iPhone X Costs Apple $370 in Materials: IHS Markit (ihsmarkit.com) 120
Engineers at marketing research firm IHS Markit cracked open the base version iPhone X, which Apple is selling at $999, this week. After preliminary physical dissection, the firm estimated that the iPhone X carries a bill of materials of $370. From their findings: With a starting price of $999, the iPhone X is $50 more than the previous most expensive iPhone, the 8 Plus 256 GB. As another point of comparison, Samsung's Galaxy S8 with 64 GB of NAND memory has a BOM of $302 and retails at around $720. "Typically, Apple utilizes a staggered pricing strategy between various models to give consumers a tradeoff between larger and smaller displays and standard and high-density storage," said Wayne Lam, principal analyst for mobile devices and networks at IHS Markit. "With the iPhone X, however, Apple appears to have set an aspirational starting price that suggests its flagship is intended for an even more premium class of smartphones." The teardown of the iPhone X revealed that its IR camera is supplied by Sony/Foxconn while the silicon is provided by ST Microelectronics. The flood illuminator is an IR emitter from Texas Instruments that's assembled on top of an application-specific integrated circuit (ASIC) and single-photon avalanche diode (SPAD) detector from ST Microelectronics. Finisar and Philips manufacture the dot projector. IHS Markit puts the rollup BOM cost for the TrueDepth sensor cluster at $16.70.
A Plumber Goes on a Call to Fix a Leaky Faucet... (Score:5, Insightful)
When he arrives at the customer's house, he inspects the faucet, installs a new rubber gasket, and gives the customer a bill for $100.
"This is outrageous," says the customer. "I demand an itemized bill."
The plumber quickly writes up an itemized bill:
Rubber Gasket: $0.50
Knowing where to put it: $99.50
Re:A Plumber Goes on a Call to Fix a Leaky Faucet. (Score:4, Insightful)
That's the essence of all economics. If you trace the components back to their source, its a few cents worth of sand, aluminum oxide and other ores and petroleum. Everything else is labor, licensing fees and debt service.
And taxes. So one could accurately say that an iPhone X costs $1000. Paid to Apple Jersey. Net profit for Apple USA: $0.
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These cost to make it versus sale price comparisons are useless.
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Taxes? What percentage of that $999 goes to taxes?
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Knowing Apple, probably somewhere in the vicinity of 0.01%, to Ireland.
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Dan Ariely, an economist, also has a similar story [danariely.com] to share:
As I mention in the video, what's really interesting is that this locksmith was penalized for getting better at his profession. He was tipped better when he was an apprentice and it took him longer to pick a lock, even though he would often break the lock! Now that it takes him only a moment, his customers complain that he is overcharging and they don't tip him. What this reveals is that consumers don't value goods and services solely by their utility, benefit from the service, but also a sense of fairness relating to how much effort was exerted.
Emphasis is mine.
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Rubber Gasket: $0.50
Knowing where to put it: $4.50
Having the experience to actually change the rubber gasket without fucking everything up and without making a leaky mess: $95.00
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rubber gasket
In my limited experience, they are usually called washers or o-rings. Gaskets usually don't involve moving parts so rarely fail.
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/Oblg. X marks the spot, aka Handyman's Invoice [snopes.com]
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You're kidding yourself if you think Apple doesn't wield huge bargaining power for their business. I believe Apple can purchase a finished good for under $500 if their component cost estimate of $370 is accurate.
The Two Locksmiths (Score:5, Interesting)
Good one, but I like this allegory better:
A locksmith is just getting started. He gets a call to a homeowner who has locked their keys in their house. He shows up, pulls out his lock pick set, spends half an hour working the lock before he gets it open. He scratches up the lock face a bit and loosens the pins so the key now rattles a bit in the tumbler. Hands the homeowner a bill for $50, which, seeing all the hard work the locksmith has done, gladly pays.
Fast forward ten years. The locksmith is now an expert at picking locks. He can do so without so much as scratching the lock face or damaging the lock in the slightest. Gets a call to a homeowner who has locked their keys in their house. Locksmith shows up, pulls out the correct tools the first time, and unlocks the door in ten seconds flat. Hands the homeowner a bill for $50, and promptly gets yelled at for having done hardly any work at all.
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Couldn't agree more.
It's one of the big reasons I tell my customers they are buying outcomes not time. How long it takes me to do the project isn't relevant. You have an outcome you want and I will provide you with that outcome at a very high standard. And I will charge you X. Just because I automated it to the Nth degree and did it in a fraction of the time of my competitors doesn't mean you pay me less. If anything you should pay me more as your systems were offline for less time and your internal st
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... except that money, represents labor; and why should I pay you with 10 hours of my labor, for 10 seconds of yours.
that outcome stuff, is for idiots who can't follow system dynamics.
You're free to shop around and get someone else to do it. But by your logic, why pay $70 (or whatever) for enjoying a football game on a stadium, when you can go to a high school game for free? They're all running anyway...
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No!
