iPhone 5C Teardown Shows Strong Margins for Apple (AAPL)
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Rating Summary:
46 Buy, 27 Hold, 8 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 5
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Apple (NASDAQ: AAPL) took a lot of flak from investors for pricing an unlocked version of its new iPhone 5C at $549; keeping it out of the low-end smartphone market. However, data today shows that while the company had plenty of room to charge a lower rate, for the integrity of margins, it chose not to.
A 16GB iPhone 5c carries a bill of materials (BOM) of $166, IHS reported today. The cost rises to $173 when manufacturing expense is added in. The 32-GB model has a combined cost of $183.
The cost is sharply less than the $197 BOM and manufacturing cost for the original 16GB iPhone 5, but still on the high end for a smartphone, IHS notes.
To merit a low-end pricing of $400, while maintaining its customary high hardware margin, the combined BOM and manufacturing expense for the iPhone 5c would have had to amount to about $130, IHS estimated.
"Many expected Apple to take an affordable strategy with the iPhone 5c, producing a lower-cost smartphone that would be priced at around $400 in order to address developing markets, such as China," said Wayne Lam, senior analyst for wireless communications at IHS. "However, the reality of the iPhone 5c is completely different, with Apple offering a phone with a $173 BOM and manufacturing cost, and a $549 price tag - without subsidies. Once again, Apple has stuck to its old tried-and-true formula of optimizing its iPhone hardware gross margins to attain maximum profitability."
A 16GB iPhone 5c carries a bill of materials (BOM) of $166, IHS reported today. The cost rises to $173 when manufacturing expense is added in. The 32-GB model has a combined cost of $183.
The cost is sharply less than the $197 BOM and manufacturing cost for the original 16GB iPhone 5, but still on the high end for a smartphone, IHS notes.
To merit a low-end pricing of $400, while maintaining its customary high hardware margin, the combined BOM and manufacturing expense for the iPhone 5c would have had to amount to about $130, IHS estimated.
"Many expected Apple to take an affordable strategy with the iPhone 5c, producing a lower-cost smartphone that would be priced at around $400 in order to address developing markets, such as China," said Wayne Lam, senior analyst for wireless communications at IHS. "However, the reality of the iPhone 5c is completely different, with Apple offering a phone with a $173 BOM and manufacturing cost, and a $549 price tag - without subsidies. Once again, Apple has stuck to its old tried-and-true formula of optimizing its iPhone hardware gross margins to attain maximum profitability."
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