Cost Breakdown of IPhone.

Discussion in 'The Powder Keg' started by blueice, Aug 29, 2010.

  1. blueice

    blueice G&G Newbie

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    CARPE DIEM: Apple iPhone: Designed in U.S., Assembled in China

    It should read: Assembled for nothing in Red China.

    Tuesday, July 06, 2010

    Apple iPhone: Designed in U.S., Assembled in China


    [​IMG].​
    Turn over your iPhone and you'll see that it's "assembled in China." But that doesn’t mean that most of the profits or revenue go there. In fact, only about $6.54 (a little more than than 1%) of the full $600 retail price of an iPhone goes to China and more than 60% goes directly to Apple and other American companies and then indirectly to American workers (see chart above), according to a recent "teardown report" by iSuppli that was featured in a New York Times article yesterday.

    If you follow the supply chain for the Apple iPhone 4, you'll find that it was:
    "...designed by Apple engineers in the United States, sourced with high-tech components from around the world and assembled in China. Shipped back to the United States, the iPhone is priced at $600, though the cost to consumers is less, subsidized by AT&T in exchange for service contracts.

    “China makes very little money on these things,” said Jason Dedrick, a professor at Syracuse University and an author of several studies of Apple’s supply chain. Much of the value in high-end products is captured at the beginning and end of the process, by the brand and the distributors and retailers. According to the latest teardown report compiled by iSuppli, a market research firm in El Segundo, Calif., the bulk of what Apple pays for the iPhone 4’s parts goes to its chip suppliers, like Samsung and Broadcom, which supply crucial components, like processors and the device’s flash-memory chip. The total bill of materials on a $600 iPhone — the supplies that go into final assembly — is $187.50, according to iSuppli (see chart above).

    The least expensive part of the process is manufacturing and assembly. And that often takes place here in southern China, where workers are paid less than a dollar an hour to solder, assemble and package products for the world’s best-known brands.
    MP: There are several important points here:

    1. We often assume that "assembled in China" means that 100% of the product's content and value is produced or "captured" in China, when in this case only 1% of the iPhone's value is produced by China, and more than 60% of the iPhone's retail value is produced by American engineers, designers, and other IT professionals at Apple, and also at other U.S. companies like Intel and Texas Instruments that provide some of the components.

    2. Assuming the U.S. government counts an iPhone as a $600 import from China (or some lower wholesale value) and increases the trade deficit with China by $600 - even though China contributes only about 1% to the final value - our $227 billion trade deficit with China could be significantly overstated.

    3. The article also points out that labor costs are starting to rise in China's "dominant electronics manufacturing center in Shenzhen toward lower-cost regions farther west, even deep in China’s mountainous interior." In other words, China's workers are receiving significant benefits from globalization and trade with the United States - "buy an iPhone in the U.S. and you're helping a worker China get higher wages or a bonus." I thought trade, globalization and capitalism were supposed to produce bad outcomes for workers, who get exploited by greedy employers?

    4. At least in the case of the iPhone, a strengthening Chinese currency or rising inflation or wages in China wouldn't have much effect on the retail price here, since the cost of assembly is so insignificant to start with - $6.54 per $600 unit. Further, production will shift towards lower-cost regions of China as the article mentions, or production will shift out of China to Vietnam and other markets with lower wages.

    5. To paraphrase what economist Hal Varian wrote in 2007 about the iPod:

    "The real value of the iPhone doesn't lie in its parts or even in putting those parts together. The bulk of the iPhone's value is in the conception and design of the iPhone. That is why Apple gets $360 for each of these iPhones it sells, which is by far the largest piece of value added in the entire supply chain. Those clever folks at Apple figured out how to combine hundreds of mostly generic parts into a valuable product. They may not make the iPhone, but they created it. In the end, that's what really matters."

    This is what the NY Times meant when it said that "Much of the value in high-end products is captured at the beginning and end of the process," in this case by Apple and its distributors and retailers.

