The cost of building an iPhone

Posted In Apple news - By Joon On Wednesday, February 22nd, 2012 With 0 Comments

An Asymco analyst published an interesting report recently which tries to find out what it costs Apple to pay for the manufacturing of each iPhone. Because of the iPhone, Apple has become an even bigger company than it was just with the Mac.

From iDB:

Dediu uses a number of resources, including manufacturing information that has recently come to light thanks to ABC’s “A Trip to the iFactory” documentary, to determine what Apple spends building each iPhone, from parts to shipping…

For starters, Horace says that Apple’s average revenue per handset is $650. So if the company’s [reported] profit margin on the iPhone is 55%, that means that its COGS (Cost of Goods Sold) is around $293 per phone. But where does that money go?

Well around $200 of it goes to BOM, or bill of materials. That’s how much Apple pays for all of the iPhone’s parts like the display, the cameras, the hard drives, etc. That leaves roughly $93 left to cover transportation/warehouse costs, manufacturing, and warranty (the cost of a returned iPhone) expenses.

Of the $93 dollars, the analyst believes that Apple begins to spend about $12.50 and 30 on the manufacturing of each phone. He determines this by using the details in the ABC Foxconn report:

  • There are 141 steps involved in building each iPhone, which require about 24 hours to complete
  • Of that 24 hours, 6 to 8 hours is spent installing and testing software, leaving about 17 hours for actual assembly.
  • Given that factory workers earn about $1.78/hr, 17 hours would equal $30 in labor costs

But there’s a good chance that each iPhone spends some of that 17 hours in automated operations, or sitting idle, waiting for the next process to begin. So Horace does the math, estimating that if each of the 141 steps takes 3 minutes, then human hands will only touch the iPhone for about 7 hours. Once again, at $1.78 per hour, that equals about $12 in labor — thus the $12.50 – $30 estimate.

So what do you think?

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