Apple's 50 per cent profit margin on iPhone

[G_F]

http://www.itpro.co.uk/internet/news/102688/apples-50-per-cent-profit-margin-on-iphone.html

Apple will enjoy a 50 per cent profit margin on each iPhone sold, according to a breakdown of the handset's component costs by research phone iSuppli.
The figure is drawn from analysis of the capacity and features of the phone-iPod hybrid, combined with information from Apple about the materials used plus company sources and third-party publications. iSuppli says that although the figures are preliminary until it gets hands on a physical unit, it has a 'high degree of confidence' in its findings.
'iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM [bill of materials] 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. 'Meanwhile, the 8GB 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.'
Such margins are not unusual for Apple, according to Jagdish Rebello, director and principal analyst at iSuppli, with margins of 45 per cent and more in several other products including the iMac and iPod nano. And such high margins give Apple plenty of scope for price cuts in the face of what is expected to be extensive competition.
"With a 50 per cent gross margin, Apple is setting itself up for aggressive price declines going forward," Rebello said.
iSuppli estimates that some 835 new mobile phone models are expected to be introduced in 2007, including 14 music-enabled handsets with features that compete closely with the iPhone that are already shipping from manufacturers including Nokia, Motorola, Samsung and LG.
Tina Teng, analyst, wireless communications, for iSuppli said that she expects phone manufacturers (OEMs) such as these to introduce models designed specifically to compete with the Apple iPhone.
"The most successful OEMs will be those already established in the mobile-phone business, that support all file formats and that have excellent sound quality," Teng said.
To succeed these must have excellent supply-chain relationships with suppliers of the kind of touch screen used in the Apple iPhone, Teng added.

Fook buying one when they first come out then

 

[iPap]

I'll have one the day it comes out!

 

[Andy]

Me too.

 

[biojo]

end of the day though its a great product and if ppl are willing to pay that (including me) then why shouldnt they charge it. Its only like if we ourselfs sell some thing we`d want the best price we can get.

 

[Turkish]

Electronic good = massive profit margin every time. If you were told the actual cost of things you've bought you'd be shocked at just how much profit there is in them.

 

[Rasclart]

Electronic good = massive profit margin every time. If you were told the actual cost of things you've bought you'd be shocked at just how much profit there is in them.

LOL actually most electronics products DONT have a huge margin, both at manufacture end retails even less so.

Its not just the cost to produce a unit, its the cost to tool up to build the product in such bulk and distro and advetising all take there chunk as well!

 

[tommyboy]

b******s. I'll still get one if I can though

 

[Turkish]

Electronic good = massive profit margin every time. If you were told the actual cost of things you've bought you'd be shocked at just how much profit there is in them.

LOL actually most electronics products DONT have a huge margin, both at manufacture end retails even less so.

Its not just the cost to produce a unit, its the cost to tool up to build the product in such bulk and distro and advetising all take there chunk as well!

All the car audio kit I used to deal with we would buy in at about half the price at what it was retailed out at, and thats without even taking into consideration the profit the manufacturer and wholesaler used to make prior to us!

 

[Rasclart]

I can assure you margin on TV's and so forth isnt that great!

 

[Revels]

I'll have one the day it comes out!

Yup! Can wait a few months, but by then there will be something else!

 

[dk]

I can assure you margin on TV's and so forth isnt that great!

exactly, when i worked at comet as the audio visual manager we used to make more money on a £15 scart lead (about £14.50) than we did on most tvs as they were so competitive.

Why do you think retailers try and push you so hard to go for extra warranties and things like scart cables, its where all the money is, the main bulky products are worthless in comparison.

 

[sn00p]

What cost a product is to a retailer/wholesaler bears no relation to what the manufacturer can produce it for.......

The manufacturer wants to make it as cheap as possible and sell it to it's distributers/retailers/wholesalers for as much as they can get away with.

Electronics manufacturing is a wonderful thing as soon as the volume ramps up the cost drops dramatically.

 

[browno]

I haven't read the full thread - but I would expect that there's a fair gap between manufacturing cost and the cost to actually bring something like this to market - there will be a hell of a lot of cost involved in R&D, marketing etc that isn't taken into account by merely adding up the rice of the components and adding a bit.
Like with all significantly different/new consumer products (consoles being a prime example) the early adopters pay extra to help cover the devlopment bill... Then as volumes increase, the price can come down...