You only flat rate what you're guaranteed able to deliver and you must treat the contract of deliverables like it was handed to you directly by Jesus and never touch anything outside the guaranteed deliverable.
Otherwise, you sell your time by the hour. Do you know any attorney or doctor that will take random cases off the street and offer flat rate care? Most will only flat rate a very narrow spectrum of things (bladder infection or uncontested divorce), everything else is billed by the hour because th
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Horses for courses.
I agree with your $$ figure. I never negotiate based on hours. But also we are obviously in different industries as I can estimate extremely accurately how long a job will take me. Project variations just don't happen in my industry. If I was dealing with legacy systems that couldn't be scoped accurately I would agree with you. Then its a T&M or highly risk marked up.
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Of course (Score:2)
And, of course, the cost of putting the phone together is negligible.
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the iphone 7 cost $5 to put together according to apples own estimates.
And also the cost of doing business. (Score:3, Insightful)
People who get upset over margins have never ever run a business.
Re:Of course (Score:5, Insightful)
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It's almost as if (Score:5, Insightful)
Apple is a company that wants to make money. They also need to do things like, you know, pay people, rent/own/lease buildings/stores, pay for electricity, pay for marketing, bandwidth, servers, turn a profit, that sort of thing. It's almost as if they are selling phones in a capitalist society where they can set a price and people can choose to buy it or not. Gasp, they are selling their top of the line phone for significantly more than the parts required to make it cost!
I work at a software company. We don't even sell a physical thing, people just pay us for some bits they download. We must be doing an OK job because people keep paying us, it's like our software provides value for them to do work.
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Re:It's almost as if (Score:4, Interesting)
Plus, Apple has to do demand-management. The iPhone X is neat, it's got a lot of neat stuff in it, but Apple has to price it right because they can't make enough to satisfy demand. Sure they could sell it at $800, but demand will outstrip supply so much that everyone will complain about it being constantly out of stock.
Add in scalpers and the price might very well be $1500.
Apple can only make so many of the things - there are parts that are just hard to make (e.g., the screen, the 3D camera) and Samsung cannot produce any more than they're already producing. Samsung might be able to revert one of their other lines for iPhone X screen production instead of Galaxy S/Note 8 production, but that only adds a fractional more amount of screens to the market. Ditto the 3D camera which is apparently the bottleneck at the moment.
There in lies the challenge - where do you price it so demand is high, but not too high (or you send people to the competition and leave money to scalpers), but it's also not so high that once you satisfy initial demand that you're forced to drop the price.
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BOM cost is totally all a product costs to make... (Score:5, Interesting)
And of course assembly, quality assurance, engineering, shipping, etc... are all free. What greedy bastards, how dare they make money off of a product people want to buy.
The BOM of a cup of coffee... (Score:2)
... is less than 10 cent.
Newsflash: Companies sell things to make a profit! (Score:5, Interesting)
Today, the Internet was completely shocked to find out that Corporations sell things above cost -- what is collectively called "at a profit" in the business -- in order to sustain their infrastructure, support, and logistics of all the engineering, design, implementation, fees, certifications, and quality assurance needed to sell a product.
When Millennials were asked:
"How do companies produce these things you buy?"
they replied:
"I thought it was all magic pixie dust. What do you mean "people" have to spend months writing software for our devices? What's an Operating System? How is it different from an app?"
More News at 10. Film at 11.
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Yup. Nobody complains that a bag of socks is marked up 3x over wholesale.
What is the cost of the ingredients for a pint of beer? Pennies. It's mostly water. And they dare to charge five quid for it in a pub!
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I'm curious what the actual run-down of costs are.
If we assume $300 for BOM, then that's $700 for R&D, Salaries, Prototypes, Offices, etc...
Assuming they sell 200 million [statista.com] of them, we are talking $140 billion. Tim Cook's salary is $2m, then another $8m in incentives, so we'll say $10m. We know that not everyone in Cupertino is making that kind of money, and they don't have 1,400 Tim Cook's on payroll. Where exactly is that line between "covering costs", "making profit", and "Scrooge McDuck greedy"?
Apple
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Uh, the WHOLE point of a company is to maximize revenues while minimizing expenses. I'm not saying it is right, but that's the nature of the beast (Capitalism).
How MUCH profit is too much? 2x? 5x? 10x? 20x? Where do you draw this arbitrary line and make a stand saying "You are fleecing your customers TOO much?"
Apple has a LONG history of driving hardware expenses down to maximize profits. i.e. When they sold (Floppy) Disk Drives for the Apple 2. [apple2history.org]
Price has little to do with cost (Score:2)
The cost of a product only dictate whether it is made or not. If you cannot sell at more than cost, it's insane to produce it. Aside of that, and as soon as the price you can ask for (and getting it) is higher than cost, cost becomes a minor variable in the price.
The main question is at what price you can maximize your profits. Can I sell so many units more if I make it 10 bucks cheaper that it offsets those 10 bucks? Will my sales drop less than what asking 10 bucks more per unit nets me? This is what dete
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That's the moment I close my store and hold out the hand for unemployment money.
