The cost of making Apple products, at a glance

Zippyjuan

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http://enews.earthlink.net/article/bus?guid=20120329/9bb9f782-95d0-4fa6-8414-40fc35fb16e6
From Associated Press
March 29, 2012 7:01 PM EDT
While Apple Inc.'s relationship with Hon Hai Precision Industry Co. gets a lot of attention, the Taiwanese company accounts for only a fraction of the cost of each device it assembles.

The Chinese factories of Hon Hai, also known as Foxconn, put together iPhones and iPads, but high-cost components like chips and screens come from a range of U.S., Taiwanese and South Korean companies.

Research firm IHS iSuppli provides the following cost breakdowns:

—Basic iPhone 4S

Price: $199 with two-year contract

—Cost of components

Memory chips: $28.20

Touch-sensitive display screen: $37

Wireless chips: $23.54

Camera: $17.60

Total cost of materials: $188

What it costs Apple to have the basic iPhone assembled in a Foxconn plant: $8

—Basic iPad

Price: $499

—Cost of components

Memory chips: $30.70

Touch-sensitive display screen: $117

Battery: $32

Total cost of materials: $306

What it costs Apple to have the basic iPad assembled in a Foxconn plant: $10
Click to expand...
 
This is the power of branding. It's like Nike-the products are cheap to produce but they can charge a heavy premium due to demand for that little swish logo.
 
heavenlyboy34 said:
This is the power of branding. It's like Nike-the products are cheap to produce but they can charge a heavy premium due to demand for that little swish logo.
Click to expand...

hardly. I think the point of this article is that Apple makes LITTLE profit if the costs are accurate. And the wages to assemble such high technology, compared to the materials, is negiligible. If the material costs are accurate, that means a $500 iPad has only about 40% profit (this is assuming it costs nothing to ship, handle and operate retail stores). Which is very low for anything that costs $300 to make.

A $500 iPad makes less than $200. And the $10 assemble fee is ridiculously low.

The labor costs are extremely low compared to the material costs. But labor costs is NOT the total cost.
 
er,no marketing and retailing costs? what about the cost of the apple designers themselves? the apple software and design engineers must cost a bomb
 
thoughtomator said:
just FYI, "$199 with 2-year contract" is a significantly different price than "$199"
Click to expand...

Yeah the actual price is about $600. Look at the price without a contract and that approximately what the carriers pay (obviously they get a discount though)
 
This information, and do forgive my ignorance, seems dubious to use as any argument, as the following observations one can make, only seem to beg questions:

For the basic iPhone 4s, it lists a cost of components, followed by some, certainly not all, components. Just under the cost of components is the total cost of materials. This has a few roadblocks to me. Foremost:

The cost of components added up equals $106.34, the cost of materials exceeds that. So..what is the point of listing the cost of components, followed by a cost of materials without specifying the actual costs of the actual materials, IF components and materials are exclusive of one another. If they are not exclusive from one another, then just lump them together(right?) If one does not have the same pricing information that the individuals working at the company have(for does that not dictate how they operate?), how are some to positively or negatively critique Apple?

As well, what constitutes the specific costs of components, that is to ask this: Apple certainly pays for touch-screens, but they certainly pay as well to have them shipped to the factories, do we know if shipping and fuel are added to the invoices, thus necessarily being included in the costs, or they not?

I feel like I did all this thinking for nothing. :toady: NOTHING!
 
thoughtomator said:
just FYI, "$199 with 2-year contract" is a significantly different price than "$199"
Click to expand...

Yep. A two year contract would mean the user pays $50-100 a month for 24 months (which is $1200-2400). I have no idea how much of it goes to Apple (and it's not dependent on how much a typical data plan costs).
 
eduardo89 said:
Yeah the actual price is about $600. Look at the price without a contract and that approximately what the carriers pay (obviously they get a discount though)
Click to expand...

In other words, an iPhone costs more than an iPad?
An iPod touch costs $200.
New iPad without cellular capability costs $500
iPad2 with cellular capability costs $530
New iPad with cellular costs $630

So, while an iPhone with cellular hardware doesn't cost $200, I don't think it costs $600 either.
 
Dsylexic said:
er,no marketing and retailing costs? what about the cost of the apple designers themselves? the apple software and design engineers must cost a bomb
Click to expand...

That's why I'm very skeptical the materials and components actually cost that much. If it was true that an iPad nets $200 profit, and the assembly costs $10. That means Apple really only pockets $190. Like you said, how can retail fit into this $190? Marketing may be cheap because they have a cult following.
 
Dsylexic said:
er,no marketing and retailing costs? what about the cost of the apple designers themselves? the apple software and design engineers must cost a bomb
Click to expand...

plus support costs and warranty repair costs, patents, cross-licensing agreements, shipping, legal, etc
 
onlyrp said:
That's why I'm very skeptical the materials and components actually cost that much. If it was true that an iPad nets $200 profit, and the assembly costs $10. That means Apple really only pockets $190. Like you said, how can retail fit into this $190? Marketing may be cheap because they have a cult following.
Click to expand...

Then they must make more money on the iPhone then. True it only costs us $200 for the base model, but AT&T (or Verizon) foots the bill for the other $400.
 
onlyrp said:
hardly. I think the point of this article is that Apple makes LITTLE profit if the costs are accurate. And the wages to assemble such high technology, compared to the materials, is negiligible. If the material costs are accurate, that means a $500 iPad has only about 40% profit (this is assuming it costs nothing to ship, handle and operate retail stores). Which is very low for anything that costs $300 to make.

A $500 iPad makes less than $200. And the $10 assemble fee is ridiculously low.

The labor costs are extremely low compared to the material costs. But labor costs is NOT the total cost.
Click to expand...
I stand corrected. :toady:
 
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