Teardown reveals iPhone parts cost two bills

Unlike video game consoles, phones are typically profitable to manufacture from day one and it turns out that the iPhone is no exception -- far from it, in fact. Teardown specialists at Portelligent claim that the 4GB iPhone runs Apple just $200 worth of components, while the 8GB adds an extra $20, not far off at all from iSuppli's slightly higher estimates from January. Granted those tallies don't include the actual cost of assembling the device -- but even so, those numbers are very far cries from the $500 and $600 asking prices at the register, leaving a healthy $299 and $379 respectively (of which an overwhelming majority are $379) for profit and miscellaneous costs. Interestingly, Portelligent's unceremonious destruction of an iPhone in the name of research revealed no further proof that Hon Hai / Foxconn is the ODM responsible for assembling the darned thing.

[Frankenstein Black @ Jul 2nd 2007 3:32PM]

"ARM1176JZF chip with TrustZone (enables trusted computing environment for media, apps, network, OS, etc. -- very bad for hackers)" He, he, heeee. How'd that get in there ;^)...
Let the battle begin. Bring it BITCHES!!!

[sean @ Jul 2nd 2007 5:52PM]

http://www.ipodhacks.com/article.php?sid=2291

[brad @ Jul 2nd 2007 3:34PM]

Apple usually does make a nice profit on its products, thats no surprise, but then again hopefully we would see either a)price drop b) more featuers in the next revision (gps,camera upgrade, copy freaking paste)

[Ben @ Jul 2nd 2007 3:35PM]

yeah, but there's gotta be a ton of overhead.

[Owned @ Jul 2nd 2007 3:35PM]

All Apple is...Over-priced hardware.

They need to do this to pay all the children putting these together at 50 cents an hour.

[Steve Jobs @ Jul 2nd 2007 3:36PM]

Move along people, there's nothing to see here.

[zonamanoz @ Jul 2nd 2007 4:38PM]

omg Steve Jobs!, can I haz an iFone?

[geezer @ Jul 2nd 2007 3:36PM]

well what did ya expect? most companies make a 100-200% profit margin on their products - and still we buy most of it!

[Jonathan M @ Jul 2nd 2007 5:55PM]

Weren't people bitching to no end about the 10% profit margins oil companies were making?

[Jimmy @ Jul 2nd 2007 3:37PM]

I think I will just stop reading this blog for two weeks. Maybe by then we can get some news other than the freakin' iPhone. Please, we do not need every other post to be about this gadget.

[fontendet24 @ Jul 2nd 2007 4:36PM]

WE want more! More iphone news!

Only US has it, all other planet - NOT and drooling about it!
US - is not all earth and you are not a Rome Pope.

MORE!

[I.M. Yerpappy @ Jul 2nd 2007 5:36PM]

You don't need to mention you're leaving, cause nobody gives a crap if you do. Just disappear forever and our iMerry lives will still go on. It's your loss, not ours. Unfortunately, you'll be back again to continue bitchin' and whinin' for more attention. Effin pathetic Endgadget junkie.

[Big @ Jul 2nd 2007 6:07PM]

I'm starting to think Engadget is a PRO APPLE, ANTI SONY, ANTI MICROSOFT, establishment.

[paloooz @ Jul 2nd 2007 9:36PM]

Yeah, the way it should be, and the way any rational person is.

[booyaka @ Jul 2nd 2007 3:37PM]

Who said all those iPhone accessories were free? =P

[vampmiller @ Jul 2nd 2007 3:37PM]

Good thing R&D cost absolutely nothing, so the profits are just 100% gravy for Apple.

[doyouflip @ Jul 2nd 2007 3:42PM]

That's what I was going to say. They pulled from the Leopard dev team to get this thing off the ground on time. Yup, that was allll free. Not to mention R&Dm patent law and the team of lawyers that's going to fight off every jackass who decides to sue because he got tired of wiping his fingerprints off the screen or realized after buying that he can't drop his T-mobile SIM into it.

[Argot @ Jul 2nd 2007 3:49PM]

Yeah, well, R&D can't be that expensive for Apple since they copied the design from Prada and the functions from Neonode....

Apple the new Microsoft.

[andy @ Jul 2nd 2007 3:37PM]

Yeah sure, the actual components cost $200, but the price of the assembly is not cheap, then there's paying the factory workers, packaging, millions on marketing, the designers and engineers who make this thing work get a good chunk of change.

All in all, that "$200 to make" argument is garbage.

[Matt B @ Jul 2nd 2007 3:38PM]

Heh, and I thought the Wii markup was pretty gratuitous.

[Smudded @ Jul 2nd 2007 3:39PM]

Isn't that basically Apple's philosophy for most of its products? Make it seem like you're extremely uncool if you don't have it and then make you pay out the butt for it. Granted that's a great business model for making tons of money, but it's really not fair to the consumer at all. Somehow Apple fanboys still don't care. "You're paying for the software!" Right.

