iPhone 6 costs at least $200 to build

iPhone 6 and iPhone 6 Plus

A teardown analysis of the iPhone 6, set to be published later this afternoon, reveals that Apple spends between $200 and $247 in parts and labor to assemble an iPhone 6. The analysis, obtained by Re/code ahead of time, also reveals that the iPhone 6 Plus costs between $216 to $263 to build based on the model.

The estimates come from research firm IHS, which has factored in both the cost of hardware components and cost of labor at approximately $4 to $4.50 per device. Perhaps to be expected, this means that Apple has very high profit margins between about 69 to 70 percent on each iPhone 6 sold.

However, it goes without saying that the bill of materials (BOM) estimates do not include costs arising from labor, shipping, advertising, software development or patent licensing.

Nevertheless, the estimated bill of materials provides an interesting perspective on the estimated profit margins that Apple stands to make from the sale of the new iPhone 6.

iPhone 6 and iPhone 6 Plus retail for starting prices of $199 and $299 respectively on a new two-year service agreement, although the full price of the smartphones start at $649 and $749 respectively in the United States. Additionally, iPhone 6 and iPhone 6 Plus with higher storage capacities have a $100 or $200 premium on top.

Meanwhile, the cost that Apple pays for the additional storage is only about $47 extra for 128 GB versus 64 GB.

“They seem to be configured and priced to encourage you to buy the models with the higher memory,” said Andrew Rassweiler, the IHS analyst who supervised the teardown. He estimates that Apple is paying a price of about 42 cents per gigabyte on the flash memory, which is supplied by numerous companies, including Micron and SK Hynix.

The gross margins for the iPhone 6 and iPhone 6 Plus are similar to that of the iPhone 5s and iPhone 5 released over the past few years, but higher than the previous models that launched ahead of those devices.

The most expensive component of the iPhone 6 is the combined touchscreen and display that is supplied from LG Display and Japan Display for $45 on the iPhone 6 and $52.50 on the iPhone 6 Plus.

Do you think that Apple’s profit margins are acceptable?

[via Re/code]