Apple’s huge profit margin on the iPhone 5 explained! Cult of Apple responsible

The iPhone family of products (handsets and accessories) has allowed Apple to make over $150 billion in revenue with over 100 million units of the iPhone sold to consumers.  Many consumers purchase Apple products regardless of the usefulness or real worth of the product. Apple users somehow believe that what they have just bought is the most user-friendly, fastest, and innovative product ever.  With the same rhetoric and complete disregard for reality they purchase the same product a few months later with few minor tweaks. Most of the users are, “Easily mislead by their own egos and think they are being unique and innovative. Often wrong but convinced they are correct.”

So if you are a person that follows technology trend by buying every iteration of iPhone that gets put out by Apple, then you might be interested in the cost breakdown of manufacturing an iPhone.

The unlocked version of the iPhone 5 costs around $649 for 16GB, so the difference between manufacturing cost of $207 and $649 retail price is $442. That translates into a profit margin of around 68% per iPhone. This is exactly how Apple manages to make a hefty profit every quarter. Apple posted quarterly revenue of $35.0 billion and quarterly net profit of $8.8 billion in Q3 2012.

According to this report from IHS iSuppli Research, the least expensive 16GB iPhone5 costs Apple around $207 to manufacture. Which is $11 more than the cost of iPhone 4S. The increase in the price comes from the new display ($44) and 4G LTE modem ($34).

We have outlined the manufacturing cost breakdown for Apple iPhone 4, iPhone 4S, iPhone 5 16GB models.  One important fact to note is that Apple makes even more money with different memory options with the iPhone. If you buy the 32GB and 64GB instead of 16GB, then Apple makes a profit of $90 and $160 respectively.

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Consider the above profit margins when you decide to buy your next iPhone, is it really worth the hype? After all, the high quality apple products are prone to damage and having a protecting case on your iPhone hides the industrial design that Apple likes to show off. We are at a point in the smartphone market, where the competition has not only caught up but surpassed the iPhone in many ways. So keep an open mind when deciding on your next smartphone. If you are concerned about the operating system/ software then have a look at these articles that explains software features of iPhone and the competition.

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Source: IHS iSuppli Research

  • kimmy

    I would like to know if shipping and customs clearance fees have been taken into account in this analysis. I’m just curious, because everyone know the manufacture in China and the import to the US.
    Maybe the profit margin becomes lower if we add this things.

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  • hendra

    Is this a joke? are you really want to show to everybody how you can not run a business or what?

  • Sanjay

    is this an apple bashing site… all anti apple articles…. I luv android and am an android user, but cribbing about apple’s ability to demand higher prices based on a superior product is not right. remember, samsumg has been convicted of copying apple so I don’t need to tell who is ahead or superior. Secondly, hoards of crappy features does not make a device more useful but less usable. Remember, less is more..

  • Michael Li

    68% gross margins is ridiculously high.

  • James

    Its sad that so many of iPhone users behave exactly like this article describes..