iSuppli sez iPhone 3G is running Apple $53 less than original

Tech firms seem to have this uncanny ability to significantly boost functionality while significantly reducing cost with each new generation of a product -- and you'll never believe this, but it looks like Apple is no exception. The teardown and bean-counting experts over at iSuppli are at it again with the iPhone 3G, finding that the whole kit and kaboodle tallies up to just $174.33 (give or take) for the 8GB model in material and manufacturing costs. That works out to about $53 less than iSuppli's estimate for the original 8GB model back in June of last year, an amount saved in part by moving to a single 10-layer circuit board (versus a pair of 6-layer boards). The firm figures Apple's shelling out about $50 in royalties for each iPhone 3G that rolls off the assembly line, leading to a grand total of $224.33 in costs. Offset that with a healthy AT&T subsidy, and all told, we're looking at something like a 55 percent margin to help Steve finance his next round of black turtlenecks.

[Via AppleInsider]

[ddub @ Jul 16th 2008 1:33AM]

I'm with stupids . ^^^

[Surur @ Jul 16th 2008 2:49AM]

You obviously don't have an electrical engineering degree, if you did you would understand that if apple made replaceable battery, the phone would be bulkier and less battery capacity as well as not being sleek.
-----------------------------------
@Fatima

You mean like the Samsung Omnia, which is the same size as the iPhone 3G but has a 1440 mah removable battery (not to mention metal back?)

[ben_j @ Jul 16th 2008 4:08AM]

@Surur: wtf?

[OX4 @ Jul 16th 2008 6:09AM]

No electrical engineering degree is gonna help you post to the right thread.

[Nitty @ Jul 16th 2008 7:10AM]

How about the case? Cases cost money too!

[ddub @ Jul 16th 2008 1:34PM]

Actually I do have an Electrical Engineering degree. But I don't what that has to do with my "I'm with stupids" comment.

[phoenixpr @ Jul 16th 2008 1:34AM]

I've always been number 1 fan of all Apple...
Especially that I've been waiting for an iPhone since it was a rumor. I was so excited I told everybody I was gonna get one. But the one thing that got me to jump ship on the iPhone was a simple fix. I had to be dependent on an Apple rep to change my battery. That don't fly with me at all, especially with identity theft in an upraise. I don't know who is hire in retails these day. It will be my luck I handed over my iPhone, if I had one to a disgruntle employee. You hear this crap all over the news every day, about employee stealing company information for their own gain. It's nothing new at all. It's happening NOW as you read this. Big issue here as well is you can not walk in with battery problems, you must make an appointment with an Apple Genius. Which adds even more DOWN time of you cell phone use. What next I have to go to Athletic Footwear to have them tie my sneakers, cause I bought it from their store?????? Please! Find another SUCKER! At least with an LG Dare your guaranty ZERO down time if you ever had battery issues. Because you can change it your self. The way it is suppose to be in life... In NYC it's THE LAW to use hand free dialing. So I use voice dialing like ten thousand times a day. I been using voice dialing for 22 years on so many CHEAP FREE phone. Hmm.. Why should anyone be looking toward the App Store to get sh*t it should already have in it? Shouldn't the App Store be for innovative Apps? Voice Dialing isn't innovative and shouldn't be in the App Store. It's like offering a phone with out a dialing capability, so now you will have to go to the App Store to download a dailing App to make Calls. Hello! It is 2008 isn't it?

[Fatima @ Jul 16th 2008 2:14AM]

Voice dialing is blatantly missing. But you are one hell of a paranoid freak. Also during non peak hours you can just walk in w/o appointment. I've done it many many times.

You obviously don't have an electrical engineering degree, if you did you would understand that if apple made replaceable battery, the phone would be bulkier and less battery capacity as well as not being sleek.

Get a USB cigarette adapter if your a power user and need to charge while driving.

[dazepro @ Jul 16th 2008 9:13AM]

I am not too sure if you have seen the tear-down photos of the new iPhone but I am sure the replacement process of the battery can be done while you wait or maybe even possibly by yourself. If you follow the below link you will see that Apple got smart and did not solder the battery in this time, so all you would have to do is open the phone and swap out the battery. I am sure someone at the Apple store could do it right in front of you if you asked.

http://www.appleinsider.com/articles/08/07/10/first_iphone_3g_tear_down_photos_live_from_new_zealand_launch.html

[white_ultras @ Jul 16th 2008 1:43AM]

Not a single genuine Apple part.

[Fatima @ Jul 16th 2008 2:09AM]

No shit shirlock Apple does not make components. Nor does Sony, Microsoft, or Nintendo.

