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Making the new iPhone costs more than ever

Written by Matti Vähäkainu (Google+) @ 21 Sep 2016 13:45 User comments (5)

Making the new iPhone costs more than ever Apple's equipment has never come cheap, and there has always been a cheaper hardware version of the same product. This means couple of things. First, Apple knows their real power is in the software and secondly that profits are off the roof.
The new iPhone is certainly not an exception in this manner. The software can only be found on Apple's iPhones and the profits are going to be one of the highest in the industry with the most expensive version costing nearly a grand.

According to new information from IHS Markit though shows that the high price is not all for nothing. Teardown of the iPhone 7 revealed that the phone is more expensive to build than ever before. According to the estimate it cost 18% more than iPhone 6S with $224.80 (including materials and manufacturing costs). Even still it retails the phone starting at $649, almost three times as much.

Although Apple has had to increase the build costs for more innovative design and better components to ultimately fend off the Android flagships the IHS researchers say that profits are still far better than for Samsung, which puts around $265 worth of hardware in their flagship Galaxy S7.

It seems that Apple has pulled a good release this time around, selling out several models before launch, and might be in for a new upward trajectory.

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5 user comments

123.9.2016 17:14

It's still just an Iphone...nothing more, nothing less.

223.9.2016 23:40

The profit calculation here ignores the fact that Apple is having to provide huge subsidies to get people to buy these phones. At least for now, most of the profit is disappearing in the subsidies.

As for several models selling out, that doesn't mean "Apple has pulled out a good release." It's a mediocre release that Apple has managed to sell by throwing cash subsidies at anyone who will take one so the net cost to the user is FREE.

324.9.2016 3:35

Originally posted by SoTired:
The profit calculation here ignores the fact that Apple is having to provide huge subsidies to get people to buy these phones. At least for now, most of the profit is disappearing in the subsidies.

As for several models selling out, that doesn't mean "Apple has pulled out a good release." It's a mediocre release that Apple has managed to sell by throwing cash subsidies at anyone who will take one so the net cost to the user is FREE.

Um...that's not how the subsidies work. Apple still gets their full revenue of the iPhones...it's all about how carriers sell it to customers, which basically pays off the cost of the phone over a (usually) 2-year contract.

424.9.2016 23:29

Originally posted by xnonsuchx:

Um...that's not how the subsidies work. Apple still gets their full revenue of the iPhones...it's all about how carriers sell it to customers, which basically pays off the cost of the phone over a (usually) 2-year contract.
You correctly describe the way carrier subsidies used to work in the US - they used to give you a phone, and you indirectly paid for it through inflated monthly line charges. Not any more. The carriers stopped doing that about a year ago. They started offering lower line charges, and if you want a new phone, they will give you an installment payment option that brings your monthly payment back up in the range that the line charges used to be under the old subsidized system. Or you can keep using your existing phone and stick with the lower monthly line charges. It's all explained here. http://www.cbsnews.com/news/verizon-kil...e-should-worry/


But that's not what's going on with the iPhone 7. With a trade in, they are giving it to you for free; you do not get a higher line charge or a monthly installment payment. (Well, technically, they do put a monthly payment on your bill, but then they give you a full credit for the amount of that payment each month.)

My company just got a boatload of iPhone 7s for our employees, and the carrier reps explained that the credit is being paid for through a subsidy that Apple has paid to the carriers to get people to upgrade to the iPhone 7 or 7 Plus. I can't find any articles that explain the way this is being funded, but the fact that all of the carriers have been giving away a free iPhone 7 with a trade-in for the past month, and the fact that all of the carriers are ending that promotion this week, is consistent with the carrier reps' explanation.

53.10.2016 10:13

yea but you can only upgrade if you have a iPhone 5 5s 6 or 6s they won't let you trade in your iPhone 4s towards the credit which is bull crap considering most users still have a 4s

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