Surprise! Apple's making a lot of money!
Apple is generating a nice profit on its latest iPhone.
The company’s latest release, the iPhone SE, costs Apple $160 to build, according to analyst IHS IHS and its Teardown and Cost Benchmarking service. The analysis firm, which tears down devices and estimates their cost, says that all of the 16GB iPhone SE’s components cost a total of $156.20. The iPhone maker spends a little less than $4 on actual manufacturing, bringing the total cost to build the handset to $160, IHS estimates.
Apple started shipping the 4-inch iPhone SE on March 31. The smartphone sports a 4-inch screen, Apple’s A9 processor, and a 12-megapixel camera. The iPhone SE is designed to compete within the mid-range smartphone market as well as emerging markets around the world, where customers are buying their first or second smartphones.
At $160, Apple’s 16GB iPhone SE is a nice money-maker for the company. Apple sells the 16GB model for $399 along with a $499 64GB option, which is about $11 more expensive to build because it comes with more storage. Assuming the IHS data is correct (the company only estimates costs and does not get data from Apple), Apple is thought to be generating a profit of $239 on each 16GB iPhone SE it sells. Apple makes $328 on the 64GB model, IHS estimates.
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In other words, Apple’s iPhone SE is one profitable handset. Additionally, the iPhone SE could be a hefty contributor to Apple’s bottom line this year. The tech giant boasts it sold 30 million 4-inch iPhones last year, alone.
Those who have been watching Apple’s quarterly results, however, are likely not surprised. The Cupertino, Calif.-based company generates billions of dollars in profits each quarter, thanks in large part to its ability to reduce component and manufacturing costs but still offer its devices at lofty price tags. During its last-reported quarter ended December 26, for instance, Apple’s profit hit $18.4 billion on $75.9 billion in revenue. Both were quarterly records.
While Apple doesn’t break out its profit margins for each product category, the iPhone is critical to its success. During the last-reported quarter, Apple’s iPhone accounted for nearly $52 billion of its total revenue. It’s also been one of the main drivers for the company’s profits over the years, thanks to Apple’s ability to control its supply chain and keep costs low whenever possible.
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According to IHS, one of the iPhone SE’s “costliest” components is its 4-inch display, which costs about $20 on its own. IHS estimates Apple pays $22 for the iPhone SE’s A9 processor and $15 for the processor that handles wireless connectivity to carrier networks. The lithium-ion battery in the iPhone SE costs just $2.15, according to IHS.
In addition to pricing, IHS found when looking under the iPhone SE’s hood that it’s an “amalgamation” of several predecessors. The company noted that the iPhone SE comes with identical components to the iPhone 6 and iPhone 6s, including the radio frequency chips in the former and the A9 processor in the latter. Apple also likely saved some cash by delivering a nearly identical design to the iPhone 5s, which was discontinued after the iPhone SE was unveiled.
That said, the iPhone is no treat to manufacture. In fact, Apple enlisted the help of three manufacturers—Japan Display, LG Display, and Sharp—to ensure it can accommodate customer demand.
“Because the iPhone display is difficult to manufacture, Apple has qualified three suppliers to ensure an adequate and ongoing supply,” said David Hsieh, senior director of displays at IHS Technology, in a statement.
Apple declined to comment on claims about its iPhone’s profitability.