How much costs an apple

The Cost of Making an iPhone

Apple (AAPL) is one of the most popular companies in the world and produces one of the most ubiquitous smartphones. Despite the iPhone being one of the most sought after products in the world, as of 2019, Apple was third in market share for smartphones, behind Samsung and Huawei.

Apple controls 14.5% of the global smartphone market share, while Samsung controls 21.8% and Huawei controls 17.6%. That being said, in terms of profits from smartphones, Apple is the leader. The company took 66% of the industry’s profits and 32% of revenue in 2019.

It seems that the company must be making a sizable markup if it’s the leader in profits but third in sales. Let’s find out how much it costs to make this iconic product.

iPhone 11 Pro Max

The current and most expensive iPhone is the iPhone 11 pro max, released in late 2019. Depending on the storage size, the cost of the phone ranges from $1,099 to $1,449. It’s quite a hefty price tag, especially when it’s estimated that the actual cost of all the components to make the phone amounts to approximately $490.50.

Cost Breakdown

The breakdown of the cost of the components of the phone is as follows:

• Screen: $66.50
• Battery: $10.50
• Triple Camera: $73.50
• Processor, Modems, and Memory: $159
• Sensors, Holding Material, Assembly, and Other: $181

It’s important to note that this cost does not include research and development (R&D) or marketing, which would increase the price of the phone.

Labor Costs

The iPhone is primarily assembled in China by Taiwanese companies, such as Foxconn. The starting wage for an iPhone worker in China is $3.15 per hour. Much lower than the minimum wage in the U.S., which is $7.25 per hour. In 2018, it was quoted that employees at Foxconn make around $300 a month.

According to Tim Cook, the CEO of Apple, the reason to build in China is not because of the lower labor costs. If this were the case, Apple could make its phones in even cheaper locations. The main reason, according to Cook, is the skill required in tooling engineering. He claims that the specific skill set is no longer available in the U.S., but in China the expertise is prevalent.

In addition, logistically, China makes the most sense to ship a product around the world as the country has seven of the world’s largest 10 ports. If Apple were to build the iPhone in the U.S., it would only be able to build a small amount a year at a significantly higher cost.

Labor Conditions

In the early days of iPhone production, there were reports that labor conditions for workers were awful, however, this seems to have improved over time. According to some employees at Foxconn, the conditions are no worse when compared to other factories in China, and sometimes better. Outside of the big cities in China, most of the country is still underdeveloped and the cost of living is low, resulting in wages that may appear low when compared to Western society. The issue, really then, is not the wages, but the conditions employees endure to earn those wages.

The Bottom Line

Apple is a very successful company, and as consumers, we pay a premium price for the products the company makes. Some people purchase Apple products to become part of the ‘trendy’ Apple brand. However, for Apple to maintain its high profits and low manufacturing costs, the company will continue to manufacture its phones in China, as it looks for other low-cost locations, such as India and Vietnam.

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The Economics of the iPhone

What Are the Economics of the iPhone?

It’s estimated that more than 900 million people in the world own an iPhone.   From our culture to the economy, the small, handheld device has made a splash, changing the way we live, and that influence is likely to continue.

Apple Inc. (AAPL) unveiled the XR and XS in 2018, which was the company’s cheapest phones in recent years.     Meanwhile, the iPhone X saw its international launch with a $999 price tag.   In 2019, Apple unveiled its latest iPhone with the iPhone 11, which has a dual-camera lens and the iPhone 11 Pro along with its three camera lenses. 

However, Apple’s greatest product has also been its greatest curse. The iPhone makes up approximately 50% of the company’s total revenue, meaning the company is at the whim of the mobile smartphone market. As a result, Apple has been busy creating ancillary services and products that complement the iPhone. 

With all of the products and services intertwined, it’s made it challenging for investors to determine, just how much money Apple earns from iPhone sales.

Key Takeaways

• Sales from the iPhone make up more than 50% of Apple’s total revenue. 
• Although it’s estimated that 900 million people own an iPhone worldwide,   sales were down in 2019 versus 2018. 
• Apple’s services and wearables businesses grew by 16% and 41% respectively, which indirectly adds new revenue streams for the iPhone. 

