The real price of the iPhone 5: $207

We all know Apple has a big profit margin on all of their devices and thanks to market research firm IHS iSuppli, we now know how much Apple pays for manufacturing the iPhone 5. The 16GB version of the recently launched mobile phone costs $207, which is $442 less than the retail price without a contract. The 32GB and 64GB cost $217 and $238 respectively.

Only the first iPhone was more expensive to build, carrying a bill of materials of $246. That price steadily declined to $188 for the base model iPhone 4S. The components of the iPhone 5 are slightly more expensive than those of its predecessor. The latest iPhone offers a bigger screen with in-cell touch sensing and supports 4G LTE, which accounts for the increased materials costs.

The only component to cost less is the NAND flash storage at $10.40 compared to the iPhone 4S at $19.20. According to senior principal analyst Andrew Rassweiler, Apple is the largest buyer of NAND flash storage in the world and the company therefore gets preferential pricing.

Advertising costs were not a part of the calculation, as well as licensing fees, royalties and software development costs.

Oh and iOS 6 has released too by the way.

Source: IHS iSuppli via TG Daily | Image via IHS iSuppli

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The real question is how much does it cost AT&T / Verizon / Sprint to deliver service to an individual. At $100 a month for 24 months (typical contract), they are making $2400 per customer in a 2 year period. Which I guess is not horrible. Also, how much does AT&T/Verizon/Sprint actually pay for the iPhone.

Everyones astonished at apple for their markups like its news to them... Everything apple makes is grossly overpriced and always have been. Because of this they actually invested into R&D at one point and made the iPhone come to market. From there they are pushing the boundaries of micro-componentry and SOC designs, which benefits everyone in the long run.. until these record-breaking patent disputes and trade dress disputes.. Now they realize their mistake and want to corner the market using the technology their designs drove to develop.

A lot of those Android phones according to that site have as big or bigger profit margins.

But no one mentions those.

Not sure why this is news.

Obviously the person that wrote this report knows nothing about the manufacturing industry.

They have not factored into the equation R&D costs e.g development of A6 CPU, manufacturing equipment, marketing, sales and distribution, which are then applied in the cost of the unit price. BOM costs are also probably not the correct figures either as Apple will not get each item at there cost price, the supplier will have added a markup.

I very much doubt that the manufacturing cost is only $8 per unit

So therefore the report is complete nonsense.

+ licenses (nokia & samsung).
+ shipping
+ marketing.
+ returned devices
+ insurance
+ Stores costs.
+ Online store costs.

That's only hardware cost. What about billion dollars R&D cost? Not to mention multi-years waiting cost to create such product.

Exactly,the "real" cost of the iPhone would r&d, advertising, packaging, labor(which includes those recent raises and safety increases), etc. Title should read "The Actual Hardware Cost of the iPhone", but that wouldn't grab as many readers I guess. Neowin = Foxnews of Tech.

mahara said,
That's only hardware cost. What about billion dollars R&D cost? Not to mention multi-years waiting cost to create such product.

R&D, Software Development, Warranty costs, Support costs, Online Services costs, Sales costs, and a bunch of other stuff are not represented in these breakdowns.

virtorio said,
R&D, Software Development, Warranty costs, Support costs, Online Services costs, Sales costs, and a bunch of other stuff are not represented in these breakdowns.

That shouldn't be more than $100/phone tops. Still a big margin.

omgben said,
Because if that stuff is figured in, it would be hard to argue that the iPhone is overpriced.
LOL I hope you're joking

Maybe if this was the first iphone (i.e. new and innovative)... now that this is just a refresh, the overhead is going to be minimal per unit.

This is not about paying for a "brand" or "image", people. You are not paying for 200 dollars worth of chips and circuitry.

I am not an Apple fan, however it is obvious to anyone with any business sense, that you are paying for DESIGN. Many, countless, man hours go into the design of the hardware, software, and how they interact. The seamless experience you get is the result of many engineer's efforts to solve problem you never know existed. And that's the point.

Yeah they're expensive, but that's exactly the "brand image" that is so successful for Apple. They want people to perceive the iPhone as a luxury product… they can't sell it 300$, it would destroy the brand image.

Marketing 101

myxomatosis said,
Yeah they're expensive, but that's exactly the "brand image" that is so successful for Apple. They want people to perceive the iPhone as a luxury product… they can't sell it 300$, it would destroy the brand image.

Marketing 101

But if you used the same methodology with regards to the phone network the device runs on, people would be calling for a revolution. Even though the phone network has costs associated (manpower, cabling, data centres, cell towers etc) if you tried to charge $150 a month for it people would laugh at you.

But when apple does it? It's called branding

You're right it is Marketing 101. Subtitle underneath "Idiots abound in the world".

Funny how we always see these for iPhones but never any of the other flagship smartphones. I would guess that they're mostly the same. It isn't like Apple charges that much more for a no-contract iPhone than Samsung etc. charge for no-contract versions of their current flagship phones.

