If you buy an iPhone 6 Plus instead of the smaller iPhone 6, Apple makes an extra $US84.50 in profit on the phone, according to Bloomberg, citing a manufacturing cost breakdown by the research form IHS.
Another parts analysis, from Teardown.com, found something similar: The larger screen and battery in the iPhone 6 Plus, plus a few other more marginal costs, add an extra $US15.50 to the cost of making an iPhone 6 Plus — but Apple is charging up to $US100 more for the larger phone.
You’re paying a whole lot more for iPhone 6 Plus even though it doesn’t cost Apple that much more to make it, in other words.
Here’s the Teardown chart:
Here is the IHS breakdown chart:
Teardown.com says the two aspects of iPhone 6 Plus that increase its manufacturing costs are the screen and the battery. The larger screen on iPhone 6 Plus costs $US9.50 more, bringing the total screen cost to $US51, and the larger battery is $US2.50 more, bringing that cost to $US6.
The overall effect on Apple’s initial profit after manufacturing costs alone is significant. That would mean initial profit on an iPhone 6 is about 73% of the $US849 price ($619.77). On iPhone 6 Plus it’s 75% of $US949 (or $US711.75). We got those numbers in part from Re/code.
Remember, this is BEFORE all the other costs that Apple must bear, like sales and marketing, staff, and distribution costs. So these numbers are somewhat misleading. However, they are interesting because they show that regardless of how you calculate the two sets of manufacturing costs, Apple is going to make more money on iPhone 6 Plus — simply because of its size — than it will on iPhone 6.
Now add in the way Apple has arranged pricing for the various storage levels inside the phones. As we told you previously, iPhone 6 models come with 16 GB, 64 GB, and 128 GB of storage (instead of the 16 GB, 32 GB, and 64 GB of prior models). Nobody is going to choose 16GB if they can help it — it’s way too small an amount for a modern smartphone. So a lot of customers will pay an extra $US100 for the higher range storage — adding a bunch more money to Apple’s margins.
This is all great news for Apple’s shareholders — it proves CEO Tim Cook is maintaining the company’s vast profit margins and adding to the $US13 billion pile of cash it keeps on its balance sheet.
Whether it’s good for consumers is a separate question.