Understanding How the iPhone Makes Money

Investors and analysts can not easily calculate how much profit Apple earns on each product. Apple, in the past, had reported unit sales for each product. However, the company has stopped that practice and instead, reports revenue by product. The table below contains the products and services revenues for the past three years. The data was pulled from the company’s 10K report on September 28, 2019. 

• Apple reported $260 billion in revenue for the end of the company’s 2019 fiscal year–highlighted in green in the table below.
• The iPhone generated $142.3 billion in revenue in 2019, meaning the iPhone represented approximately 55% of the total revenue for the year.
• The iPhone revenue declined in 2019 by 14% versus 2018. However, revenue for 2017 was an 18% increase from the year prior. 

Apple is one of the most valuable companies to date, yet more than 50% of its revenue depends on one product line.

Services and Wearables

Apple has been actively expanding its services business in recent years, which includes iTunes and Apple T.V. The company has also grown its wearables business such as the AirPods.

It’s important to consider that the company’s services and wearables business is an extension of the iPhone and other hardware products. To conclude that Apple had a poor year by only looking at the 14% decline (-$22 billion) in iPhone revenue for 2019 versus 2018 would not be a fair analysis. 

The company also grew its services business by approximately $6.5 billion and wearables by $7.1 in the same period for a total of $13.6 billion. The $13.6 billion only partially offsets the $22 billion decline in iPhone revenue from 2018. However, the services and wearables businesses are growing at faster rates–16% and 41% respectively–versus the decline in iPhone sales of 14% from 2018. In other words, Apple is using the services and wearables business to fill the gap left from iPhone revenue declines. 

The ancillary businesses would not be possible without the hardware products such as the iPhone, which makes determining the overall profitability for the iPhone that much more complex.

What Does it Cost to Build an iPhone?

Apple’s sourcing model is one of the reasons it generates attractive profit margins. The company makes very little of its own products. Instead, components and materials are gathered from around the globe and sometimes even from direct competitors, such as Samsung. This process significantly lowers capital expenses for Apple, saves the consumer a bit of money, and lets shareholders benefit from the difference.

The iPhone 11 Pro Max has a retail price of $1,099 per unit.   It’s estimated that all of the components that make up the iPhone cost approximately $490.50 per phone, according to a report by NBC News. Some of the components include the Samsung battery unit, which costs $10.50, the triple camera costs $73.50, and while other equipment such as the processor, modem, and circuit boards cost approximately $159 per phone. 

A $490 cost and a retail price of $1,099, Apple appears to be earning a $609 profit per phone. However, it’s difficult to determine the actual profit per unit since there are other cost factors that go into making the iPhone. The manufacturing, assembly, software, research, and development costs all must be paid for with the $609 profit per unit. There are also marketing and advertising costs as well as the cost of sales, general, and administrative costs such as the corporate office.

How the iPhone Helps the Economy

Apple took it upon itself to illustrate its effect on the economy and the job market. Apple reports that the company has created a «job footprint» of nearly 2.4 million jobs across the U.S. 

According to Apple, most of the jobs created are in the app economy, which is:

«Currently responsible for 1.9 million American jobs—an increase of 325,000 in the last two and a half years.» 

Apple also employs 90,000 workers in all 50 states and is planning to add 20,000 more jobs by 2023. 

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How Much Does It Cost To Make An iPhone?

14 Year Anniversary Of The iPhone

iPhone Bill Of Material Costs Vs Retail Pricing

The 9th January 2019 is the thirteenth year anniversary of Steve Jobs announcing the original iPhone at the Macworld convention (2007). Considering the retail price of the iPhone continues to rise, in 2019 the iPhone accounted for an average of 53.89% of Apple’s revenue. BankMyCell decided to create this visualization showing both the evolution and value comparisons of the iPhone’s technology, BOM costs, and retail pricing. Using teardown estimates from HIS Markit’s benchmarking services, we can see how much each iPhone cost to make over the last 13 years.

If you have an old iPhone you want to trade-in or do simply price check to see how much it’s worth, we also offer an iPhone buyback comparison service in the US, you can see live prices right here.

How Much Did Your iPhone Cost To Make?

