Apple to generate 50% margin on iPhone?

Written by Tim Smalley

January 19, 2007 | 12:02

Tags: #50 #bill #bom #cingular #hardware #iphone #manufacture #margin #of

Companies: #apple #isuppli

Technology research firm iSuppli has estimated that Apple's iPhone will generate almost 50% gross margins for the company and its partner, Cingular Wireless.

According to a preliminary Bill of Materials (BOM) created by the firm, it will cost Apple less than $250 USD for the parts to build the 4GB version of the device, while the 8GB version costs just over $280 USD.

Apple and partner Cingular expect to release the 4GB and 8GB versions priced at $499 USD and $599 USD with a 2 year Cingular contract.

The research firm's preliminary BOM was generated based on analysis of the capacity and features of the iPhone, combined with information on materials used in the device from Apple and a number of additional industry sources.

While the cost of manufacture figures for the device are preliminary estimates, the firm "has a high degree of confidence in its conclusions." It's not unusual for Apple to make this kind of profit on hardware though, as products like iMac and iPod nano already generate margins in excess of 45%, claimed the firm.

Initial prices are undoubtedly high, increased pressure from competitors in the music phone market - including Nokia, LG, Sony Ericsson and Samsung - could see the company cutting its margins with reduced pricing in the future.
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