    HT: Colin Grabow for the NY Times article link.
  2. killsnapz

    killsnapz G&G Newbie

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    I just will never understand why anyone would want to lock themselves into a $2500 dollar contract to get a $100 dollar discount on one of these smart phones. If I want to browse the internet I stay home and do it. If I go out it is because I want to participate in an activity or talk to my freinds. I will never understand why people drive across town to a freinds house just to sit on there couch and then stare at there smart phone for a couple of hours.

    Michael
  3. AllAlaskan

    AllAlaskan G&G Enthusiast

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    I know some people like my mom who is a Realestate agent they are really handy to have but those people like you mentioned who LIVE on there phone, I think those are real live Zombies! Must........Play............On......Iphone, Drool.
  4. Chris

    Chris Administrator Staff Member Founder

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    To buy the phone outside of contract is $600.
    So to pay $200 or $100 for it for service you can only get with that carrier.....well it works out.
  5. 9mmXDm

    9mmXDm Suspended

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    My uncle is an apple fanatic. Litterally, if a new iPhone came out every month for a year he would buy each one and sell the old one.

    He uses his iPhone way too much and when he comes to visit he is either on it or on his iPad or his Mac Air or MacBookPro.

    It is a toy for him and you cannot get him away from it.

    Now I always wanted an iPhone but after the current debacle and the fact that AT&T dropped their UNLIMITED plan I am steering clear of an iPhone even though I still would love to have one.

    However I did just get a new phone through Verizon and I am loving it! I got the Droid Incredible. It is basically the iPhone and has many of the same apps. So I found my happy medium. The only downside is it uses a lot of battery power.

    It is nice to be able to look something up while your away from a computer sometimes. Like a few weekends ago we were at a restaurant. My parents my uncle (Apple freak) & myself. They didn't have the wine we wanted so we ordered something we had no knowledge about. While in the end it was good. We found out through the internet that it was a $13 bottle of wine that they were selling for about $42 a bottle. We also wanted to find the rating but never did.

    So there is good use for smart phones. I find that usually people that wonder why anyone would want one are older people who are not that into technology. They can work their way around the TV and the computer but aren't wizzes at it.
  6. billy

    billy G&G Evangelist Forum Contributor

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    i dont even text.
    to me a telephone is just that.
    i tried to get one with no camera but they cost too much.....
  7. nathangdad

    nathangdad G&G Newbie

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    Another cost to the world

    just wanted to add all that shipping around the world adds to the pollution of the atmosphere as well as other areas of pollution. So, a societal cost is incurred.

    Personally, I think these phones are overrated and I choose not to own one.
  8. BarryHalls

    BarryHalls G&G Enthusiast

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    I am pleasantly surprised that such a large chunk of the cost stays in America. I'd like to see it closer to 75%, or more, for every product we consume, but this is a product sold world wide, with a huge chunk of the gross coming back home. I call it a win. Most "Made in China" products are 100% Chinese, design being a possible exclusion, made with little or no regulations as to worker or consumer safety. Depressing.
  9. BarryHalls

    BarryHalls G&G Enthusiast

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    They are nice, but like all apple products, they are far overpriced IMO. I also KNOW that the majority of owners use them for nothing more than calls, texting, and a little bit of web surfing, all the stuff that can be done on the $200 phones.

    I want a droid, but my friend writes apps for it, so I would be using it to do things that my computer can't, which will keep me ahead of my competitors.
    Last edited: Aug 30, 2010
  10. nathangdad

    nathangdad G&G Newbie

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    Hi BarryHalls

    Thanks for the agreement. I appreciate it.

    For Apple on this product it is too many apps at too high a price.

    You are so right. What I want from phone could be provided for many, many hundreds of dollars less in price.
  11. TheWanderingMind

    TheWanderingMind G&G Newbie

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    Billy: I still don't carry a cellphone at all. If they can't raise me at work or home, they don't need to talk to me.

