What you need to know
- A new teardown has a 512GB iPhone 11 Pro Max costing $490.50 to build.
- Apple sells the phone for $1,449.
- That's around 66% profit.
Whenever a new iPhone is released someone takes one apart and tries to work out how much it costs to build. The bill of materials (BoM) is always an interesting read and that's certainly the case with iPhone 11 Pro Max. Once the phone was disassembled a $490.50 cost was calculated by Tech Insights.
According to the report the phone in question was a Midnight Green 512GB iPhone 11 Pro Max (opens in new tab). And it was picked apart in the name of science. The results? Lots of tiny pieces that all look the same. But it's the costs associated with those pieces that are interesting.
Take the camera and image processing hardware, for instance. Tech Insights calculates that to be the most costly collection of parts at $73.50. Following that we have the display at $66.50 with the impressive A13 Bionic chip coming in at $64. Add everything together, including final assembly and testing, and we get the $490.50 figure.
Considering this configuration is the most costly iPhone Apple sells – at $1,449 assuming no trade-ins – that means that Apple is pulling in around 66% profit for each of these handsets. At least, that's what you might think.
But of course the BoM only tells part of the story. It can't take into account shipping. Or the wages of the people who handle construction. Or the cost of the services that come free with an iPhone like iCloud syncing, AppleCare coverage with free support, and more. And advertising, of course. Those white rooms probably cost a fair bit to keep clean.
For a little context, Samsung's 128GB Galaxy S10+ costs around $420 to make, again according to Tech Insights. That model costs $999 making the profit a reasonable 58%. Note the difference in storage capacity, though.
But of course Samsung's BoM doesn't include the intangibles, either. Which brings us back to my original point: these figures are interesting. But they can't tell the whole story.
Oliver Haslam has written about Apple and the wider technology business for more than a decade with bylines on How-To Geek, PC Mag, iDownloadBlog, and many more. He has also been published in print for Macworld, including cover stories. At iMore, Oliver is involved in daily news coverage and, not being short of opinions, has been known to 'explain' those thoughts in more detail, too.
Having grown up using PCs and spending far too much money on graphics card and flashy RAM, Oliver switched to the Mac with a G5 iMac and hasn't looked back. Since then he's seen the growth of the smartphone world, backed by iPhone, and new product categories come and go. Current expertise includes iOS, macOS, streaming services, and pretty much anything that has a battery or plugs into a wall. Oliver also covers mobile gaming for iMore, with Apple Arcade a particular focus. He's been gaming since the Atari 2600 days and still struggles to comprehend the fact he can play console quality titles on his pocket computer.
Well, we all know that Apple is earning a little fortune with extra memory. Buying a 512GB model kinda subsidises the smaller models. I find that even a bit 'Robin-Hood-like'. Let the wealthier users pay a bit more for the development of the other hardware everyone gets. In Apples case that means alot of Apple-only silicon which costs quite some money to develop. The benefit for the user is the fastest SoC on the market with the least power consumption. How much do you want to pay for that? Not available in a Samsung. UWB technology, another unique chip in a phone so far. Directional Airdrop is just the beginning for this technology (i.e. finally usefull key tags after all that Bluetooth 'crap'). The many co-processors Apple is using, including that new neural network 'Bionic' thing, that makes the new camera modes possible. And don't look at the silicon alone. What's the cost for all the software necessary to drive these chips? I mean there's hardly any stock parts in an iPhone (key parts, not the 'bird seed'). And then there is iOS. A unique OS, built by Apple from scratch, that also needs thousands of developers to maintain and to expand. Someone has to pay for that. My 2 cents? I find a Samsung S10 for $1000 much too expensive, if an iPhone 11 Pro with similar memory is just a few bucks more expensive! If Samsung really pays $420 to build an S10+, they pay too much - considering that one of the most expensive parts, the OLED screen, is coming from their own factory.
You are quite correct, it’s refreshing to read your comment. And above the costs you have already mentioned, there is also licensing costs for the technologies used by the device, basically almost anything Apple have not founded themselves have to pay a license to use. On the issue of the S10+, they actually become even more expensive to buy, when you consider that you will only get two platform updates and a year or two of quarterly security patches, whereas with iPhone you looking at 5 platform updates plus a year of on time patches.
Why write a story like this? Anyone that knows manufacturing, knows it is standard practice to set the manufactures list price or MSRP to 3x the cost to build the product. There is no secret or surprise here.
And it is not unreasonable to MSRP 4x cost of parts to cover cost of design, maint/warrenty, assembly, packaging.
These reports are about as credible as the rantings of a Lean (The Toyota Way) Consultant's estimates of productivity gains. These people have been making these baseless claims for years. It's time to stop repeating their nonsense.
Yep, these numbers do not tell the complete story.
But, readers will whine regardless.
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