Apple's iPhone Margins Could Hit 55.6%, Says iSuppli

Now with an official fresh consumer-grade iPhone in its laboratories, CE analysis firm iSuppli can fine-tune its estimates of how much of a markup Apple adds to the device, based on its estimated bill of materials. Each 8 GB model which retails for $599, iSuppli estimates, cost Apple a total of $264.85 in manufacturing and parts costs.

While profit margins are certainly not unheard of, and are arguably the reason why capitalism exists in the first place, Apple's possible 55.6% gross take from each retail sale is, by any estimate, healthy. Other expenses for royalties on intellectual property, shipping, and certainly marketing must also be taken into account.

But with over half a million units believed to have been sold since Friday alone, there may be some movie studios today wondering whether they should have entered the electronics business instead.

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ISuppli's complete report is forthcoming; for now, the firm has discovered that Samsung - as expected - is "the biggest winner among the component suppliers," as its statement this morning reads. It supplies an estimated $76.25 in parts for each iPhone, including $6 per gigabyte of NAND flash memory, $14 for a 1 GB DDR SDRAM module, and an Advanced RISC (ARM) applications processor costing $14.25.

What about the advanced touch screen display - certainly Apple is spending a pretty penny for that? There are two primary components to this part. The display is manufactured by a German firm called Balda AG, which manufactures it in mainland China through TPK. Last month, a German newspaper reported Balda nabbed the contract from Sharp, which had been scheduled to produce displays in Japan but apparently was plagued with low yield problems. That costs $27. The touch-sensitive portion of the control reveals parts supplied by three manufacturers: Epson, Sharp, and Toshiba. Together, those parts cost $24.50, making the screen component slightly more than one-fifth responsible for the iPhone's materials costs.

Though Samsung plays a large role here as it has with iPod and iPod nano over the past few years, a surprisingly varied number of manufacturers have contributed to iPhone's design, iSuppli found out. National Semiconductor is one of them. Supplying a serial display interface chip that nets it $1.50 per unit, that design win could be enough to keep a still-struggling National on the map.

Infineon was also represented here, with digital baseband, radio frequency transceiver, and power management device contributions totaling an estimated $15.25 per unit. So while Samsung had received both praise and criticism last year for making a deal with Apple for iPod parts supplies that reduced its costs while shoving other manufacturers out of the mix, this time around, Samsung doesn't get to play boss.

It is probably too early to say how many iPhones Apple will sell over the next three years, but that won't stop iSuppli from trying to say it anyway. The firm expects Apple to ship a total of 4.5 million iPhones this year, increasing to a staggering 13.5 million units next year, before climbing to 30.02 million units through 2011. But iSuppli is not saying how it comes up with this figure. Remember, part of iPod's success story is that it split into multiple models, one of which now looks like a money clip. For a company to ship 30 million phones a year, it needs to have a fully-extended product line.

But even at 30 million phones per year, Apple as a phone manufacturer would have yet to crack 3% of global market share, based on figures supplied by Gartner for 2006. According to its figures, BenQ was the world's #6 mobile phone supplier last year with 2.4% market share, dropping from 2005. Market leader Nokia, meanwhile, shipped an estimated 344.9 million units last year. So perhaps iSuppli's estimate is not so far-fetched after all: Perhaps just like in the computer market, Apple could become a player, but not the player.

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