If you go to an Apple Store and buy an iPhone 7 with 32GB of storage space, Apple will charge you $649.
That device only costs $224.80 to make, according to an estimate by research firm IHS, which took apart and studied Apple’s latest phone.
When IHS examined the cost of last year’s iPhone 6s, it estimated the cost of materials to come out to $211.50 — which suggests that this year’s model costs significantly more to make. IHS hasn’t estimated the cost of materials for the bigger iPhone 7 Plus yet.
If the estimate is accurate, it suggests that higher materials costs might be squeezing Apple’s legendary (for the consumer electronics industry) profit margins.
Last quarter, Apple reported its gross margin at 38%, and Apple’s Asian suppliers have been complaining recently that Apple’s been driving a hard bargain.
Part of the increase can be attributed to the fact that Apple is now including 32GB of storage as the base level, costing it $16.40 per iPhone sold. Other expensive components include the chip, which is estimated to cost $26.90, the display, at an estimated price of $43, and the device’s two cameras, which could cost $19.90 per phone.
Apple CEO Tim Cook has criticised teardown cost estimates in the past. In 2015, he said that he had “never seen one that’s even close to accurate.”
IHS teardowns don’t take into account several different costs that get factored into the final price of the iPhone, including warehousing, research and development, and marketing.
Here’s the IHS cost breakdown by component:
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