Your new iPhone 5 cost Apple 20% of what it's costing you

Your new iPhone 5 cost Apple 20% of what it's costing youApple has kindly issued a press release revealing that Lewis Curdie and some two million others are considerably lighter of pocket after spunking upwards of £500 (or the local equivalent) on an iPhone 5 in the first day of pre-orders.

To say the company is happy goes without saying: after all, wouldn't you be after cashing in to that extent on a device that cost you barely the other side of £100 to build in the first place?

OK, so the $167.50 (£103) bill of materials TechInsights has produced for the 16GB iPhone 5 is by necessity a preliminary estimate, largely because when it comes to information Apple prefers the smoke and mirrors approach to actual facts.

In other words, there's a fair bit of guessing involved, and TechInsights admits its figures come from a combination of the info released by Apple itself on launch day, and estimates based on the innards of previous iPhones.

But still, it's safe to assume the estimate is roughly correct, which means the iPhone 5 16GB, which you can pre-order right now for £529 (plus a three-week wait), actually costs Apple barely £100 to make.

Of course it's not like the rest is pure profit. There are considerable extended costs and other expenses, and we imagine a fair whack will go to marketing. But considering that essentially amounts to Apple using your hard-earned cash (and plenty of it) to persuade others to part with theirs, there's every reason to feel just a bit hard done by.

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26 comments

Pondlife  Sep. 17, 2012 at 19:18

Taking that figure with a huge pile of salt. That's less than the 4s for starters, certainly make a killing on the 64gb ones though...

JanSt / MOD  Sep. 17, 2012 at 19:19

Tap water in plastic bottles with a BS-label makes up to 12,000 times what the company pays for the water. Not 12,000%! 12,000 TIMES! No research involved....

JanSt / MOD  Sep. 17, 2012 at 19:19

"kindly issued" hahaha :p

Pondlife  Sep. 17, 2012 at 19:28

Makes me think of Peckham Springs water.

bettsy  Sep. 17, 2012 at 20:16

Most, if not all, manufacturers smart phones come in at around the £100 for the cost of material, this isn't an Apple only thing. The difference being that most will price there's under the iPhone to try to gain market share.

flackon1989  Sep. 17, 2012 at 20:55

Oh wow, a business makes money?

Who would have thought it.

Pondlife  Sep. 17, 2012 at 21:38

Plenty of them don't

Treab  Sep. 17, 2012 at 21:40

Plenty of them don't

LG for one ;) sony for another .... actually alot don't... apple and microsoft are the only 2 that do off the top of my head... well except energy companies lol

martyn_3000  Sep. 17, 2012 at 22:56

I don't think that cost takes into consideration advertising, or research and development. I'm sure they're making a filthy profit margin, but there's a lot more than goes into making a product than the material costs alone.

Pondlife  Sep. 17, 2012 at 23:07

As r&d has been said to be 2% that's fairly negligible and the other Martin mentions advertising in the article.

martyn_3000  Sep. 17, 2012 at 23:11

Labour cost? That's got to be at least 50p in those Chinese sweat shops...

Treab  Sep. 17, 2012 at 23:19

Labour cost? That's got to be at least 50p in those Chinese sweat shops...

thats the cost of 50 martyn its 10p a day and each person can make 10-20 on a good day...

Pondlife  Sep. 17, 2012 at 23:24

Shipping them over probably costs more than the labour....
Don't forget the amount they spent on security so we didn't get to find out anything about it before the launch.......... .......... ........

