AfterDawn: News

Apple stands to make a bundle from iPhone

There's been so much buzz on the Internet lately over Apple's newest gadget, the iPhone. With whats being touted as the perfect merge between smartphone and personal audio device, the iPhone hits the market at a steep $500-$600 price tag. According to research company iSuppli, that figure looks to make Apple as much as a 50% profit on each iPhone produced. Apple appears to be betting on the brand loyalty of Apple enthusiasts to make their profit dreams come true.

"iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price," said Andrew Rassweiler, senior analyst for iSuppli. "Meanwhile, the 8GB Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price," he added.



This, of course is nothing new to Apple, as the iPods themselves have been found some time ago to be priced at least 45% over their build cost. With the recent lawsuits facing Apple, perhaps they need this margin to pay off their high priced lawyers. Additionally, the brand has achieved such superstar status that people will pay just about whatever price tag they put on their products. Analysts state this price point for the iPhone puts Apple in a prime position to lower the price and still gain a profit.

Source:
Reuters

Written by: Dave Horvath @ 19 Jan 2007 5:52

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• 19 comments

• solarf

  What a 50% profit margin,thats insane. They should lower the price tag just a bit.

  19.1.2007 06:37 #1

• DarkJello

  While I agree 50% profit margin is pretty huge, but I would think Apple spends tons of money developing something like this, and that isn't taken into account. A price 50-100 dollars lower would be quite welcome though :)

  19.1.2007 09:41 #2

• Silo45

  50% Wow!!!
  I think thats awsome. I would love to be in a position where I could charge a 50% mark-up from the original cost of manufacturing. Big-ups to Apple.
  Although I regret to announce that I will buying one, due to that fact that, well Im broke.
  But hey thats me...
  
  Silo.

  19.1.2007 10:04 #3

• ucbhere

  honestly, a ton of people follow the apple name like a cult, whereas their product quality and r&d do not show much more of an investment than other hand held electronics. their touting of gadgets and gizmos of most pointless use are the only thing that will sell this item. and working as a technician on apple products their reliability better have improved or their in worse trouble as a company with even more lawsuits.

  19.1.2007 12:38 #4

• OzMick

  50% profit margin isn't that obscene, everybody involved in the whole life cycle of manufacturing to sale has to make their own cut, remember. It isn't like Apple just walks into a retailer's store, drops them on the shelf and takes the entire sale value. Apple has to recoup R&D costs, along with advertising and development costs for iTunes, the wholesaler makes their margin, transport companies make their commission for delivery, the retailer has to make their profit to pay wages and for floor space etc...

  19.1.2007 14:55 #5

• borhan9

  I think the price is steep but was really the way it was going to be because its the first phone of its kind. I will wait and see what happens.

  19.1.2007 20:34 #6

• wetsparks

  If you think that 50% is a big profit margin think about clothing. A store will sell a shirt for $15 dollars before xmas, and after words you'll find the shirt on clearance for $5. That company is making a big deal out of it because it says Apple on the back.

  19.1.2007 21:56 #7

• dt92348

  I'm sure they'll lower prices once sales have leveled off to some prescribed sales volume only they know.

  20.1.2007 05:42 #8

• DarkJello

  If you know anything about Apple, it's that prices don't drop. Usually an item gets replaced with a better version, and all the older versions disappear so you can't even get a deal on those.

  20.1.2007 06:09 #9

• anubis66

  apple thinks so much of themselve, i wish Jobs wasnt so stuck up in himself. apple gives everyone the shaft. good products, but 2ce the price for half the product in most cases outside their computers.

  20.1.2007 14:11 #10

• ethernet

  apple should really bring the prices down
  i mean a psp screen is like 10 times bigger than the ipod nano, and psp is way more functional,i pod nano arround 200
  psp 200
  1 gig memory stick 15 in ohio. i mean come on
  

  20.1.2007 14:18 #11

• ethernet

  if u look at it closely it looks like a knock off palm
  

  20.1.2007 14:19 #12

• DarkJello

  I agree, but I'd call it a knock-up...

  20.1.2007 14:21 #13

• qwertass

  Um maybe I need to go back to school but if it costs $250 to make and you charge $500. That would be ratio of 2:1 not 1:2. Making it a 100% markup and not 50%.
  
  Again if my math is wrong somebody please correct me! W2 's are coming soon and I don't want to screw up my taxes!

  20.1.2007 15:05 #14

• wetsparks

  what they are saying is that 50% is profits. if you were talking about mark up percentage, then yes it would be a 100% markup.

  20.1.2007 15:28 #15

• eLeCTR0n

  what?
  
  50% profit is already a lot. what more do they want?
  

  20.1.2007 18:18 #16

• johnnydo

  come on kids.
  this article was meant to trash apple.
  most products you buy in the store are marked up %100 by the distributor after paying the chinese factory were they are made.
  in this case the article is talking about the HARDWARE BILL OF MATERIAL.
  not the cost of the item. Apple has a sizable company payroll, non of those people manufacture or assemble hardware. A major part of the cost of an Apple product is in the creation of software to make it functional.
  how much do you think the "parts" in a car cost?
  The fact that Apple replaces products all the time is because they are PAYING soiftware engineers to advance them.
  A concept thats a little foreign in the Microsoft World.
  
  
  

  20.1.2007 19:07 #17

• solarf

  after I think about it I wouldnt mind paying top dollar for this, I mean already own an MP3 phone just because i dont have to carry my phone,keys,lighter and an I pod. so this way all I carry is Iphone,keys and lighter. Now if only the iphone lit my cigarrettes and turned on my car......

  22.1.2007 09:04 #18

• nitrous3

  There is some speculation going around that Apple will lower the price on their iPhone on the day of the release, with a rebate ranging between $50-$150; depending on which version you buy(4GB or 8GB). So if this is true the price of the 4GB will around $400, which is very good compared to its features and that early in the market.

  18.4.2007 12:35 #19