Apple with 70% margins for each iPhone 4S sold

11 October 2011 by
According to a recent report, the iPhone 4S hardware component costs is $170 for the 16GB version and $220 for the 32GB model giving Apple impressive margins over 70%

Apple iPhone 4 puzzle

According the analyst Chris Whitmore at Deutche Bank, Apple are paying $170 for the hardware components used in the iPhone 4S 16GB. The 32GB version is a little more expensive where components are estimated to cost $220. Apple iPhone 4 8GB component costs are approximately $140. Whitmore estimates that Apple has 71-73% manufacturing margins on the iPhone 4S. No wonder why Apple is the most valuable company in the world.

Apple spend approximately 600 million USD on research and development per quarter and since the iPhone 4S basically is just a more powerful iPhone 4 we was expected something more during the iPhone 4S announcemet last week.

However, iPhone 4S pre-orders still reached one million during the first day. The previous 24 hours pre-order record was held by the iPhone 4 with 600,000 devices. It seems like everyone is going for the Apple brand even though the disappointment when it was known that the iPhone 5 not are coming out this fall. If you are at the end of your contract and want something out of the ordinary, you should consider another phone model. It all reminds us of Nokias hegemony a decade ago.

The weekly publication The Economist published a similar break down of the cost of iPhone 4 hardware parts before the iPhone 4S was announced. Their conclusion was that the cost for 16GB iPhone 4 hardware components was estimated to be $178 USD. After manufacture cost and hardware parts was bought, Apple was left with $368 per iPhone.

Apples Q3 financial report reveals that almost half of the revenue comes from the post iPhone and Related Products and Services which does not include iPad, iPod or music products. A not well known source of income is from the accessory business. Every company wanting to make accessories for the iPhone has to pay for the use of certification logos, via the MFi program (Made for iPhone/iPad/iPod). After signing a NDA contract, accessory makers will receive benefits such as Tech info, Product Certification, MFi Logos, iPhone/iPod/iPad compatibility logos. Typically, a 20-25% royalty of the accessory price are collected by Apple. When you buy a $100 speaker for your iPhone, Apple receives $20.