Average iPhone Manufacture Cost (2007-2020)

We cover all the Tech Insights and IHS bill of materials per device below in both text and graphic formats, here are the average costs of building an iPhone:

• Estimated iPhone material costs ranged from $156.2 to $450.50 (model dependant)
• Retail prices of these entry-level iPhones ranged from $399 to $1099 (2007-2020)
• The difference between material cost and the retail price ranged from 27.6% to 44.63%
• Projected markup ranged between 124.06% to 260.17%

Apple axed some profits in 2019 models: The iPhone with the most expensive estimated materials cost is the iPhone 11 Pro Max 64GB at $450.50, which is 35.49% of its retail cost of $1099. The iPhone with the highest estimated materials cost in proportion to the original RRP was also the iPhone 11 Pro Max 64GB at $450.50 material cost, which is 44.63% of its retail cost $1,099. So, this data shows that the 11 Pro Max had the least % margin since the original iPhone according to bill of material data.

When the second model was released, the iPhone 3G, the estimated bill of materials was $51 less than the original, and the phone retailed for $100 more which doubled Apple’s markup. This was, in fact, the lowest percentage of the retail price at 27.76%, later on, the iPhone SE was the only device to be released that was actually cheaper material-wise at $156.2.

The costs are representative of parts and do not account for research and development, logistics, marketing, and other general business costs. Additionally, the iPhones cost of manufacturing $3.80-$8.00 per device was not included as it was not available for all devices. Sources: Statista, IHS, GSMArena

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How much does it cost Apple to make an iPhone?

You’re about to plunk down $699 on that new iPhone 11 Pro – or *gasp* $1,449 on the 512GB iPhone Pro Max without a trade-in. That’s quite a few nights out on the town, you think to yourself, or as much as a used car. How much does it cost Apple to make these darn things?

Good question! The answer is just as maddening as you’d expect.

Every year, intrepid technologists at sites like iFixit and TechInsights do teardown analyses on the newest smartphones, which examine and inventory the various parts that make up the phones. While these might not give a full picture of costs, they go pretty darn far. What did they find? According to a recent analysis by TechInsights and NBC News, the 6.5-inch screen on the iPhone 11 Pro Max is eye-catching for sure, but the price? Not so bad: It cost Apple roughly $66.50. (Aren’t replacement iPhone screens much more than that?)

Inside the phone, the battery module is the next most obvious part, and it’s hardly a whopper either. The Samsung battery inside the iPhone 11 Pro Max costs about $10.50, the site says.

Then there’s the triple camera module, which lets you take all of those glorious shots. Those combined set Apple back about $73.50. The rest of the phone – a processor, the modem, and the memory, as well as the circuit boards that house ‘em – go for about $159. And a variety of other sensors, wires, PCBs, and so on is required to put the whole thing together into a recognizable form factor. Those bits and pieces called about $181.

A disasembled iPhone 6S iFixit

Total cost? About $490.50, TechInsights said. That’s substantially less than the retail cost of the device. Keep in mind, that’s just a bill of goods. The price tag for a product like the iPhone also includes the cost of manufacturing and assembly, the expense of shipping the product to you, the software, marketing, and intangibles such as R&D costs.

Putting a price tag on those things is far more challenging. But is it $600 bucks, the difference between the bill of goods and the $1,099 retail price of the entry-level iPhone 11 Pro Max? You’ll have to make that call for yourself.

How much does it cost to make older iPhones?

Hang on, you’re asking yourself. Has it always been like this? Were older phones cheaper, perhaps … or is Apple making more money off us today than it used to? We’re glad you asked. Let’s take a look at some earlier models.

According to an iFixit analysis of 2018’s iPhone XS Max – the $1,250 256GB model that is – the phone contains about $443 worth of materials. That’s a difference of $807, meaning Apple’s making substantially less on its new phones than it did last year.

Employees work on the assembly line at a Foxconn plant in Shenzhen, China. In Pictures Ltd./Getty Images

But wait, you say, what about even earlier stuff? Flash back to 2014, when the iPhone 6 came out, and your hair looked way better. (Admit it. It’s true.) A teardown analysis of that 16GB model, which sold for $649 at the time, revealed said that components and manufacturing costs added up to $200.10, or about $450 less than Apple charged you at the time. Time magazine noted at the time that the price tag was more than three times the cost of components and manufacturing.

Clearly, iPhone parts have gotten substantially more expensive, and there’s more stuff overall getting crammed into phones, especially camera lenses. And keep in mind that the earlier analysis includes manufacturing costs, something TechInsights did not.

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