Apple's iPhone profit margin greater than 50%

For each 8GB model sold, Apple makes $333, according to iSuppli

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

El Segundo, Calif.-based iSuppli Corp. calculated the bill of materials and manufacturing costs of the $599 8GB iPhone as $263.83, giving Apple a profit margin of nearly 56% 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 $264.85. (see "Why the iPhone is a rip off ")

As other tear-down artists have done, iSuppli named the suppliers of iPhone components. Infineon Technologies AG, 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 $15.25 of the iPhone's bill of materials, or 6.1% of the total.

Samsung Electronics Co., however, was the biggest winner, said iSuppli, with $76.25 in bill of materials, or 30.5% 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 Inc. yesterday (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 AG, a German firm, gets credit for the iPhone's touch-screen module. ISuppli priced the module at $27, or 10.8% of the total.
  • The display itself costs an estimated $24.50 and comes from multiple sources, including Epson Corp., Sharp Corp. and Toshiba Matsushita Display Technology
  • National Semiconductor Corp. contributed one chip, a $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 $499 4GB iPhone and its more expensive 8GB sibling is the amount of NAND flash memory and the $24 cost increase from 4GB to 8GB. By that accounting, the total bill of materials of the 4GB iPhone is $239.83, putting Apple's margin at almost 52% for the cheaper model. Most buyers, however, want the 8GB iPhone, said analysts yesterday.

    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 $299 Apple TV's bill of materials at $237, a margin of 20%.

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Copyright © 2007 IDG Communications, Inc.

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