Analyst: iPhone 5 costs shaves a fraction off Apple's colossal gross margins

One analyst predicts that higher cost of goods for the iPhone 5, combined with an increase in iPad volume sales, could shave Apple’s overall gross margin for this quarter down from 40 percent to 38.8 percent.
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

When it comes to consumer electronic gross margins, no company comes close to pulling in the numbers that Apple does. But one analyst thinks that the gross profit per device have hit the stratosphere, and now the only way is down.

According to Pacific Crest analyst Andy Hargreaves the iPhone 5's cost of goods has risen from $353 to $370, and that this will shave Apple’s overall gross margin for this quarter down from 40 percent to 38.8 percent.

In a note to clients, Hargreaves ponders if "Apple's gross profit per unit has likely peaked," because of, "declining gross profit dollars per iPhone and volume sales of iPad are driving lower gross profit per unit of Apple product sold."

In other words, the problem isn't that Apple can't sell products; it can, and by the truckload. The problem is it's too good at selling the newer, lower gross profit products.

The problem that seems to be facing Apple is that it not only tries to make each new product better than the last one, but also smaller, more compact, and thinner.

While the iPhone 5 is undoubtedly proved to be a success with consumers, Apple has had a hard time keeping up with demand. Problem with scratches -- and not to mention Foxconn workers going on strike -- put quite a crimp in the supply chain.

See alsoThis holiday season will 'belong to Apple,' says analyst

According to Piper Jaffray's analyst Gene Munster's nightly checks on 100 Apple Stores, stock levels have shown dramatic improvements over the past couple of weeks.

This is more than likely down to the Cupertino, Calif.-based technology giant throwing significant amounts of money and resources at the problem to make sure there are enough iPhones for all the good little girls and boys this holiday season.

Apple could also be sacrificing gross profits in the short term in order to gain a foothold in the enterprise and education markets given that Hargreaves bought up the issue of "volume sales of iPad" driving lower gross. Apple's massive iOS profits have so far been primarily driven by consumer adoption of the iPhone and iPad.

A shift to volume markets invariably results in a decline in gross profits, but the upside is breaking into new and, in the long-term very lucrative, markets.

Image source: Apple.

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