[Byrdman @ Jul 16th 2008 2:09AM]

most of apples products, while bearing the apple logo, are produced by a third party. i believe the iphone is made by quanta.

[helloUser @ Jul 16th 2008 2:13AM]

lol, dont worry, the sheep still think apple is godlike.

[DarkLight @ Jul 16th 2008 2:31AM]

No no, Sony DOES make components..

I just bought one of their DSP chips

[Daza @ Jul 16th 2008 8:16AM]

Sony do make components, but they are not a significant contributor to the PS3 (apart from their stake in the Cell processor, I think Toshiba did most of the R&D with that).

[RIMShot @ Jul 16th 2008 8:45AM]

You obviously don't have an electrical engineering degree

[Jeff @ Jul 16th 2008 1:48PM]

@RIMshot ...so is that a new meme i missed?

[John @ Jul 16th 2008 5:25PM]

wait, you think Toshiba developed the Cell proc? Try IBM.

[Russ @ Jul 16th 2008 1:49AM]

I've never used voice dialing. Too much of a pain in my butt. Sure it's not the PERFECT phone, but if you don't like it, don't buy it. In the end, it's still the best smartphone out there. And with the TONS of apps, it'll be far and away the best tool around. 3G has an easier to change battery FYI.

[heshmati4 @ Jul 16th 2008 2:09AM]

Yes, their are only 2 screws on the iphone 3G.... It's easier to take out the battery but it's still not user replaceable though...

[Cellenin @ Jul 16th 2008 2:26AM]

Are the Dems in congress going hold a congressional hearing as to why apple is making so much??

[Nastro @ Jul 16th 2008 2:27AM]

Are the Dems in congress going hold a congressional hearing as to why apple is making so much??

[Kizorblade @ Jul 16th 2008 2:52AM]

I wonder how that happened... on two different accounts.

[Nastro @ Jul 16th 2008 2:27AM]

Are the Dems in congress going hold a congressional hearing as to why apple is making so much??

[andres @ Jul 16th 2008 4:36AM]

CCC-COMBO BREAK

[Michael LaFramboise @ Jul 16th 2008 2:31AM]

THEY SEZ THAT? NO WAI!

[Kizorblade @ Jul 16th 2008 2:51AM]

WAI!!!111ONE!ON!ETWO

[David @ Jul 16th 2008 2:34AM]

I don't think voice dialing is all that important. I don't know anyone who ever uses it except for ONE person and it's only because it's built into his car. As we move further into the hands-free law era I'm sure more auto manufacturers will offer BT in their head units.

[Joshua Ochs @ Jul 16th 2008 2:48AM]

Yes, and R&D, developers, packaging, and oh - those "Source Unidentifiable" items are all free. As are the marketing folks, store personnel, etc...

There is a lot of so-called "overhead" in any product. The physical materials or parts are usually a tiny fraction of the overall cost of doing business.

[TheGasMan @ Jul 16th 2008 1:31PM]

Engadget knows better than this -- especially after how many times they've posted similar Apple hardware price breakdowns and have been bombarded with posts. Why they keep doing this is anyone's guess. Maybe to encourage commenting. Maybe to incite class warfare (eg, evil greedy corporation making obscene profits!). Who knows.

[Jeff @ Jul 16th 2008 2:08PM]

I'm with TheGasMan.

this is just more of the same bullshit flame-bait hit-mongering.

good job engadget! integrity!

[Reality Check @ Jul 16th 2008 3:08AM]

Quoting the cost of the components is rather silly, since this fails to take into account research and development costs.

How much were all the iPhone engineers paid?
What about keeping the electricity on while they worked?
What about their health benefits?
What about advertising costs?
etc
etc

Silly.

[quiksilv3r @ Jul 16th 2008 3:25AM]

Other companies get by with a much lower margin, what's to say apple can't?

[erislover @ Jul 16th 2008 9:17AM]

R&D is a sunk cost, and should not figure into the price. If you suspect any company is including fixed or sunk costs into their pricing model, you have a real opportunity to undercut them and profit like mad, and I highly recommend starting your own company for the easy money.

http://en.wikipedia.org/wiki/Sunk_cost

[matt @ Jul 16th 2008 10:59AM]

@ Erislover

Go check your high school econ textbook again. Just because R&D is a sunk cost doesn't mean a company doesn't have to recoup it. If R&D costs > Total profit on product over lifetime --> Company loses money.

http://en.wikipedia.org/wiki/Profit

[Rand @ Jul 16th 2008 11:14AM]

Saying 55% margin is only valid if you IGNORE a bunch of other costs they don't talk about.