Treab  Sep. 17, 2012 at 23:26

Shipping them over probably costs more than the labour....
Don't forget the amount they spent on security so we didn't get to find out anything about it before the launch.......... .......... ........


well steve jobs did.... tim cook doesn't waste a penny ;)

Pondlife  Sep. 17, 2012 at 23:38

Thought they were doubling down on security or was that someone else.

fluff86  Sep. 18, 2012 at 01:16

i cant understand the amount of people about who seem shocked or annoyed by this, business selling stuff for more than what it cost to buy / make, isnt that just how to run a profitable business? as long as they can keep finding idiots to cough up silly money for a (usually) barely upgraded rehash of the one you just coughed up 400 odd for then happy days at apple hq

eddyday  Sep. 18, 2012 at 06:01

Martin has taken his first, tentative steps into understanding how business works.

TechnoMaker  Sep. 18, 2012 at 09:10

That's a pretty standard gross profit figure for technology products: The biggest cost in developing technology hardware (by a long way) is R&D. As noted, that figure is just the cost of components on the BOM. It doesn't really mean much in isolation.

Stelph  Sep. 18, 2012 at 09:23

i cant understand the amount of people about who seem shocked or annoyed by this, business selling stuff for more than what it cost to buy / make, isnt that just how to run a profitable business? as long as they can keep finding idiots to cough up silly money for a (usually) barely upgraded rehash of the one you just coughed up 400 odd for then happy days at apple hq

True, I wonder what other products/areas have profit margins of that much?

One thing that does annoy me about the market however is the price difference between a snartphone and tablet, why on earth is a tablet cheaper than a smartphone? The screen is the most expensive part so really the tablet should be more expensive, consumers seem to have cottoned onto this (hence why the Nexu 7 and Kindle did so well) but havent perhaps realised the same for the smartphone. Its a shame the trend started by the ZTE Blade did not continue...

StephenTMorris  Sep. 18, 2012 at 09:57

Who knows if this figure is correct? In any case, there are going to be a lot of additional costs before Apple sees a profit. Most iPhones are probably sold wholesale to companies like Carphone Warehouse, O2, etc, who also have to take a cut.

Pondlife  Sep. 18, 2012 at 11:43

Aww bless, if the retailers were getting them at much cheaper prices there would be higher variation in retail price.
Can't see many regulars being shocked by the figures though undoubtedly inaccurate as we get these sorts of figures each year.
As for tablet prices vary phone, making things smaller and more efficient has its costs too, look at how laptop prices vary to similarly specced desktops, how some netbook are same price as rather more powerful laptops even. Making a 720p phone screen seems trickier than 720p tablet screen too.

jaybear88  Sep. 18, 2012 at 13:05

Well they need at least 50% of the profits to continue their patent trolling.... I mean, protecting their IP :p

Having worked in a retailer, 10% would be a stupidly high profit margin on a handest. Normally it's about 5 at best.

Eddy and Fluff, I wouldn't be so condescending to the writer if I were you; your ignorance beams through as people have ample reason to be irratated.

- Apple, as I'm sure you know, is one of the most profitable company in the world.
- Apple has had a reputation for being overpriced for many years
- Apple uses Foxconn, a company that treats their employees like s**t on their shoes and quite frankly, is guilty of crimes against human rights.

Now, the rest of us, see 2 possible problems with Apples wealth. Either they should stop screwing us, the consumer, or their employees. While you obviously like to stick up for the person that is shafting you.

Sorry everyone else for the near Orthopheliac-like rant ;)

matt101101 / MOD  Sep. 18, 2012 at 13:44

Sorry everyone else for the near Orthopheliac-like rant
No need to apologise, your rant doesn't make you sound like you huff paint.

Also, interesting that retailers only make ~5% on handset sales, no wonder they always try and sell you a contract, and failing that insurance.

Pondlife  Sep. 18, 2012 at 13:48

Or a £10 screen protector or a £20 case or a £20+ charger.

Saw that as interesting more than a rant, so when a retailer suddenly has 40% or more off a phone price, that's brought about by a similar reduction from the manufacturer rather than the store clearing stock itself presumably?

matt101101 / MOD  Sep. 18, 2012 at 13:51

Or a £10 screen protector or a £20 case or a £20+ charger.
All good points, all money making rip offs.

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