The reason for Apple's record profit forecast? Apparently, the iPhone X costs $358 to make
Apple pours in $358 worth of parts in the iPhone X, takes out $999 at retail for a dreamy 64% gross margin
Given the rumors that the iPhone 8 lags in sales compared to the iPhone 7, and is even overcome by the iPhone 8 Plus, such a rosy outlook might seem premature, but Apple is not one to talk empty words on conference calls, so where is Tim Cook's optimism coming from? Well, from the iPhone X gross margin, it seems. The phone got another teardown over the weekend, and its bill of materials (BoM) estimate is $357.50.
Apple can be different here because they are the 800 pound gorilla
While quite a bit higher than for most iPhones so far, whose BoM usually hovers in the $200-$250 range, the retail price of the iPhone X is also up there, and returns no less than 64% gross margin for Apple, compared to the iPhone 8's 59%. Needless to say, this doesn't include R&D expenses, or marketing and administrative costs, but these, in the case of Apple, usually stay in the 10-15% range anyway, even for a unique handset like the X. Thus, while the cost of materials to build an iPhone X is 25% higher than for the iPhone 8, its price is 43% higher, so Apple expects the new OLED iPhone to add a big fat chunk to its revenue and profit this quarter, and probably the next few.
The priciest part in the iPhone X is the OLED screen, supplied by Samsung, at $65.50 a pop, just as predicted, but Apple also didn't skimp on another important aspect - structural rigidity, as the $36 stainless steel frame costs much more than the iPhone 8's $21.50 aluminum housing, which is made of the highest grade 7-series alloy, but still gives way to the steel frame Apple uses in the iPhone X. Thus, analysts are expecting Apple to pierce through the $100 billion quarterly revenue barrier next year, riding on the wings of the iPhone X and its sucessors' gross margin, and it will be the first company in history to do so, barring any unforeseen troubles with Apple's newest handset.