Apple's iPhone profit margin greater than 50 percent

iSuppli lays bare the cost of the components that go into the iPhone

Each 8GB iPhone sold by Apple puts US$333 more in the till than the device cost to build, a market research company said Tuesday after tearing apart the new phone.

iSuppli calculated the bill of materials and manufacturing costs of the US$599 8GB iPhone as US$263.83, giving Apple a profit margin of nearly 56 percent on the device. The tear-down analysis only spells out what's inside the iPhone, component prices and estimated cost to make; it doesn't take into account research and development or marketing costs.

Earlier this year and before iPhones were actually available, iSuppli had pegged the cost at US$264.85.

As other tear-down artists have done, iSuppli named the suppliers of iPhone components. Infineon Technologies, a German semiconductor supplier, provided much of the core communications capabilities of the device, including the digital baseband, radio frequency transceiver and power management chips, said iSuppli. Infineon's parts accounted for US$15.25 of the iPhone's bill of materials, or 6.1 percent of the total.

Samsung Electronics Co., however, was the biggest winner, said iSuppli, with US$76.25 in bill of materials, or 30.5 percent of the phone's total. Samsung contributed the applications processor -- which includes an ARM RISC core -- as well as the iPhone's NAND flash memory and dynamic RAM. The exact same NAND flash is also used in the 8GB iPod nano, said rival tear-down research company Semiconductor Insights Monday (watch YouTube video), just one of several common components that let Apple apply some of its existing design expertise to the new gizmo.

Among iSuppli's other findings:

- Balda, a German firm, gets credit for the iPhone's touch-screen module. ISuppli priced the module at US$27, or 10.8 percent of the total.

- The display itself costs an estimated US$24.50 and comes from multiple sources, including Epson, Sharp and Toshiba Matsushita Display Technology

- National Semiconductor contributed one chip, a US$1.50 serial display interface, but it was still singled out by iSuppli because - National Semiconductor has never had a part inside an iPod.

The only difference between the US$499 4GB iPhone and its more expensive 8GB sibling is the amount of NAND flash memory and the US$24 cost increase from 4GB to 8GB. By that accounting, the total bill of materials of the 4GB iPhone is US$239.83, putting Apple's margin at almost 52 percent for the cheaper model. Most buyers, however, want the 8GB iPhone, said analysts Monday.

ISuppli conducts tear downs on most Apple gear, but it doesn't always find such high margins over bill-of-materials costs. Last month, for example, iSuppli estimated the US$299 Apple TV's bill of materials at US$237, a margin of 20 percent.

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Gregg Keizer

Gregg Keizer

Computerworld
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