1.) Tooling costs - All those mechanical parts need tools to be made. And support builds in the MILLIONS they need a lot of those tools. Also...those tools have a limited life, meaning they will need to be replaced to continue production at some point.

2.) Royalty cost - Engadget left off iSupplies estimate of $50 for royalty payments. Unless you are Nokia, Sony-Ericson, Qualcomm, Siemens, or Motorola you can expect to pay a hefty fee to one or all of those 5 patent holders I just listed.

3.) Google Apps - You don't seriously believe Google is doing the map function on the iPhone for free do you?

4.) Yahoo Weather & Stocks - Same thing as Google, it ain't free.

5.) FVS/ICT - "Functional Verification Systems" and "In Circuit Test" - test fixtures that have to be made to support manufacturing of the product. Again to support builds in the millions. They are NOT cheap.

6.) Warranty and repair - Every iPhone shipped carries with it a "hidden" charge to pay for those iPhones that get replaced under warranty.

7.) R&D costs - Probably in the realm of 6-7 million dollars.

8.) Corporate Operating Expense - every product has an op-ex cost burdened against it to run the company. Everything from employee costs, facilities costs, IT costs, toilet paper for the Johns. A look at a quarterly report would tell you what Apple's Op-ex is as a percentage of revenue. A wild ass guess on my part without doing the math would be 15% or more for a company like Apple.

There are probably more costs involved but I've touched on the major ones right off the top of my head.

[erislover @ Jul 16th 2008 5:08PM]

@Matt

Sorry, but one does not "recoup" sunk costs. One determines whether the venture should be profitable in some time frame given the expected sunk costs, then decides whether or not to go ahead with the venture based on that information. When you are spending your R&D money, it has to come from your profits. Scientists, engineers, and the electric company, as a rule, don't work on promises that they will get their money once the iPhone starts selling later. Today's sunk and fixed costs come out of today's profits. It doesn't work any other way, except in PR people's wet dreams for justifying monopoly pricing (e.g., pharmaceutical companies).

[Johan S @ Jul 16th 2008 5:05AM]

If a pharmaceutical did this after they invent a wonder drug, people would call it profiteering.

When oil companies do this, people call profiteering.

Yes overpricing a drug may reduce the number of lives saved .. but the company deserves compensation for its work .. else the drug wouldnt exist at all for anyone. So u gotta decide .. companies either have the right to make crazy profits for their inventions or they don't.


Btw, I have no prob with companies pricing things according to how they can make the most money. It's their right,

[Chris @ Jul 16th 2008 8:13AM]

These things never include the labor costs and set-up costs for tools, dies, and machinery, not to mention R&D and development costs. Double that $174, I'd say. I would suspect that Apple is practically selling these at cost to gain market share, not making money at all.

Bad economics. It's a lot more complicated than material costs.

[Dead_Rebel @ Jul 16th 2008 8:17AM]

Ha, we replied at the same time, along the same lines. W0rd.

[erislover @ Jul 16th 2008 9:19AM]

Sunk cost. Look it up.

[matt @ Jul 16th 2008 10:59AM]

Lol erislover. Twice? Go run a lemonade stand before you deciding to be flippant.

[Dead_Rebel @ Jul 16th 2008 8:14AM]

How come this company didn't factor in labor costs? Insurance? Maintenance of facilities? Logistical Operations such as trucks/tailors/tires/fuel? What about marketing materials? Hello, overhead anyone? This shit doesn't come out of the blue, it has to be passed along to the consumer somewhere, even if it's only $45-$75 per unit, it's in there.

[Almighty- @ Jul 16th 2008 8:25AM]

Get a Life !

[anonymouspimp @ Jul 16th 2008 12:26PM]

It does say total bill of materials and manufacturing costs at the bottom of the list.

I don't know what manufacturing costs includes, but I would assume it includes some of what you are asking about. Probably not all the logistical stuff like shipping tho... or marketing materials. But I am sure thats a reasonably small fraction of the $175mil they made opening weekend.

I mean, how much could it cost to get these websites to hype up your product? I keed, I keed... (sort of) :)

[sicko @ Jul 16th 2008 12:48PM]

or would you say, iLife ?

[Jeff @ Jul 16th 2008 1:59PM]

just another piece of flamebait garbage from iSuppli, purposely reposted to engadget for all the hits it'll generate from people who want to say "this shit is stupid."

how tedious.

[John @ Jul 25th 2008 5:41PM]

I will buy from you
please email me at [e-mail]

I am seriuos , i will buy a lot of iphone 3G

[John @ Jul 25th 2008 9:18PM]

I will buy from you

please email me at [e-mail]

I am seriuos , i will buy a lot of iphone 3G