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Apple takes a hit on margins to keep iPhone prices constant
NEW DELHI: Apple may have cut down on margins to keep prices of the new iPhone 7 at the same level as iPhone 6S despite a rise in input costs.
NEW DELHI: Apple may have cut down on margins to keep prices of the new iPhone 7 at the same level as iPhone 6S despite a rise in input costs.
The bill of material (BOM) for an iPhone 7 equipped with 32 gigabytes (GB) of flash memory is $219.80 (almost ₹15,000), according to IHS Markit, an analytics firm.
After $5 in basic manufacturing costs, Apple’s total cost to manufacture the iPhone 7 rises to $224.80. The unsubsidised price for a 32GB iPhone 7 is $649. This is $36.89 higher than the final analysis of the iPhone 6S published by IHS in December 2015. That is 6% decline in margin — the difference between BOM and sale price.
“Total BOM costs for the iPhone 7 are more in line with what we have seen in teardowns of recent flagship phones from Apple’s main competitor, Samsung,” said Andrew Rassweiler, senior director of cost benchmarking at IHS Markit. “All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past.”
The supposed drop in margins can be attributed to Apple trying to make up for sliding profits and the failure of the iPhone SE, which was aimed at emerging markets.
In April, Apple had reported its first-ever drop in iPhone sales, with third quarter shipments down 15% to 40.4 million units, though in line with expectations.
The company is also facing a sales crunch in China, which was hitherto its biggest overseas market. According to a Canalys report, the company has to look at markets like India to match sales figures.
The increase in BOM can also be seen in Apple’s move of ditching 16GB models. “This increase in the overall memory cost definitely puts pressure on the bill of materials costs,” Rassweiler explained.