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Bonovox12 years, 8 months ago
Ah well so customers are being ripped off with the high price of the iphone then
admad12 years, 8 months ago
Yeah, and what's more they are happy about it That's the phenomenon of Apple
Tsepz_GP12 years, 8 months ago
INCREDIBLE! It must be so sweet to be a an Apple shareholder.
Companies around the world can only wish to have such high margins, Apple just keep amazing me, its not their fault people still pay the high price, most CEOs wish their companies could be operating like this, Steve Ballmer must have thrown his WindowsPhone at his Windows computer when he read this, and Stephen Elop still can't decide between throwing the SeaRay, N9 or 100bucks he picks the N8
pt02012 years, 8 months ago
laffen12 years, 8 months ago
Apple can charge whatever they want for their products. No one is forced to buy any devices from them. Like every other public company, Apple is rising the prices as far as they can.
Bonovox12 years, 8 months ago
True. They know the people want it & will pay anything to get it within their means. And paying for high priced contracts too. Whoever said were expensive??
[ This Message was edited by: Bonovox on 2011-10-11 12:28 ]
jplacson12 years, 8 months ago
Ok, I was not gonna comment, hoping people would notice the obvious slant of the article.
I love how "analysts" only state component costs and not R&D, Marketing, Distribution, Logistics, etc...
If all employee salaries were part/component based... then it would just be the cost of the paper reports and ink they submit.
Since when has a company ever charged AT COST?
How much does an Intel chip cost, at cost? How much is a sliver of silicon?
Restaurants should only charge the cost of ingredients. Waiters have no product output and shouldn't be paid at all.
Consultants shouldn't be paid either, except for the cost of the paper reports they give in.
Businessmen should only be paid for the ink used to sign contracts.
A business is free to charge however much they want for their products. People are free to buy them or not. Regardless of how much people complain about Apple's prices, they still buy it... at the end of the day... actions are what matter.
I don't own an iPhone. Not because I don't like Apple, but because I don't think it's good enough for me. I see its appeal to others, much like how a Rolex isn't more accurate than a Casio watch... but people will pay a lot for a Rolex, but not more for a Casio.
[ This Message was edited by: jplacson on 2011-10-12 07:38 ]
laffen12 years, 8 months ago
I hope it was clear that this was manufacture margins and not total earnings. Of course Apple spend some of these left overs on marketing, R&D, packaging, shipment etc. but nevertheless their quarterly earnings was 3.5 billion USD of the 28 billion revenue. Not bad at all
jplacson12 years, 8 months ago
Hey laffen, although it was clearly stated in the article that it was manufacturing costs... you can see the writer's obvious slant towards implying how big a margin Apple is making... by actually NOT stating how much Apple actually makes... he only makes a biased assumption using incomplete data to stir negative emotional responses.
etaab12 years, 8 months ago
Possibly because Apples cost price versus recommended retail price is disproportionately large in comparison to any other manufacturer out there, which is even more evident since the new 4S does not even top the table in current specifications of top end flagship devices.
Apple are known for over charging for their products, which i think this article illustrates quite nicely. Thats all.
I would never buy an iPhone outright unless i had money to burn. Its far too well known your money does not fully go into R&D, Q&A, salaries etc, its pure fleecing of peoples hard earned cash which all companies who produce products are capable of, but Apple simply fleece the consumer without any thoughts of guilt clearly.
titus112 years, 8 months ago
If they're coming up with great products...who cares. It's not like they're releasing an iPhone every 2-3 months.
[ This Message was edited by: titus1 on 2011-10-11 23:23 ]
jplacson12 years, 8 months ago
@etaab no offense intended, but define "overcharging"? And who defines the "recommended retail price"? That's the first time I've ever heard of such a thing.
Does Lexus overcharge? What about Sony? Bowers & Wilkins? They cost way more than the "retail average".
What about salaries? I'm sure management always feels employees are overpaid.
Disproportionate? I think Samsung has more ridiculous pricing than Apple... considering their first 7" tablet (which was a sad attempt at a tablet) cost more than the iPad 1.
Remember that all Android manufacturers don't spend anything on OS development, only on custom skins which aren't even coded well. So all Apple iOS R&D is additional expense on Apple's part. And seeing as how the iPhone 4 and Galaxy S2 cost about the same (and the S2 screen isn't as high-res) I would say Apple charges pretty fair prices. Higher than most but not by much. With the exception of the Xperia ray, I haven't seen any flagship phone use metal in their frame, just glossed over plastic. If the case material doesn't matter to you, then don't buy it. It matters to me.
There were no 9-10" Android tablet in the $500 range... not until Apple released the iPad 2... I thought THAT was overpricing on all Android manufacturers... Prior to the Kindle Fire, the only sub $500 Android tablet you could get was some crappy Chinese iPad knockoff running Android and a resistive screen.
The whole point of Android being free was to reduce development costs for manufacturers (and to drive more ad traffic to Google)... so far, only seems to be giving flagship phones $100 less than everyone else, and they do it without copying the rounded corner design of Apple (which ironically is what I'm not fond of with the iPhone)... the rest are in the iPhone price range.
Let me repeat, I like Apple products but I don't own an iPhone. (tried it, didn't like it, went back to ) Much like how I like Rolex but I would never buy one. I don't think Rolex is overpriced, even though Casios tell much more accurate time.
Specifications don't tell the whole story...
A block of coal = 100% carbon
A 1 carat diamond = 100% carbon
Specs and numbers are so easy to fudge. I highly doubt the 100% carbon argument would work with a girl if you gave her a lump of coal and say "But it's a much bigger block of 100% carbon, better specs! It's heavier!"
I don't mean to offend anyone, but this is a free market... people vote with their money, and the ones with money have voted for the iPhone and Apple. I would get annoyed if Apple was the ONLY choice, but they're not. I'm happy with my Xperia, among all my friends w/ iPhones... Steve said "Think Different"... in a sea of iPhone users... I am.
masseur12 years, 8 months ago
I agree with you jplacson... companies set the price, consumers decide if thats the product they want and if thats the price they want to pay. no one is holding a gun to their head saying you must buy this at that price.
I rarely buy branded clothes because generally they only offer a name whereas I can buy similar items that do exactly the same at much less cost.
Although I have tried, as yet I have not found another phone that gives me everything I want and in the same way that the iphone does... so I'm prepared to pay that extra. (Mind you I haven't tried the new windows phone 7 - yet).
I honestly don't care what margin Apple make in as much as I don't care what margin any other company take for products that I buy as it has never been a consideration in any purchase.
etaab12 years, 8 months ago
Thats all pretty deep and you're very much right.
But the point im making is simple. Apples pricing structure is based mainly around brand identity. Apples products all sport that large Apple logo which has become very desirable to the consumer. That alone makes its stand out against every other phone out there. Apples products are seen as very high tech, cool and sexy. People will pay for a brand as Masseur said.
Apple simply price their phones to generate as much revenue from such people as possible. Which is morally wrong, but makes great business sense.
masseur12 years, 8 months ago
so you're saying that companies should factor in morality when determining selling price?
surely you can see thats nonesense in the business world? morality doesn't enter the equation.
price is set by market factors including competitor pricing and what people are willing to pay.
This is also evidenced by the fact that some tablet manufacturers reduced their prices after the Kindle Fire was announced.
jplacson12 years, 8 months ago
And how much time, money, and talent does it take to build a brand?
If it was easy and cheap to do so... I think Samsung would have an easier time selling a million tablets.
It doesn't matter how good your product is, if you cant convince anyone to buy it, then it's useless.
A smartphone is a luxury (as much as you wanna try to justify 'needing' it, you won't physically die w/o it), not a necessity... It's a status symbol, much like a nice car, a good suit (which btw costs way less in material than an iPhone but is priced way higher)
semo12 years, 8 months ago
IMO a very good reason not to buy this product.
julias12 years, 8 months ago
Its not about the price but more to do with fashion and trends and the iPhone being the latest trend in the must have gadget so as long it retains a stronghold on this trend which I suspect will be for many years to come unless by some miracle Apple loses its appeal people will pay the premium price for this product and people forget that the iPhone is also a status symbol so would it have the desirability factor if it was selling for lets say budget smartphone prices?because then everyone would have one but even now almost everyone I know has a iPhone.
etaab12 years, 8 months ago
@ Masseur - do i think companies should consider morality when determining a price ? no, it should not even be a factor at all. But for me, companies setting a massive price tag like 699 for their product which is clearly not worth it to me screams they ARE considering the morality of it and totally disgregarding it. Im sure at some point Apple did consider whether setting the 4S 64gb variant with a 699 price tag was too much of a fleecing, but chose to go ahead with it anyway knowing their brand identity is strong enough to keep their hooked customers.. hooked ?
Im a business man myself, i never consider the morality in my pricing structure, but then i never have the intention of greedily fleecing my customers which would then in turn make it a factor for the informed customer.
@ jplacson - i dont think owning a smartphone is a status symbol or luxury over owning a normal dumb phone, since smartphones now are as cheap as some none smartphones.
I also disagree that it takes time and money to build a brand, of course it does but that does not mean they should so obviously fleece consumers as a reward for making a successful brand.
Its not only Apple, they're just the worst in the mobile phone scene. In other areas, its companies that make clothing like G-star, 100 for a shirt which cost around 3 to make. A pair of Reebok trainers, 150 to buy and cost 14 to make etc..
[ This Message was edited by: etaab on 2011-10-13 22:20 ]
Bonovox12 years, 8 months ago
I so hate those words status symbol I was not told how much but I was told a while ago by a computer salesman that making an Intel or whatever chip inside a pc costs next to nothing. It's all made from atoms
[ This Message was edited by: Bonovox on 2011-10-13 22:24 ]
Supa_Fly12 years, 8 months ago

