The TRUTH Behind The Cost of the Apple iPhone.
INTRO:
Today we will be exploring the TRUE cost of an iPhone.
Apple has been one of the top valuable companies in the world. Their most selling product is the iPhone. iPhone was released in 2007 and since then it has become an essential device for every person from company owners to teenagers. Apple introduced iPhone as a luxury product, with price ranging up to thousand dollars. But that’s the market price. How much is the actual cost of manufacturing and how profitable is it for the company? Let’s find out.
BODY:
Apple is a very successful company. And we consumers have to pay a premium price for the products the company makes. Some people purchase Apple products to become part of the ‘trendy’ Apple brand. iPhone has become the symbol of wealth. As now a days, to judge the economic condition of a person, we check what he has. A person having a passport, an iPhone and an iPad is considered to be of higher status.
iPhone has been one of the most sought-after products in the world. But in 2019, Apple reached third place in market share for smartphones, behind other brands such as Samsung and Huawei. Apple controls 14.5% of the global smartphone market share. Apple is in the lead, when it comes to gaining profits from smartphones. In 2019, Apple took 66% of the industry’s profits and 32% of revenue. It seems that the company must be making a sizable mark-up if it’s the leader in profits but third in sales.
The history of iPhone began when late Steve Jobs introduced touchscreen in the form of the iPad. Steve announced iPhone on January 9, 2007 on stage at the mac world conference. Two hundred and seventy thousand iPhones were sold during the first week when it was available. Before this, smartphones were based on the design of blackberry, but Apple revolutionized the smartphone designs, as now we have big screens, latest cameras and beautiful designs. Even now we have edges on the front screen for front selfie camera. It took six years for other smartphone companies to copy the design of Apple iPhone.
From the very beginning, Apple’s storage feature in their phones has been the actual money maker. Similarly, other tech companies are working on the same thing. But price tags of Apple are higher than others. But how much does an iPhone cost to manufacture?
There is an estimation that the actual cost of all the components to make the phone amounts to approximately $490.50 and the 256 gigabyte iPhone XS max, costs the consumer 1249 dollars.
The numbers
Let’s talk about iPhone 11 pro max, which was released in the late 2019. Based on the storage size, the cost of the phone ranges from $1,099 to $1,449. If we look at the cost of the components of the phone, we see that the cost of screen is $66.50 as compared to 77.27 dollars for the iPhone X. The battery of the phone costs around $10.50 and Triple Camera at $73.50. Other features such as the Processor, Modems, and Memory are the most expensive ones having higher cost of $159 along with Sensors, Holding Material, Assembly of the parts, and other expenses making up $181.
It’s important to note that we have not included the cost of research, warranty or return approvals, software development or marketing, amortization of manufacturing infrastructures among others. And adding these would increase the price of the phone.
The iPhone is primarily assembled in China by Taiwanese companies, such as Foxconn. An iPhone worker takes the wage of $3.15 per hour. According to Tim Cook, the CEO of Apple, the reason to build in China is not because of the lower labour costs. If this were the case, Apple could make its phones in even cheaper locations. The main reason, according to Cook, is the skill required in tooling engineering. He claims that the specific skill set is no longer available in the U.S., but in China the expertise is prevalent. If we look at this logically then China makes the most sense to ship any product around the world. The reason is China has seven of the world’s largest 10 ports. On the other hand, if Apple were to build the iPhone in the U.S, then fewer number of smartphones would be made at a much greater price.
Overall Apple is getting a much higher profit on every sale and on expensive upgrades by customers. Apple is a for-profit company and it’s their rule to sell products at a cost at least three times higher than the production value. This doesn’t mean Apple is going anywhere as Apple has sold more then 1.5 billion units and according to an estimation 395 iPhones are sold per second.
But we have seen Apple sales going down in the past couple of years, as iPhone has another competitor in market. It’s not another phone company, not Samsung, not Huawei but iPhone itself. Apple makes the premium versions which are at much greater prices and not every person can afford that. Used iPhones being sold at lower prices have caused decrease in the sale of premium versions which are of much higher prices. As, it’s not sustainable for the average people to buy a new phone every year. Hence, its necessary for Apple to divert its attention from iPhone to some other device. But this transition won’t be easy…
OUTRO:
Now we know what is the actual cost of an iPhone and it’s manufacturing, it is not as pricey as it costs. Still the iPhone is the new trend and we all know that. Do you have any other opinions? Let us know.
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