Apple aiming for 50% margins on iPhone?

Posted on Thursday, Jan 18 2007 @ 20:02 CET by Thomas De Maesschalck
Research firm iSuppli predicts the total cost for Apple to produce one 4GB iPhone will be close to $245.83 and $280.83 for the 8GB version. This means Apple will get more than a 50 percent gross margin on both phones:
“iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price,” said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. “Meanwhile, the 8GB Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price.”
This large margin means Apple will be able to offer significant price cuts in the future. “With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward,” said Jagdish Rebello, PhD, director and principal analyst with iSuppli.

The research firm further estimates that there are already 14 phones on the market from phone makers including Nokia, Motorola, Samsung and LG with features that come close to the Apple iPhone. One of the biggest iPhone competitors will be the LG KE850, which will start shipping later this year. Another product that comes close to the iPhone is the Nokia N800, but this phone is more focused on niche markets.

The single most expensive item, besides the flash memory, is the 3.5" touch screen which costs $33.50. Here's the full breakdown of the expected material costs:

While iSuppli has a high degree of confidence in its conclusions, these figures are considered preliminary until they perform an actual physical teardown and analysis of the iPhone.

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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