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Apple iPhone generate 50 percent margin

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Posted by Ralf Jurrien

Friday, January 19th 2007 - 00:03 CET - Comments: 0

E ach Apple iPhone sold will generate nearly a 50 percent gross margin for Apple Inc. and partner Cingular Wireless, giving the companies a hefty profit, as well as plenty of room for future price cuts, according to a preliminary functional Bill of Materials (BoM) estimate created by iSuppli Corp. "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.

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Apple iPhone - 8GByte

"iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 49.3 percent margin on each unit sold at the $499 retail price," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. "Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 46.9 percent margin at the $599 retail price."

Apple iPhone - iMac & iPod nano

While iSuppli has a high degree of confidence in its conclusions, these figures are considered preliminary until we perform an actual physical teardown and analysis of the Apple iPhone. For Apple, such a strong hardware profit is par for the course, with the company having achieved margins of 45 percent and more in products including the iMac and iPod nano, according to iSuppli. However, because Apple is facing extensive competition in the music-phone market, the company may need to cut into its margins to reduce pricing in the future.

Apple iPhone - iSuppli

iSuppli developed its preliminary functional BoM estimate based on an analysis of the capacity and features of the Apple iPhone, combined with information from materials from Apple, company sources and third-party publications. To further help determine the content of the Apple iPhone, iSuppli leveraged the extensive knowledge of its Teardown Analysis service. iSuppli also employed data from its Mobile Handset Cost Model and Design Forecast Tool. This estimate differs from iSuppli's typical teardown analysis of electronic equipment. iSuppli's teardowns involve the actual physical dissection of electronic equipment in order to make first-hand observations of equipment content and design.