iPhone 7 Hardware Components Estimated To Cost Apple $220 Against $649 Retail Price
Apple finally bumped up the minimum storage allotment on its iPhone 7, doubling it to 32GB compared to 16GB on several previous iPhone generations, along with also offering 128GB and 256GB tiers for the middle and high-end SKUs, respectively. The Cupertino outfit did it without jacking up the price of the iPhone, though don't fret on Tim Cook's account, he and the rest of the Apple gang still stand to make a pretty penny on every iPhone 7 handset sold. It's estimated by IHS Markit that the actual bill of materials (BOM) is only $220.
Well, just a little less if we're picking nits—$219.80. Toss in $5 for "basic manufacturing costs" and you're looking at a BOM of $224.80, compared to the full retail price (unsubsidized) of $649 for a 32GB model iPhone 7. That's almost $37 higher than the iPhone 6s, though a markup of $424.20 still leaves plenty of room for other costs associated with bringing an iPhone to market, such as advertising, R&D, and so forth.
"Total BOM costs for the iPhone 7 are more in line with what we have seen in teardowns of recent flagship phones from Apple’s main competitor, Samsung, in that the costs are higher than in previous iPhone teardown analyses," said Andrew Rassweiler, senior director of cost benchmarking services for IHS Markit. "All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past."
Apple's biggest expense remains the display at $43, followed by the entirety of the baseband, which collectively costs $33.90. After that, Apple's custom A10 System-on-Chip (SoC) is the third most expensive item in the iPhone 7, adding $26.90 to the BOM. Compared to the previous generation SoC, the 64-bit ARM-based A10 processor finally makes the leap from a dual-core design to having four cores, along with a hexa-core GPU. The chips is built on a 16nm FinFET manufacturing process.
The real value here is the battery. Apple upgraded from a 1,715 mAh battery pack to a more capacious 1,960 mAh battery for longer run time, but at $2.50, it's the second least expensive item in the iPhone 7.
And what of removing the standard 3.5mm audio jack that's caused such an uproar? Apple includes a Lightning to 3.5mm audio adapter with every iPhone 7 sold so that users can continue plugging in their existing earbuds. The cost of that along with the other contents (Lightning cable, headset with Lightning connector, charger, boxes and literature) are estimated to run $11.80.