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iPhone Guts Reveal Apple’s High Margin

Jul 8, 2007  •  Post A Comment

Initial research into the guts of Apple’s iPhone shows Samsung Electronics and Infineon Technologies as two of the major component suppliers for the much-hyped device. But figures from teardown firm iSuppli Corp. reveal Apple itself is the true victor, as the device carries sky-high margins of more than 50 percent.
In comparison, most of the world’s handset makers subsist on margins of 10 percent or less.
“iSuppli’s teardown, conducted [June 30-July1], determined that the 8-[gigabyte] version of the iPhone has a total hardware bill of materials and manufacturing cost of $265.83, generating a margin in excess of 55 percent on each 8 GB iPhone sold at the $599 retail price,” said Andrew Rassweiler, principal analyst for iSuppli.
The figures are almost identical to what iSuppli predicted in January, when the iPhone was announced. The numbers do not include potential royalty payments and logistics expenses.
Both iSuppli and rival teardown firm Portelligent dug into the iPhone following its release June 29. Both firms outlined the primary component suppliers for the device:

  • Samsung supplies the iPhone’s applications processor and its memory. According to iSuppli, Samsung has $76.25 worth of semiconductor content in the 8 GB version of the iPhone, giving the company a 30.5 percent share of the product’s hardware cost — the largest total of any single supplier.
  • Infineon supplies the digital baseband, radio frequency transceiver and power-management components, which amounts to most of the cellular communications portions of the iPhone. The deal is especially notable for Infineon, which prior to the iPhone did not have any of Apple’s business. According to iSuppli, Infineon’s components account for $15.25 worth of the iPhone’s bill of materials, representing 6.1 percent of the 8 GB version’s total cost.
  • Other suppliers that popped up in the iPhone include Marvell (Wi-Fi chip), Balda (touchscreen module) and CSR (Bluetooth chip).

“To state the obvious, this is a milestone product for both Apple and the wireless industry, so having a place among the suppliers of key ICs that enable the iPhone carries heavy bragging rights in the semiconductor industry,” said David Carey, president and chief technology officer of Portelligent.
“Without pre-judging the commercial success of the iPhone itself, there’s no doubt that the semiconductor makers who have chips in this product view their design win as having significance that goes beyond just the revenue implications — it helps validate their solution and their approach,” he added.
ISuppli predicts Apple will sell 4.5 million iPhones this year, and more than 30 million by 2011.

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