iPhone Rings Up Hefty Profit for Apple
According to a preliminary teardown analysis by research firm iSuppli, Apple stands to make as much as a 50 percent profit on each phone sold.
The figure is of course preliminary, as no actual production models have been made available to the public. However, such high profit margins are nothing new for Apple. The company regularly has a margin of 45 percent or more across many of its Mac and iPod products.
For the 4GB version, the hardware cost totals $229.85, and a total expense of $245.83, yielding a 50.7 percent margin. The 8GB model is even more profitable, yielding a 53.1 percent profit margin on a $264.85 hardware cost and $280.82 total expense.
Such high margins also play into Apple's current marketing strategy. "With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, PhD, director and principal analyst with iSuppli.
However, with the mobile phone industry so competitive, these high margins may not last too long. At a price of $499 and $599, the devices are priced well above other phones in its category. In order to stay in the hunt, Apple may have to cut into margins earlier than it has in other categories.
The most expensive part in the device is the NAND Flash memory, estimated at $35.00 per chip. This is closely followed by the 3.5-inch touch screen at $33.50, and then the application processor at $18.50.