IHS: iPhone 7 cost to manufacture is higher than iPhone 6s, but profit margin still healthy


While we had an estimate for the parts and manufacturing costs that go into the making of an iPhone 7 the other day, pegging the overall tag of $292 seemed quite high, given Apple's propensity to keep all new iPhones under $250, in order to enjoy a healthy margin when it tags on R&D and SG&A expenses.

Indeed, the IHS Markit research shop that is the granddaddy of build cost analysis, just released its estimate for the bulk price of the parts that go into an iPhone 7, and the cost to put them together, and came up with a $224.8 bill of materials (BOM) for the iPhone 7. This is just $13 (6%) higher than the BOM estimate for the iPhone 6s last year, despite that we have new components in the 7 like a capacitive home key and a revamped camera, but the repeat parts like the housing have also fallen in price for a year, so it all balances out in the end. The wide-color display is the costliest component at $43, against $52.5 for the iPhone 6s last year around that time. The baseband modem that covers a record number of LTE frequencies is $34, and the new A10 Fusion chipset and assorted circuitry come at $27 for the third place.

The iPhone 7 starts from $650 in the shop, but to the $225 BOM estimate we have to add research, marketing and various administrative expenses to arrive at the true cost of a unit for Apple. These are notoriously hard to estimate, though the chart below, coming from a reputable analyst, give us a good ballpark estimate of about 12% for both at the beginning of the year. Even if we are generous and peg the operational, research and engineering expenses to be 20% of the final iPhone price on top of BOM, that still leaves a hefty 40%+ margin for Apple from each iPhone 7 unit, not bad for a phone that will sell in the tens of millions in the next year or so.

source: IHS, Asymco

Related phones

iPhone 7
  • Display 4.7" 750 x 1334 pixels
  • Camera 12 MP / 7 MP front
  • Processor Apple A10 Fusion, Quad-core, 2340 MHz
  • Storage 256 GB
  • Battery 1960 mAh(14h 3G talk time)

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21 Comments

1. PhoneFix

Posts: 81; Member since: Aug 30, 2016

Profit is 425 dollars

2. Finalflash

Posts: 4063; Member since: Jul 23, 2013

It's fine though, a sheep and their money are soon parted. As long as that is true then they can continue to charge that much.

3. ctdog4748

Posts: 797; Member since: Mar 05, 2016

You hurt bro?

4. AlikMalix unregistered

Why the hell would I buy an android devices if it's a worse experience for me? f**k you for your derogatory s**t.

8. Subie

Posts: 2324; Member since: Aug 01, 2015

Well said Alik! Everyone can buy what works best for them... and enjoy.

9. willard12 unregistered

Stupidly said, Subie! Everyone can buy what works best for them, as is their right. Everyone can comment on what they buy based on the facts presented in an article, as is also their right. Thus, Phonearena enabled comments for the article this article which addresses profit margin and what one actually gets for what they pay for. AlikMalix likes to joke about terrorism with his comments, others like to address value with their comments. He can buy, he can comment. Freedom of speech is guaranteed a lot more directly than the right to buy. That freedom of speech includes AlikMalix's hilarious terrorism jokes.

11. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

Terrorism in any context is never funny. Terrorist acts have always and will always result in someone getting hurt or killed. Just think, America has made lots of nations not so happy, for basically putting their nose in things that is none of their business. America has lots of enemies. How do we know countries like China or Japan or even that new leader in Korea, couldn't find a way to devise an significant sized explosive device that could fit in a phone, that is design to detonate when so many have been actually sold and activated. Joking about such ifs poor taste no matter what OEM it happens too. Because the fact is, all of the phones with like for the most part are put together in an Asian country. Not all of them like the USA either. So while some fools like to joke, the fact is; they could one day buy a new phone and they are using it up to their ear and it could blow up and take half your head off and kill you. Phone exploding for whatever reason is not funny under any circumstance. Just because it didn't happen to you, doesn't mean it can't happen to you whether you phone has a seal battery or not. A battery is still a source of power that depending on battery size can cause serious injuries and damage to you and property. That si what made me so angry about the Samsung issue. It's because in reality, any of us could have been in a phone store with our kids and they could have been playing with a phone on display and it is charging and all of a sudden it could have exploded in their hands or face. So all the fools joking about such, it could have been you or your child, or mom or whatever. To joke about such isn't funny. It makes whoever does it a complete unsympathetic fool. Any oen who would joke over the poetential for someone to be injured or even killed is inhumane and is a PoS. Even if I do it. I would never joke about that. When other phone have exploded, I have never made stupid jokes. Idiots who have done stupid things like used a phone while plugged into a wall, while in the tub and dropped the phone and electrocuted themselves, I have joked about because that was something that happened based on that fools on incompetence and ignorance. But an innocent bystander who bought their purchase, and using it as designed and it hurts them is serious and the fact is every phone in the world has the potential to do the same whether it happens to your or not. You wouldn't want it to happened to you. If it did, you certainly wouldn't want someone joking about it, so why do it to someone else, even if they can't or aren't aware of you doing so?!

