According to a new report by IHS, Apple’s component costs for the iPhone 7 have risen compared to the previous iPhone, although Apple is still making a tidy margin higher than the industry average. The report says Apple’s bill of materials for a 4.7-inch iPhone 7 with the base 32GB storage is $220.80. Apple sells this iPhone 7 for $649 at retail.
"The iPhone 7 Plus would also distinguish itself from the iPhone 7 due to display size, larger enclosure costs, the dual-cameras, a larger battery, and an increased presence of power management electronics," IHS Senior Research Director Andrew Rassweiler said. The iPhone 7 Plus includes longer battery life than the iPhone 7 in addition to two 12 megapixel rear cameras.
Based on the IHS breakdown, the margins on the 4.7-inch iPhones have narrowed as Apple maintained the $649 starting price, but the company seems to have offset this by raising the price of the iPhone 7 Plus. The iPhone 7 Plus costs $769 for a model with 32 GB of storage compared with last year’s $749 entry-level price. Apple is also holding up its overall margins by reserving the more costly glossy black manufacturing process for the 128 GB and 256 GB models.
"No single thing is driving the cost up," Rassweiler said, rather it’s a combination of multiple factors. The iPhone 6S’s in-box materials were about $6, according to an updated analysis, while the iPhone 7’s are $11.80, according to IHS. The firm attributes the cost increase to the inclusion of new headphones with a Lightning connector to offset the headphone jack’s removal and an adapter for headphones not directly compatible with the iPhone 7.
While IHS estimates a build of materials, the firm says that "there are other costs, like software, that go beyond build of materials, that are not considered,”"so it doesn’t provide a gross margin value.
The analysis breakdown says Apple pays $26 for every A10 system-on-a-chip. IHS claims that the chip runs on a 16 nanometer process and features a six-core GPU. The front and back cameras cost just under $20 as a pair. The most expensive component is the display; Apple seemingly pays $39 for its 4.7-inch IPS LCD panels. In contrast, the 1960 mAH battery costs just $2.50.
The cost for the 32GB flash storage and 2GB RAM total $16.40 per iPhone sold. Apple will make even more money from the higher end SKUs as increasing the storage from 32GB to 128GB costs Apple a mere few dollars but the company charges $100 for the upgrade.