[booyaka @ Jul 2nd 2007 3:44PM]

The same Apple fan boys getting it from all holes by Steve Jobs are the same ones that would pay $200 for a pair of pants because it's Abercrombie.

[arthur barnhouse @ Jul 2nd 2007 3:44PM]

Of course you're right that that kind of mark-up is silly. It's not like R&D, testing, and producing the OS costs money.

[Smudded @ Jul 2nd 2007 3:58PM]

R&D... The touchscreen technology previously existed. It's a phone. Is EDGE a new standard for data transfer? I could have made the commercials for the iPhone. The OS, as they've sated, is OSX with a few differences. Apple is making a killing off these phones from the get-go just as they are from any Apple TV they sell. Just accept the fact that Apple, while they make good products, is selling the iPhone for way more than they need to to make a good profit.

[arthur barnhouse @ Jul 2nd 2007 4:06PM]

We don't know how long they've been working on the iPhone. We've been hearing rumors as early as 2003, Four years ago. And yet again, you confuse simply shoving off-the-shelf tech with actual R&D. R&D is making dozens of different models to see which one works the best. It's testing a 3G version against an EDGE version for battery life. It's seeing how hard a consumer should have to press a button on the screen before it's uncomfortable. It's stress-testing to make sure it will survive in the wild. It's creating a completely new UI (It's also hardly minor tweaks) and seeing how this new UI looks in comparison to dozens of other mock-ups. It's testing the Usability of each piece of the new UI and seeing where improvements can be made. What R&D isn't is shoving a bunch of components into a handset and kicking it out the door, which is apparently what you seem to think it is.

[craig @ Jul 2nd 2007 4:56PM]

"R&D is making dozens of different models to see which one works the best. It's testing a 3G version against an EDGE version for battery life. It's seeing how hard a consumer should have to press a button on the screen before it's uncomfortable."

How do you know Apple did these things, Arthur?

I think it's especially unlikely that Apple tested 3G in any way.

[arthur barnhouse @ Jul 2nd 2007 5:05PM]

Considering their main selling point on the EDGE for iPhone is "It's got a significantly better battery life and more national coverage" yes I do think they tested this. The idea that they left anything to chance is pretty silly.

[Asher @ Jul 2nd 2007 3:42PM]

I hate analyses like this... What about the tremendous cost of R&D that went into designing the phone? They have to recoup those costs too. And as they do recoup them, the price of the iPhone will come down. Look at pharmaceutical companies as a parallel--they charge huge amounts of money for drugs that cost pennies to make. They do so to recoup the costs of R&D for the drug, as well as the efforts that went into 99 other drugs that never make it to market.

[brad @ Jul 2nd 2007 3:47PM]

i fail to see massive R&D in this phone..i really do

the radios in the phone were basically cut and paste, the hardrive they have experince with the ipod, the touchscreen is nothing new, really the only thing they had to R&D was multi-touch which is only software based...heck even the OS, they cut out the "data" as jobs puts it...its not like apple is making the electronics, they buy from third party

drug R&D is completly different than this, drugs require massive amounts of testing and realtering to get the dosage correct and approved....the iphone doesnt have as much R&D as you would thing

[Mark @ Jul 2nd 2007 3:49PM]

Hate to tell you but Apple isn't exactly the best about lowering their prices. They tend to keep a product at the same price right up until they release a new one, and then they just don't sell the old one anymore.

[frogbat @ Jul 2nd 2007 3:43PM]

always wondered if such teardowns include all components like the dock and the earphones that come in the box.


besides apple needs all the cash to pay off the 5000 lawsuits this will generate. Someone somewhere will try and claim a patent for use of fingertips to point at things and on the human respiratory system.

[Dan @ Jul 2nd 2007 3:45PM]

I'm sorry, this is absurd. How does anyone come to the conclusion that the materials cost equates to the production cost? This is a sophisticated electronic device, not a commodity like vegetables or concrete. You don't buy them by the pound.

[JeffNLA @ Jul 2nd 2007 3:48PM]

I agree Asher - the iphone has to be engineered. That ain't cheap.

[Fatima @ Jul 2nd 2007 3:49PM]

The more profit apple makes, the better for me!
~Shareholder

[Mike @ Jul 2nd 2007 3:51PM]

Yer...because the cost of a phone is purely the components, you have to pay AT&T, the promotional costs, the stock costs, the Research and development costs, Accesory costs and NUMEROUS other costs.
The price is justified imo

[cybernesto @ Jul 2nd 2007 3:51PM]

I don't think Apple is the only company to charge you for the software. Silicon is extremely cheap. The R&D and all the processes involved in developing such a software platform like mac os X, or better yet, to fit it into a device like an iPhone is not cheap at all.
I bought a tomtom GPS a month ago for 200€. If I had only bought the GPS module and the software for my PocketPC I had paid 160€. That means, a CPU, LCD, Windows CE, 512MB Flash, Bluetooth Link, Cable, and Charger costs to an end user 40euros. Now think how much does it cost to tomtom to produce it. 1 dollar?
Working for a company developing software for the automotive branch, I can confirm, that silicon makes up only about 10% of the end price. There are lot's of people and development involved to get such a product done.
So I really don't think it's fair to judge the price of any device just by the sum of its components.

