Apple iPhone to Generate Nearly 50 Percent Margin

Jan 18, 2007, 00:00 ET from iSuppli Corporation

    EL SEGUNDO, Calif., Jan. 18 /PRNewswire/ -- Each Apple iPhone sold will
 generate nearly a 50 percent gross margin for Apple Inc. and partner
 Cingular Wireless, giving the companies a hefty profit, as well as plenty
 of room for future price cuts, according to a preliminary functional Bill
 of Materials (BoM) estimate created by iSuppli Corp.
     "iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a
 $229.85 hardware BoM and manufacturing cost and a $245.83 total expense,
 yielding a 49.3 percent margin on each unit sold at the $499 retail price,"
 said Andrew Rassweiler, teardown services manager and senior analyst for
 iSuppli. "Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware
 cost and a $280.83 total expense, amounting to a 46.9 percent margin at the
 $599 retail price."
     While iSuppli has a high degree of confidence in its conclusions, these
 figures are considered preliminary until we perform an actual physical
 teardown and analysis of the Apple iPhone. For Apple, such a strong
 hardware profit is par for the course, with the company having achieved
 margins of 45 percent and more in products including the iMac and iPod
 nano, according to iSuppli. However, because Apple is facing extensive
 competition in the music-phone market, the company may need to cut into its
 margins to reduce pricing in the future.
     "With a 50 percent gross margin, Apple is setting itself up for
 aggressive price declines going forward," said Jagdish Rebello, PhD,
 director and principal analyst with iSuppli.
     iSuppli developed its preliminary functional BoM estimate based on an
 analysis of the capacity and features of the Apple iPhone, combined with
 information from materials from Apple, company sources and third-party
 publications. To further help determine the content of the Apple iPhone,
 iSuppli leveraged the extensive knowledge of its Teardown Analysis service.
     iSuppli also employed data from its Mobile Handset Cost Model and
 Design Forecast Tool. This estimate differs from iSuppli's typical teardown
 analysis of electronic equipment. iSuppli's teardowns involve the actual
 physical dissection of electronic equipment in order to make first-hand
 observations of equipment content and design.
     For a full version of this release, including figures illustrating
 issues discussed in this release, please visit:
     All Information and Intellectual Property Contained Herein is the Sole
 Property of iSuppli Corporation
     About iSuppli Corporation
     iSuppli Corporation is the global leader in technology value chain
 research and advisory services. iSuppli provides market intelligence
 services for the EMS, OEM and supplier communities in addition to servicing
 consumer electronics and media concerns. Services afforded by iSuppli range
 from electronic component research to device-specific application market
 forecasts, from teardown analysis to consumer electronics and from display
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SOURCE iSuppli Corporation