How Much Do the New iPhones Cost to Build? (AAPL)

With the increasing market size for smartphones, different companies compete for innovation that entails new features. These new features, however, mean additional costs. With the emergence of the new iPhone models that were recently released, IHS Markit reveals the cost of creating the revamped iPhones.

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Apple (NASDAQ:AAPL) recently unveiled the new iPhone 8, 8 Plus and X. The prices of these smartphones are definitely higher compared to the previous iPhones.

Apple’s iPhone 8 Plus features 64-gigabyte of NAND flash memory. The smartphone’s bill of materials (BOM) cost came in at $288.08. After adding the basic manufacturing cost of $7.36, the total expense in making an iPhone 8 Plus becomes $295.44. Apple sells this model in the market for $799. On the other hand, the BOM for iPhone 8 is $247.51. Its market price is $699. According to IHS Markit, a big chunk of the cost comes from increased NAND flash memory content and new wireless charging components. Only the iPhone X will feature an edge-to-edge OLED display. The other new models will continue to have the traditional LCD displays but with a better support for HDR rendering for higher dynamic range and visual quality of video content.

Similar to the previous iPhones, the iPhone 8 Plus has a 5.5-inch Full HD display with a hardened glass and aluminum frame. The phones are available in colors of rose gold, silver, and space grey. One of the significant changes to the iPhone models is the wireless charging feature. Hence, the aluminum back of the phone was changed into a glass back. Some of the upgraded features of iPhone 8 and 8 Plus include a new proprietary six-core, 64-bit A11 Bionic chip. The chip is manufactured using a new 10nm process. This new feature enables the phone to run around 30 percent faster than its predecessor. The battery is prolonged as the phone runs faster at half the power. However, wireless charging is normally slower than cord charging. The cameras and the A11 Bionic chip have been optimized for augmented reality. The new iPhone 8 Plus also includes new sensors with lenses featuring f1.8 and f2.8 apertures. New color filters were added.

The senior analyst for mobile headsets, Gerrit Schneeman, said : “The new iPhone 8 and 8 Plus, and later the iPhone X, are important devices for Apple and anticipation is running high. Apple’s shipments for the last quarter were flat year-on-year and Samsung’s Galaxy S8 devices have been successful in the high-end pricing segment, creating a competitive environment. The iPhone X stands to further confirm Apple’s grip on the premium pricing tier when it becomes available in November.”

Tight competition between 3 smartphone makers has been ongoing. According to the IHS Markit Smartphone Model Market Tracker for Q3 2017, Samsung is on top, with 23% of the market; Apple comes in second, with 12%; followed by Huawei, with 11%.

Andrew Rassweiler, senior director of IHS Technology’s cost benchmarking team, said: “The higher total BOM cost for the iPhone 8 Plus can’t be tied to a single area or feature. The higher cost is the result of slower annual component cost erosion tied in with additional features.”

“Our expectation is that Apple will absolutely maintain healthy margins. Apple likes to create the best products and a good return on them. What is remarkable about the iPhone is Apple has persuaded consumers to put more of their income towards their smartphone. At the same time, Apple has maintained historically excellent margins,” said Ian Fogg, head of mobile at IHS Markit.

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