[JeffM @ Jul 2nd 2007 5:09PM]

Whoa... you think Apple is paying AT&T for the iPhone? Doesn't it seem far more rational that Apple did _not_ pay AT&T a premium to be the only service provider for their new flagship mobile product?

People that say R&D is negligible have never worked in a large inefficient corporation - there is a lot of overhead to keep these things going. Plus-- have you seen the price of real estate in Cupertino, people don't work for cheap in the Silicon Valley.

[Japalmn @ Jul 2nd 2007 3:52PM]

Yet another iRipoff from Apple.

[Siva @ Jul 2nd 2007 6:04PM]

In consumer electronics, the typical markup is more than 100%. If something costs $100 to make, they sell it for $300 to $400 or even $500. What Apple is getting is not high? In fact, Apple might be sharing some of the revenues from AT&T.

[Juan @ Jul 2nd 2007 3:53PM]

Looks like we need a new "IT PRINTS MONEY!" graphic.

[Ross @ Jul 2nd 2007 3:53PM]

is this site called iphonegadget?

I'm bloody sick of it. Don't get me wrong, apple are a great, but this is now taking the piss

How long do you think till you get over it? well let me know and I will come back then

[arthur barnhouse @ Jul 2nd 2007 3:56PM]

We have these things called RSS feeds. And did you know that there is one just for you called, "iPhone Free Feed" so that I don't have to listen to whiny little bitches like you?

[Jesse S @ Jul 2nd 2007 3:58PM]

No, ApGadget.

[kuzu-b @ Jul 2nd 2007 3:55PM]

Don't forget the massive ad campaign, and the fact that Apple basically charged as much as they though people would spend on it, and were right. Will people FINALLY shut up about the cost of a PS3 now, considering that its FAR more expensive to make, has FAR more advanced technology, does FAR more, and is being sold at a LOSS? Probably not, because people are spoiled idiots who like to bitch and moan about everything. These are LUXURY items people, you don't HAVE to buy any of them so shut the **** up about the costs.

[LJKelley @ Jul 2nd 2007 4:01PM]

As an 360 fanboi I have to agree that the PS3 is much more of a modern wonder than the iPhone and if forced I would rather buy the PS3 than the iPhone. I have never claimed the PS3 was too expensive as a multidevice capable of Linux, Gaming, Blu-ray etc..., I have claimed it was too expensive as a gaming console.

[jay sea @ Jul 2nd 2007 4:16PM]

whats so cool about a ps3? i returned mine and got a 360.

[Smudded @ Jul 2nd 2007 4:30PM]

Massive ad campaign? How much did they pay the guy holding the phone in the commercials? Does that black background cost tons of money? Does it cost tons of money to run 15 second commercial spots? Wait, it was the musical score from the commercial that cost millions of dollars right? Whoops, turns out your average prosumer could have produced that commercial. Apple is already huge. The "marketing campaign" as you call it came from Steve himself at conventions and speaches. Hardware? Cheap. Softare? The OS already existed. Production? Not nearly as much as you people are making it out to be. Marketing? Extremely cheap. they made roughly $19,000,000 in straight profit (according to hardware costs) their first weekend. Even if you halve the profit due to extraneous costs thats still $9.5 mil in profit.

[kuzu-b @ Jul 2nd 2007 5:50PM]

Actually, it does cost a lot of money to run 15 second commercials, not to mention the giant iPhone displays in all the stores that were not just cardboard cutouts. And the point of my post wasn't the cost of the ad campaign it was the fact that they can charge whatever they feel like, it's a LUXURY ITEM. So like I said, stop your bitching, if it's more than you are willing to pay, don't buy it or wait for the price to go down.

[Rainier @ Jul 2nd 2007 4:11PM]

Fine! Let's all just buy the components and build it ourselves...sheesh!

[Alex @ Jul 2nd 2007 4:19PM]

Posts like this are pretty stupid. They don't take into account research and development cost (which even though the phoen isn't doing anything new, there would be R&D for ANY new phone, that doesnt' even take into account the interface of the iphone which is pretty original).

It also doesn't take into account marketing cost (they did advertise the hell out of this phone)...

Also, it doesn't take into account ATT stores making some money off this (which they may or may not, I don't know)...

Either way, all you idiots who keep saying "what a rip off", great, DON'T BUY IT...(I wouldn't buy it till the cost comes down either though, lol)...