iPhone 5 16GB costs an estimated $207 to build

A 16GB iPhone 5 that Apple sells for $649 only costs the company an estimated $207 to manufacture. Apple also charges an incredible $100 premium for only $10 worth of NAND storage.
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

According to market research firm IHS iSuppli, a 16GB iPhone 5 costs Apple an estimated $207 to build, a slight cost increase over the iPhone 4S.

The total hardware inside a new 16GB iPhone 5 is estimated to cost $199, and the report adds another $8 manufacturing costs, bringing the total to $207. Contrast this to the off contract price of $649 that Apple charges for the handset and you can see how Apple keeps the dollars rolling in.


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If these figures are in the right ballpark -- and they seem good to me -- the hardware components to make a 16GB iPhone 5 costs Apple some $11 more than the parts to make a 16GB iPhone 4S. Much of this cost increase is down to the addition of 4G LTE technology, which has driven up the wireless technology costs of the iPhone 5 to $34, compared to about $24 for the iPhone 4S.

"With the base model carrying a $199 BOM, the iPhone 5’s components are expected to be slightly more expensive compared to the iPhone 4S model," said Andrew Rassweiler, senior principal analyst, teardown services, for IHS. "The low-end iPhone 4S with the same memory density as the base-model iPhone 5 carried a BOM of $188, according to a preliminary estimate issued by IHS in October 2011. While the price of some components, such as NAND flash, has fallen during the past year, the iPhone 5’s overall BOM has increased mainly because its display and wireless subsystems are more expensive compared to the iPhone 4S."

The new 4-inch screen is also pricier, although not by much. The new screen, featuring in-cell touch sensing, only costs $44, compared to $37 for the iPhone 4S display, which featured a separate touchscreen element.

"The iPhone 5 makes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing," Rassweiler said. "Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer."

Once again, Apple -- like Google and Amazon -- is charging a premium price for extra storage. If you want to upgrade from the 16GB base model to the 32GB iPhone 5, this will cost you an extra $100, but the additional flash storage only costs Apple $10. If you decide to splash out and go for the 64GB model instead of the 16GB base model, you'll be paying a whopping $200 premium for $29 worth of NAND chips.

Sterne Agee analyst Shaw Wu believes that Apple will sell some 27 million iPhones for the September quarter, and that this will rise to 46 million units during the December quarter.

"We continue to believe many underestimate iPhone 5 in that it is a significant update and will drive a powerful product cycle," writes Wu in a note.

Wu believes that Apple could sell more iPhones but that supply constraints for the new in-cell touchscreens will be a limiter.

Image source: IHS iSuppli.

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