Here's how Apple made the iPhone SE so cheap

Thank falling component costs, not Apple's generosity, for the iPhone SE's cut-down price tag.

iPhone SE
IHS

The iPhone SE might not be flying off the shelves, but Apple's figured out how to squeeze maximum revenue from the device.

By reusing a number of components found in older existing iPhones, Apple was able to dramatically slash the price of the iPhone SE. This is the finding of an IHS teardown of Apple's new iPhone SE.

According to the teardown, a 16GB iPhone SE which Apple sells for $399 only costs the company $160 to make. That means a whopping $239 revenue on each device sold.

If customers opt for the 64GB version, which sells for $499, Apple's take increases by $89 to $328.

Not bad for an iPhone made up mostly from older devices.

"The iPhone SE represents an amalgamation of three iPhone generations - iPhone 5s, iPhone 6 and iPhone 6s - rolled into something altogether new," said Andrew Rassweiler, senior director of cost benchmarking services at IHS. "Despite its physical resemblance to the iPhone 5s, the resulting product is far superior. In fact, the only significant tradeoffs a consumer would make with the iPhone SE against the iPhone 6s is smaller size and lower screen resolution."

What's helping Apple pull in the big bucks is that component prices are continually falling. Back when Apple launched the iPhone 5S, the 4-inch display cost Apple over $40, but the same display in the iPhone SE costs around $20.

"Pricing is a moving target, and Apple improves its margins on its products over time," Rassweiler said. "Whatever the margin is on a display or other subsystem today, it will always be better in a year or two, as component costs decline."

Apple is also learning to make a single handset work across all carriers, instead of making different versions for each, which helps save on R&D and manufacturing.

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