Is it possible to take an iPhone XS Max, tear it down into its components, and then decipher from that how much that device that will cost you $1,249 actually costs Apple to make?
Well, you can certainly pull numbers out of the air, but how meaningful or accurate they are is open for debate.
The other day TechInsights carried out a teardown analysis of an iPhone XS Max with 256GB of storage, looked at every component, assigned it a price, and came to the conclusion that the component bill of materials (BOM) for the handset came to $443.
Also: iPhone XS Max review: The iPhone's future is big and bright
Problem is, it's a pretty meaningless number. For a number of reasons.
The first problem with it is that you can't just take the selling price, subtract the BOM and find out how much profit Apple makes from each sale. You can't even use it for gross margins because Apple doesn't break down R&D and other associated costs for specific devices in its line.
Another problem is that there isn't a big catalog that we can look at to get the pricing for all of the components. Some items, such as memory and storage, are pretty universal and we can get a pretty good pricing for them (but Apple is a high volume buyer, more on this in a moment), but even these pieces vary daily. Other components, especially bespoke stuff such as the A12 Bionic processor, we can make some educated guesses about, but that's about it.
We can't forget that Apple also buys in huge volumes. Not only does that allow it to make deals to drive prices down, but it can stockpile certain components it knows it will need when the prices are lowest.
As for more custom components, as volume and yields increase, prices will come down over time. What an iPhone costs to make in September of this year will likely be higher than what the same iPhone costs to make next year.
So while it's cool to get a number to play with, and fun to compare that to a number pulled out of the ether for last year's iPhone, it's important to keep in mind that only Apple really knows how much it costs to make an iPhone, and that figure changes hourly.
Also: iPhone XS: A cheat sheet for professionals TechRepublic
The best way to figure out how much an iPhone costs to make is by looking at the company's financial statements. Sure, those are not as cool or geeky as hardware teardowns, but we do get a clearer picture by looking at gross margin guidance. That said, we don't get a figure for the iPhone specifically, and so we're still forced to make guesstimates.
And based on that data, the gross margin for the iPhone likely stands at around 40 percent. Based on this figure, that $1,249 iPhone XS Max costs Apple in all (parts, labor, R&D, admin, and other associated costs) around $750.
Which means that a good chunk of that revenue -- some $500 -- is profit.
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