12. zunaidahmed

Posts: 1183; Member since: Dec 24, 2011

So you can comment, tease and bully others? I find all these people calling sheeps and dogs so pathetic, hiding behind their phones and monitors, but don't have the balls to say it up front. Anyway, everyone should get the freedom what ever they like, but you don't have to call someone a sheep because of that.

14. Subie

Posts: 2324; Member since: Aug 01, 2015

I agree.

16. trojan_horse

Posts: 5868; Member since: May 06, 2016

I disagree!

18. kiko007

Posts: 7493; Member since: Feb 17, 2016

Of course you do.........

15. Subie

Posts: 2324; Member since: Aug 01, 2015

You say everyone has the right to comment... but your calling me out for what?? Commenting? Oh, and commenting is not a right as you state that it is - it's a privilege granted by or taken away by PhoneArena.

19. willard12 unregistered

Yes, I am indeed saying your comment was stupid. But, I do respect the fact that you have the privilege of being stupid just as others have the privilege of describing your purchases as stupid. I recognize that PhoneArena gives you the privilege of commenting and gives me the privilege of saying it's stupid. I specifically said speech is a right, not comments. You may want to go back and read the comment again. But, you are stupid. So, that may be a pointless exercise.

20. Subie

Posts: 2324; Member since: Aug 01, 2015

Here's a quote from YOUR POST #9 dude: "Everyone can comment on what they buy based on the facts presented in an article, as is also their right" I suggest you go back and re-read your comment before continually and needlessly name calling. Cheers mate!

17. AlikMalix unregistered

WHAT TERRORISM JOKES??? I don't think terrorsim is funny! Wtf?

5. Bm888

Posts: 517; Member since: Jul 06, 2015

iRipOff...

21. Leo_MC

Posts: 6943; Member since: Dec 02, 2011

Yeah, because all those people that are designing the iOS, those handling iCloud, those that teach users how to set up their mail etc are working for free...

6. trojan_horse

Posts: 5868; Member since: May 06, 2016

A10 cost $27 to produce? That's cheaper than the Exynos 7420 from last year!

7. Macready

Posts: 1813; Member since: Dec 08, 2014

They estimate the cost price of the 750P display module to be even higher than the previous firm to make claims: $43. For the iPhone 7 Plus I might think this is possible, but not for the iPhone 7.

10. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

Got to check out the new i7's today while A T-mobile exchanging my Note 7's. The base model with only 750p looks cheap and bland. But the 7+ in the Glossy Black looks really nice. The one I got to play with had gotten dirty, so I couldnt really see how shiny the glossy color is. But it does hide the antenna lines very well at certain angles. It si a fingerprint magnet though. definintely nees a case. I think the 7+ is the better buy as far as physical looks. I got to play with the cameras and I can say when you actually use the phone, you may feel different about it vs the reviews. It turns out that for sure, if you simply step closer to an object and just snap a photo with the main camera, you will get better results vs using the telephoto lens. I took a photo with it of the iPhone 7 next to it and then used the telephoto I also tried the same taking photos of the iPhone 7 display itself and snapping photos of the text and wording on the display from various distances. lens to take a closer shot, and they kept coming out with to much noise. The room was fairly bright and they had the shade sown, so the only light was the from the fixtures over the display. Again they came out better when I simply stepped closer and used the main camera. Unless the item I snapped was significant large in size, the photo would simply blur in the background and only the largest object is clear. On the display, the 1080p certainly looks far better than the 750p. On the 7, the UI looks bland and boring, while the 7+ the display is sharper and looks more colorful. If I reviewed only on the up to 15 minutes I spent toying with it, I would give it a 7.5 at its highest grade. Since I have an iPhone 6S Plus in the house the design is definitely a turn-off for me. I am really hoping Apple brings 1080p to the 4.7" and maybe make it 5.1" and bring 1440p to the "plus". If it indeed has the dual curved display, and they make it look nice and not to much like the S6 Edge, I may consider getting it as a to go device vs taking my iPad which I consider to be very non-mobile. I would say, anyone who has an iPhone 6/6S, just wait for the next model and anyone with a 5S or lower should make the move to the 7. It would be a more worthy upgrade.

13. zunaidahmed

Posts: 1183; Member since: Dec 24, 2011

Wow, this is the first time I totally agree with you, LOL

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