How much does an iPhone cost to make?
iPhones tend to be on the higher side when it comes to price, similar to other brands and models like the Samsung Galaxy S20 Ultra 5G launched on March 6, 2020, and the Google Pixel 4 XL on October 24, 2019. The cost to make an iPhone depends on the model, architecture, features, and battery. There is no standard price for manufacturing iPhones, especially since Apple has to negotiate costs with suppliers and makers of phone components.
One year, Apple may sacrifice high-cost/high-quality components while another year, they may spend more to obtain better reliability and performance. For instance, the previous iPhone featured an OLED display. The iPhone 11 display was reduced to an LED screen to compensate for lower sales of the previous iPhone models.
For processors, resistors, transistors, boards, and body structure, the numbers can be all over the place. Also, iPhones (of the same model series) have differences in style and sometimes functionality.
The iPhone 11 Pro features a battery that lasts up to 5x times the amount of the iPhone X, and the standard iPhone 11 holds up to 4X the amount. They obviously spent more money to improve battery life. The numbers also show that the iPhone 11 Pro has a better battery than the iPhone 11, which goes back to the previous statement about varying costs for various “model-series” versions.
How much does it cost to manufacture an iPhone 11?
When the iPhone 5s came out, the cost was $198.70 for parts and assembly, and it seems that Apple pushed the boat out a little more with its past upgrades. According to Time, the Apple iPhone 6 had a cost of around $200.10. The iPhone 6s came in at $211.50, according to IHS Technology’s estimates. The iPhone 6s Plus was manufactured for $236.
We all know technology manufacturers are in the business they are in to make a profit, so it should be no surprise that there is some markup on a smartphone’s retail price. Compare the retail costs of Apple iPhone 11 Pro Max to the Samsung Galaxy S20 Ultra 5G. Buying Apple’s handset (with 256gb of storage), SIM-free, and without any contract markdowns or trade-in allowances has a retail price of $1249.
The Samsung Galaxy S20 Ultra 5G (with 128gb) costs $1399.99 without a trade-in or service provider discount. Manufacturing costs are less than half, but both companies need to compensate for marketing, advertising, research, insurance, labor, and more.
The Apple iPhone 11 Pro Max costs $490.50 to make, based on the iPhone 11 teardown and manufacturing research of TechInsights in collaboration with NBC News.
The cheaper LED screen, versus last year’s OLED, costs $66.50 to make while the three-camera setup costs $73.50. Surprisingly, the battery runs just $10.50, but that adds up quickly on a “per phone” basis. The memory, modem, and processor rank in at $159 total and all other components plus assembly tally up to $181.
Thanks to Moore’s law, component costs fall over time, but that doesn’t mean retail prices will.
There’s cost erosion, most noticeably with the big-ticket items such as displays and memory.
16GB NAND flash storage that had a cost of $15 around 2012 costs only a fraction of that now, and even four years ago! These types of erosion are predictable. Memory and display costs will go down over time.
“These manufacturing types follow Moore’s law―the equipment gets better, the process gets better, the yield improves, and the costs go down,” said iSuppli analyst Wayne Lam in 2014. “But if you look at how those components contribute to the overall BoM, the proportion of the cost remains the same.”
“Handset OEMs typically build around an unspoken BoM budget. If they’re selling a $600 phone, they know that they will throw a lot of resources and cost into the display, memory, and processors,” stated Wayne Lam. “That bucket of costs usually remains steady, since [OEMs] can leverage cost improvements over time.”
A screen that was $40 last year will stay around $40 the following year because they’ve improved the quality or the size. That’s typically how the BoM cost evolves.”
Despite Moore’s law, tech costs don’t necessarily fall with each new version, since manufacturers add better-quality parts or new features. The iPhone’s BoM has steadily increased: the iPhone 3GS was $179, the iPhone 4S $188, and the iPhone 5s was $199, according to IHS iSuppli data. Now, you have the iPhone 11 Pro Max that carries a manufacturing cost of $490.50. It’s a big jump in expenses, but technology is always expanding and evolving.
However, the price of certain elements can be offset by a previous device, helping to reduce costs.
For example, handset makers can apply the engineering of one product to the manufacturing process of a similar, later model.
Non-recurring engineering (NRE) costs are an essential reason that tablets can be made cheaper than smartphones. “The components are very similar,” notes Erensen. “Companies take smartphone designs and leverage them to make tablets―and even portable media players such as Apple’s iPod touch―using the same building blocks.”
Look at this visual cost comparison from 2012 on Nexus, Kindle Fire, and iPad Air.
IDC analyst Chrystelle Labesque, stated “Vendors adopt different strategies when positioning their products. It’s clear that when Google is pushing the Nexus, it isn’t earning money by selling the device, but by selling the content later. There’s an economic model behind that, which means the different players are earning their money in a different way.”
According to Gartner’s Erensen, the business model is a big piece of the pricing puzzle.
“Apple has very high margins on the iPhone, and that’s where it drives a lot of its profit―it needs those prices to stay high,” he notes. “Apple can justify it because of demand, the brand name, and the quality of the product. Look at Google and those past Nexus devices―they were trying to showcase Android as a platform and get into as many hands as possible because the company didn’t and still doesn’t makes its money through hardware, but through advertising, search, and the services it ends up providing.
“Amazon’s another good example: it’s almost willing to sell these devices at cost because it knows that once it has them in consumers’ hands, they’re going to use them to purchase content―and even physical goods from Amazon.”
For example, Amazon’s Kindle Fire HD retailed for $199, but the BoM was $174, leaving the company with little margin, especially after the marketing and design expenses.
In reality, connectivity costs aren’t only about the hardware. “You have to work with standards bodies in the different countries to make sure that the device is certified, and work with service providers, and go through all the testing,” stated Erenson. “When you add that cellular piece, there are lots of extra steps that can add up, in addition to the hardware costs.”
As you can see, there are many factors in determining the retail price of an iPhone and how much it costs to make an iPhone. To most people, it is surprising to see the difference between manufacturing costs and the final retail price, but it boils down to much more than just the components’ expenses.
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