iPhone to provide Apple with juicy margin

By Matthew Henry

USA: A global value chain research group has estimated that each Apple iPhone will generate nearly 50 per cent gross margin for Apple Inc and its development partner Cingular Wireless.

US-based iSuppli Corporation calculated the cost of making each iPhone through a bill of materials analysis.

“iSuppli estimates the four gigabyte version of the Apple iPhone will carry a $US229.85 hardware bill of materials and a $245.83 total expense, yielding a 49.3 per cent margin on each unit sold at the $US499 retail price,” said iSuppli teardown services manager and senior analyst, Andrew Rassweiler.

“Meanwhile, the eight gigabyte iPhone will spport a $US264.85 hardware cost and a $US280.83 total cost, amounting to a 46.9 per cent margin at the $US599 retail price.”

The company claims margins of 45 per cent or more are not unusual for Apple with the company having achieved similar margins with its iMac computers and iPod Nano music players.

iSuppli also makes the claim that Apple has allowed for a rapid reduction in retail pricing if competition in the music phone market heats up.

“With a 50 per cent gross margin, Apple is setting itself up for aggressive price declines going forward,” said iSuppli director and principal analyst, Jagdish Rebello.

The company considers its figures preliminary, and will not know the true cost of each iPhone until it can conduct a physical ‘teardown’ of an iPhone to determine its exact componentry.

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