Dead'Soul said,
And, what about warranty and software development? iphone=iOS. Patents etc.

Per unit sold?

Costs will be small.

I'd guess adding in the extra stuff and then things like marketing, shipping, the device is probably about $250 all in.

Apologists saying the "true" price will be close to the selling price are deluded. If it were really like that apple wouldn't be making so much profit.

Up to you if you think the retail price is a fair one. I'm not sure I do.

technikal said,

Per unit sold?

Costs will be small.

I'd guess adding in the extra stuff and then things like marketing, shipping, the device is probably about $250 all in.

Apologists saying the "true" price will be close to the selling price are deluded. If it were really like that apple wouldn't be making so much profit.

Up to you if you think the retail price is a fair one. I'm not sure I do.

Agreed, apple are making obscene profits and to be honest its simply good business prectise, they have shareholders, they are there to make money, its a business so I have nothing against them selling at such margins simply because if I had a company and people drooled over my products to the point where they will blindly defend the markup costs and buy whatever I put in front of them, then I'd be doing it.

Its the people that get me, even when presented with facts they still deny, face it folks you are making apple a massive profit, if it wasn't selling like it is then it would come down in price simply because it can and would have to. But while demand is high, they will NEVER lower the price, even though they can - very comfortably.

Okay, I guess it would have been nice to compare this to Samsung and Nokia phones of the same price-point to judge whether they offer superior value for money.

Without these figures, it's really hard to judge that the manufacturer is pocketing more money or not. If it's about the same, then you can argue that all are just as greedy.

ArialBlue said,
Real Price of iPhone 5: $0 when you realize that you don't need one

Clever... Do you have a point, or are you just looking to be a troll?

Astra.Xtreme said,

Clever... Do you have a point, or are you just looking to be a troll?


Clearly not trolling as this is anti-Apple article.

ArialBlue said,

Clearly not trolling as this is anti-Apple article.

I think you are sadly mistaken. You do realize that all phones cost about this much to manufacture, right? The Lumia 900 is the same price and I'm sure the Galaxy S3 is around the same price as well.

primortal said,
The remaining dollars are mostly to recoup R&D

No, its because they can (not hating, just saying), its good business, if you can charge a massive markup AND sell loads, then why not? But it is obscene!

Enron said,
$7.00 box contents. $4.50 battery. No wonder they explode!

You do realize there are quite a few things in the box, right? Paperwork, charger, cord, headphones, etc. Not sure why the price is a big shocker.

Astra.Xtreme said,

You do realize there are quite a few things in the box, right? Paperwork, charger, cord, headphones, etc. Not sure why the price is a big shocker.

What? Paperwork, charger, cord, headphones, etc. do not add much to the cost, seriously this is incredible markup on a product, of course marketing and software are not accounted for but this is spread between every single sale - the markup is simply astonishing, there is no way around that.

duddit2 said,

What? Paperwork, charger, cord, headphones, etc. do not add much to the cost, seriously this is incredible markup on a product, of course marketing and software are not accounted for but this is spread between every single sale - the markup is simply astonishing, there is no way around that.

Yeah actually those parts do add up to that cost. A battery is one component and is not expensive to make. The markup is there to cover all the development costs, which are rather huge considering all the work they have to put in to crank these out every year. Plus compared to the manufacturing costs of other phones on the market, this isn't any cheaper. The Lumia 900 costs exactly the same.

They could sell them much cheaper and still makes lots of money, the thing is they don't need to, which is incredible to be quite honest.

xstex said,
They could sell them much cheaper and still makes lots of money, the thing is they don't need to, which is incredible to be quite honest.

There's no way that would happen now. They can't just cut the price drastically to bring more people in when they're already selling the way they are. It would just be stupid. If everyone knew how much their phones cost and the markup, then they may think twice. Again that won't happen. People are just too lazy and just want the cool toy at almost any cost.

dogmai79 said,

There's no way that would happen now. They can't just cut the price drastically to bring more people in when they're already selling the way they are. It would just be stupid. If everyone knew how much their phones cost and the markup, then they may think twice. Again that won't happen. People are just too lazy and just want the cool toy at almost any cost.

I never said it would happen, nor did I say I think it would. And of course, people who differ from what you like must only be doing because they are lazy. Sigh. Maybe people just like the iPhone.

xstex said,
They could sell them much cheaper and still makes lots of money, the thing is they don't need to, which is incredible to be quite honest.

i like the $10 for 16 gigs extra and $20 for 32 gigs extra, but they charge $100 and $200 extra for it! ouch!

Buttus said,

i like the $10 for 16 gigs extra and $20 for 32 gigs extra, but they charge $100 and $200 extra for it! ouch!

Dont know why people are so dumb as to let apple get away with that. Samsung should use these stats in their ads!

xstex said,
They could sell them much cheaper and still makes lots of money, the thing is they don't need to, which is incredible to be quite honest.

Yep, they know their user base is retarder and want this to continue... And about the price - sure it is not expensive. There is nothing new in it.