On 2011-10-11 13:13:20, pt020 wrote:

Really?! And you don't think Governments, Educational institutions, or even YOU are being ripped off via Microsoft? Think again.
Apple deserves their coffers. They came into a new market segment with new product to compete with long fat-rich stallwarts and thwarted them in a single blow.
etaab12 years, 8 months ago
The whole world is one big rip off. It applies to anything. For example, my girlfriend just checked out getting a ticket for a Manchester United football match as a Christmas present for her brother - 270 !! thats 3 per minute of the 90 minute match !!
I am far from rich, in fact this past 12 months to me ive never had so little money before. Courtesy of people like David Cameron and his party running the UK economy, greedy corporations like Shell charging silly amounts for petrol when which they make about 300m pure profit every hour of the day.. you know it leaves a bitter taste in my mouth thinking how i struggle to survive financially, as are many millions of families worldwide.
Would i pay Mr Cook 700 for his new 4S ? no, its only worth half that imo. Biggest con job this month i reckon. People who spend that amount of money on a phone have too much money to waste and should think about donating some of it to charity instead. Its disgusting, selfish and offends me in so many ways.
Apple continue to offend me year after year. They've got such a great OS, beautiful interface and so much going for them, but they're still the biggest thieves in this game.
Miss UK12 years, 5 months ago
Lol etaab bet you voted for Cameron tho!
Btw everyone uses the government issues
As a excuse the thing is once everything is sorted
Come next election labour will come into power again
And it will be the same problem all over again
Under labour everybody had everything
For much or less now Cameron's here that's
Gone its tuff luck now!
I never voted myself I never do
But I see what Cameron's doing is necessary
It will benefit us all
I actually love my iPhone 4S
I would pay any price for it
I dunno why I've bothered with others
When the iPhone has been staring me in the face
For quite sometime it's an amazing handset
I find myself glued to it its awesome
Regarding price of how much it costs to make
I thought it was low but even so it's a high end phone
Something other manufacturers need to look at
Still on there handsets a lot of them skimp on lousy
Not so with iPhone you get what u pay for
Bonovox12 years, 5 months ago

