Apple iPhone 4S’ Best Feature: Nearly 75 Percent Profit Margin

Apple iPhone 4S’ Best Feature: Nearly 75 Percent Profit Margin

The iPhone 4 versus the iPhone 4S

Sure, the new iPhone 4S has a brand-spanking new iOS 5, the endlessly cool Siri voice-recognition and HD-quality digital camera. But perhaps the most exciting feature for Apple is the 71 percent to 73 percent profit margin on each handset sold – and there should be millions, one analyst said.

Thanks to numerous Asian-based suppliers and Apple’s tight control, the iPhone 4S should cost just $170-$220 to make, according to Deutsche Bank analyst Chris Whitmore. Carrier subscribers will pay anywhere from $199 to $849 for the iPhone 4S, depending on its memory configuration.

With Apple making the iPhone 3GS free and cutting the 8GB iPhone 4 to just $99, “there is now an iPhone for every budget,” announced independent financial analyst Horace Dediu of Asymco. The ‘bill of materials’ figure from Whitmore is in line with earlier numbers released by researchers at UBM TechInsights.

UBM pronounced the iPhone 4S an ‘evolutionary design’ that cost $203 to build. Monday, the Cupertino, Calif. company announced there were more than 1 million pre-orders during the first weekend consumers could purchase the iPhone 4S.

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  • S. Mulji

    With those kinds of margins you would think they’d be able to lower the price of unlocked unsubsidized phones by at least $100.  They would still rake it in.

  • Matthew Teschke

    There’s little incentive to reduce price if they sell them just as fast as they can make them.

  • Patrick Smellie

    A  $203 bill of material doesn’t result in 75% profit margin.  Let’s start with the Royalties Apple is paying for 2G/3G to Qualcomm, Nokia, IDCC.  Hell Samsung is asking for 2.4% and they are a smaller player in RF patents.  I would estimate an additional 10-15% of the BOM for royalties and then someone needs to put the parts together, I don’t think Foxconn does that for free.  Add another 5%.  Then as a business we need to fund all the operating costs, guess you have never been in business.  We have these minor categories like R & D (3-5%)and Selling, General and Administrative expense (10-15%) and oh Uncle SAM wants 35%.  So when we get done that 75% markup over BOM results in a decent but not obscene profit for bring a cutting edge CE product to market.

  • Sam Parmenter

    Come on guys, I know that a sensationalist headline like this is great to bring people to the post but please try to at least put that in some context. Wow, a 75% profit on a phone costing potentially $800 odd dollars, marvellous. So they are not paying any carriers, companies for patents or development and replacement costs.

    Profit implies the amount that you have made bringing a product to market and I don’t think that apple took the afternoon off and spat this out with parts and technology they had lying around.

  • WVMikeP

    Those higher margins are likely subsidizing the free 3GS and the cheap iPhone4 to a degree.

  • dagamer34

    Consumer price – bill of materials != profit margin.

    This is one egregious mistake too many. Consider this reader unsubscribed from your RSS feed.

  • CharliK

    so do those amounts include the various licensing agreements that Apple may have had to file to be able to use some of the tech in the phones. Or are they looking at just the costs of the physical pieces and assuming that that is all the money behind production. 

  • Beall49

    supply chain ftw

  • Matt Langston

    lol john brownlee has to be the biggest fool 

  • obamapacman

    LOL, author recognition fail

  • obamapacman

    @Sam, Unfortunately it happens with every product release.

    Here’s my satire about Profit Margin of Microsoft Windows: http://obamapacman.com/2010/02

  • Hal

    Come on you guys!!!
    Apple = BUSINESS. not a philanthropy. get over it.
    They are the best in that spec, as they are in the other things they do.

  • CuntsOfMac

    Duhhhhhh of coarse crApple makes huge profits on it’s phone it’s a cheaply made hunk of shit assembled by slave labor for a dollar a day. Hey Sutherland keep posting stories about the obvious and you’ll dethrone Brownlee as the sites idiot hack.

About the author

Ed SutherlandEd Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.

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