So what? (Score:2)
Re:That's so Jewish (Score:5, Insightful)
Markups like this, in all kinds of industries, are not uncommon, and quite frankly, are to be expected.
It is foolish to expect that a provider of a product will sell a product in retail for as low as they can and still make what they think will be a respectable profit when they can make far more by selling it for the most that they can that people are still willing to buy it for.
Is Apple being greedy? Of course they are... but it's their product, and they have absolutely every right to dictate how much they want the end user to pay for it.
Re:That's so Jewish (Score:4, Insightful)
A mash-up of components without software and without online services would be as useful as a rock.
What about all the services included with the iPhone? Email account, iMessages, Facetime, iCloud, App store (some applications are free but Apple still has to run all the backend even if you never buy anything there).
There's also all the engineers to pay for designing the hardware, all the software developers to pay for writing iOS and all the included programs.
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You forgot support. And the updates that will inevitably be necessary.
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They're have to ask them to move to the Channel Island of Jersey to pay for them, since that's where all their money is though...
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Also, if I had all the BOM on hand, what the fuck would I do with a bucket of stuff?
It's not self-assembled, self-shipped, self-marketed.
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the assembly is worth about $5-10
shipping is probably even cheaper.
Marketing is not done for every iPhone produced, but again, given the quantities Apple sells, ends up pretty low on a per phone cost.
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A mash-up of components without software and without online services would be as useful as a rock.
What about all the services included with the iPhone? Email account, iMessages, Facetime, iCloud, App store (some applications are free but Apple still has to run all the backend even if you never buy anything there).
There's also all the engineers to pay for designing the hardware, all the software developers to pay for writing iOS and all the included programs.
A $999 PC has all that (and more), but the BOM cost is much higher and the profit margin much lower. Are you saying engineers who design PC and components, and its software, are working for free?
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Miniaturization and tight integration of components isn't free.
Re:That's so Jewish (Score:4, Interesting)
I agree, but that is included in the BOM cost.
By the way, the CPU, the display and the battery are all more expensive to make on a PC compared to a phone. So is the power supply, the RAM, the storage, and obviously the keyboard. The only thing which is more expensive on the smartphone is the cellular radio, which the PC almost always lacks.
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a $999 PC has cost subsidized by bundled software. Microsoft drops the price of their OS for OEM's to spread their software more (OEM's paid something like $90, the rest of us paid $150 or more for XP). Not to mention all the crapware that's bundled in. Software vendors pay to put that crapware on.
You don't see near the same level of crap or 3rd party stuff on iOS. Samsung phones have their own crap, so no savings there either.
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Even if what you said was true, Apple's $999 PC (say base level Macbook) cost them a lot more to make then their $999 iPhone.
And Apple has big margins on PCs compared to the rest of the industry.
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The market dictates the price. If stupid morons are willing to pay $999, then that's the price. If the product doesn't sell, then a new price is set.
Apple dictates nothing.
And clearly their products are over-priced.
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Re:That's so Jewish (Score:5, Insightful)
A $500 meal at a fancy restaurant is made from $10 worth of food.
How many years of R&D were behind this phone. How many failed ideas tried. Redesign Because of changes in competition... plus they will only sell this phone for about a year until the next version.
The parts breakdown is more or less what will be needed for a knockoff product that will get sold next year.
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The *only* reason a profit-seeking company has to ever try and make its products more affordable is if they feel that their profits would actually go up as a result. If you have already have a massive audience that
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Well yes... but they do, in a way, dictate the price. They make their own decision how much of a potential market they are willing to sacrifice to price it at a higher level, and price it accordingly. It is the actual market demand at whatever price they offer it that determines how much of it will really sell, but you can be sure that if Apple figured they
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Markups like this, in all kinds of industries, are not uncommon, and quite frankly, are to be expected.
I am surprised at how LOW the markup is. I have worked for companies that charge over a thousand dollars for a product with $20 worth of components. They have no choice, because their NRE is spread across far fewer units.
Anyway, Apple is not paying "list price", and their BOM is likely way less than $370.
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We have every right to talk about how stupid it is. :) Oh silly stupid us.
Naturally we're poor and just jealous in the eyes of the Apple consumer
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Markups like this, in all kinds of industries, are not uncommon, and quite frankly, are to be expected.
Not in the consumer electronics industry.
PC and TV have much lower margins. Video game consoles are sold at loss to sell games. So did cell phones for most of their existence.
Markups like this are uncommon.
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That is only true when there is a sense by the company that they need to be competitive on price. Apple doesn't feel that way.
And the fact that people buy it despite the high markups proves that they are right.
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Of course. But this is still an anomaly in the market.
Market forces should force lower margins in the future. Apple knows it and is trying to profit while it lasts.
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So they get all confused that Apple can get away with over-pricing their product and still sell a load, when according to the laws of rational economic self interest everyone should be buying Samsung instead.
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I am pretty sure it has more to do with your racist epithets than your question.
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Pics of the five women or it didn't happen.