stacked boards is not one of them – the 10 year old first iPhone had stacked boards. And linking 2 batteries together isn’t that hard – I do it all the time when I put 2 batteries into my flashlight. 3D Touch OLED screen sounds hard until you realize it’s just a capacitive sensor layer they place behind the screen. It can be any screen – OLED or LCD. Nothing new there.
I did somewhat ignore most of these based on all these costs are usually not written off on one product when it comes to accounting. Most of these cost have been written off already since it’s taken them 3 years to get to this point. If all costs were associated to a single model, then the first iPhone ever made had an extremely low mark up since they started from scratch, literally (no buildings, employees, subcontractors, …). Usually, you hire (poach) people with the knowledge of a subject and work from there on improving it. I do agree obviously if you throw all these costs onto the X solely (or split some of it on the 8/8+ for common technologies), the markups won’t be in the same ball park.
Keep telling yourself that. If you live your life in this matter, you may end up with major depression when you discover reality.
Samsung is apparently charging considerably more for the OLED screen. I hear estimates were over $100 per unit.
That’s what I was going to say. Not to mention this price point lines them up with the Note 8’s price (which is relatively the same price but that makes no headlines oh and they have no 256GB option)
Samsung is just now starting to play catch-up. In the past, their margins were much smaller.
Yeah because they had to give away their phones to get them in peoples hands!
Of course, if Apple is getting away with it everyone including Google is going to join the party….until such a time when the public has enough and buys the less expensive less known models or brands.
And the moral of this story? Don’t believe everything you are told or read. Establish individual thinking.
So true.
Apple knows the people buying the X are the early adopters and there won’t be enough of the X’s to sell from launch day so adding a premium to it makes sense. If you don’t need the X, there are lots of lower priced options.
Apple is known in Asia as being exceptionally greedy compared to it’s competitors including Samsung….believe it or not.
“All the cost estimates […] do not account for expenses in research, development, manufacturing, and marketing”
Nor software development, I imagine. Don’t underestimate just how much those things add to the cost.
Yes, Apple’s $256.8 billion cash reserves show that all that money goes to research.
So they shouldn’t make a profit?
I was pointing out that Apple is already making quite a lot of profit even after after paying for all of their research, development, manufacturing, marketing and software development. Given that, saying “Don’t underestimate just how much those things add to the cost.” is like saying “Don’t underestimate how much taking a grain of sand will affect a beach.” It’s negligible compared to the profit they are making.
You could argue they needed to increase the price, but I don’t buy the argument that they NEEDED to increase their profit margin. They simply WANTED to increase their profit margin.
Again assuming this report is accurate.
Point being that your basis for determining their “profit margin” is excluding some very large expenses. I’ve never claimed they dont make a profit, or anything like that. All I’m saying is that adding up the cost of the parts is not a real representation of what the phone costs to actually put in your hands.
Given apple’s statement that this phone was years in development isn’t it possible (or even likely) that those costs were higher for the X than for other iPhones?
I agree with you that adding up the cost of the parts is not a real representation of what the phone costs to actually put in your hands. But what I don’t think people realize is just how little Apple puts into R&D, marketing etc. compared to the profit they make (which mostly comes from their iPhone). After all costs of wages, marketing, manufacturing, taxes, building spaceship-shaped campuses etc, Apple made US$48,000,000,000 in NET profit in 2017 alone. A stack of US dollar bills 1 billion dollars high is over 100KMs tall. They added 48 more of these 100 kilometre high stacks to the stacks they already stacked. I’m just saying if it took a few more engineers than usual to swap out the LCD screen for an OLED one and punch out the notches, their salaries at 150 grand a pop taken from one of the stacks wouldn’t make a difference you could even notice with a telescope pointed 100KM up.
Almost every time I see a post by you, I think of the Pink Floyd the Wall cartoon of people jumping into a meat grinder. I think you should be one of those people.
Nah, I’m the honourable Worm ?
And it’s even higher when you factor in Apple’s markup on the CAN/US exchange rate ?
It’s a $35 USD premium on a $1000 phone. Yes, it would be nice if the iPhone was $1299 instead of $1319, but 3.5% isn’t scandalously large.
3.5% is huge in the currency market
Yup…and then there was the dumb sheep, and the dumber sheep.