On 2012-01-06 15:59:33, Miss UK wrote:
Lol etaab bet you voted for Cameron tho!
Btw everyone uses the government issues
As a excuse the thing is once everything is sorted
Come next election labour will come into power again
And it will be the same problem all over again
Under labour everybody had everything
For much or less now Cameron's here that's
Gone its tuff luck now!

Everytime Labour are in power they leave us in debt & the Conservatives have to clear up the mess. Everytime
anonymuser12 years, 5 months ago
The iPhone is no different to any other product, it's worth what consumers choose to pay for it, no more and no less. If the price was really "too high" then it wouldn't sell, and Apple would end up cutting prices - they don't need to do that, because they're selling out anyway.
As others have mentioned, the really surprising thing is how close a lot of the android competition is to Apple's prices, given that Apple are paying for the ongoing development of the whole iOS platform while the android manufacturers get almost all their software R&D for free.
etaab12 years, 5 months ago
@ Bonovox - Labour didnt leave the country in debt, the whole world is in a bad state financially at the moment. I dont think you can blame Labour for the whole european economy. Its not Labours fault whats happening to Greece and Italy.
@ Miss UK - i actually voted Liberal, have done since i turned voting age many years ago now. Sadly, Clegg is a complete moron who sold out to the conservatives to get some power for his party at the price of selling out their policies. Sadly again, i wont be voting for them again. Or Labour or conservative.
@ Boinng - my main beef with Apple's pricing is their most expensive iPhone adding more memory doesnt cost an extra 200 over the basic 4S model.
vlotnet12 years, 5 months ago
Like it or not, Apple convinced the unwashed masses that they need a smartphone.
Like it or not, Apple chose to hand-hold the masses to make things easier for them to do the things they normally do.
Like it or not, Apple never chose to compete feature-wise, especially initially. They went another angle.
Like it or not, Apple introduced a very different phone that made a name for itself by just how much it differed.
Like it or not, many people that knew the iPhone wouldn't satisfy all their needs still wanted to try one. It was different.
Like it or not, Apple also had the advantage of building on the i-brand with the phenomenal success of iPods and the iTunes way of doing things. Familiarity with iTunes was already there.
Like it or not, people are creatures of habit and far more like iTunes than dislike it (ie. enthusiasts like me).
Like it or not, most people like to be hand-held at the expense of flexibility and freedom.
Like it or not, Apple's competitors were asleep at the wheel, especially NOKIA, who still seemingly doesn't know what a good user-experience is and seemingly doesn't care about quality control to this day, even though they are the world's biggest seller of mobile phones with quickly-eroding Symbian smartphone market share, despite free maps and navigation in many of their smartphones.
Like it or not, Apple charges what the customer is willing to pay, like any other well-run business.
Like it or not, politicians will never change as long as the bankers control all of them. Look up Max Keiser for more information about the wholesale fraud that goes on.
Like it or not, you can ride the bike instead of paying for petrol
Like it or not, Apple will never change what they charge unless demand for their products dwindles

Bonovox12 years, 5 months ago
@etaab what i did mean was Labour always mess up spending way too much money and leave us in a mess. Not blaming them for the world crisis
Miss UK12 years, 5 months ago
Lol etaab the day I vote will be when
The government issue me a fine through
My door
The 64gb 4S is abit overpriced on US apple
Site it's roughly same price as a 500 16gb
Sadly Vat suxx uhh

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