    I want one for the glovebox, but that's a hassle, too. That means paying for a pay-as-you-go thing or paying regular monthly payments.

    Hellwiddit!
  12. killsnapz

    killsnapz G&G Newbie

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    I actually love electronics. I have a Playstation 3 a high end computer tower hooked up to a 42" monitor. Satalite TV top end stereo equipment but I have never had any interest in a smart phone. Mainly because as stated if I wanted to play on the internet I would have stayed home. I can see thatthey could be a very usefull tool for some jobs as stated earlier like real estate agent or a salesman looking for a hotel or restarant on the road. Lets face it though the majority of the people are using them to text a bunch of useless garble that no one really cares about.

    Michael
  13. BarryHalls

    BarryHalls G&G Enthusiast

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    I pay a LITTLE more for a cell than I would for a home phone and get the convenience of my speed dial and Rolodex in my pocket at all times as well as the comfort of knowing I can call for help no matter where I break down.

    I can live with out a cell, but it would literally be a change of lifestyle, more planning a head, more scheduling, less wandering, and never separate from the wife in stores.

    As is, I use it ONLY for communication, primarily calls, and texts when I'm not supposed to be on the phone :), but I'm moving into real estate, and mobile internet, and said apps, will be a serious edge in a competitive market.
  14. billy

    billy G&G Evangelist Forum Contributor

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    i dont use the work phone and i dont need a home one.
    the cell is the only one.
  15. SwedeSteve

    SwedeSteve Freedom Zealot Forum Contributor

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    I can see where these new smartphones could be of great use in business. But most people are just using them to live their "e-life". Kind of like I do here, rofl !! But then again I'm not driving a car, pushing a shopping cart, or sitting next to you in a restaurant.
    Doesn't anyone just talk anymore ??

    I have a simple cell phone (pushed into it by my wife and daughter), that I don't always carry. Sometimes I just don't want someone to be able to get ahold of me !! I don't answer it while driving either. I have been accused of letting the battery die on purpose (snicker), and I am real bad about "forgetting" it. It must be old age !!
  16. 9mmXDm

    9mmXDm Suspended

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    1. I never used to TXT and all ym friends did. So when they TXTed me I wouldn't TXT back and it would cost me $.10 to $.15 per TXT they sent. By the way this was when I was still in college. It took too long for me to TXT and so calling was much easier.

    However I found out no one would answer their cellphones anymore since TXTing was the big thing to do.

    2. So about two years ago or so I decided to finally get a TXTing plan, it was when I got a phone with a qwerty touch keyboard. Much easier to TXT so I got a plan for TXTing.

    The communication was wonderful, I could actually reach my friends.

    3. My parents DO NOT TXT, WILL NOT TXT & DON'T WANT TO TXT. My father was the same way as you Billy. He wanted a phone with no camera in it. He found one and it wasn't expensive. It was a Kyocera something or other.

    Now my mother would love to get into the new technology but she just doesn't have the time to learn it and practice it. Plus I don't think she would really like and use all the programs a smartphone can offer. I know she would never use them all and would get bored with it after a week or so.
  17. Legba

    Legba G&G Newbie

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    They arent just phones. They are hand held computers. Ever gone out of town to another city and gotten lost? Doesnt happen with me anymore. The GPS maps that come with them let you find your way in real time. If I want to know what gun stores are in the area I just type in gun stores and it gives me all the info I need right down to the way there from my current position. Same with finding just about anything you could want. Not sure if you can conceal carry in a certain situation? Just pull up the states gun laws and you will know on the spot. The apps are cheap. A lot are free. The most I paid for one was $20 bucks but it's my ballistics app. You can find them on ebay or the classifieds in the newspaper for a lot cheaper. I paid $150.00 for my phone because I bought it off a friend. With the family plan we have my bill comes to $45.00 a month. That's with unlimited text, and media with 300 minutes of talk time. Ive seen the phone zombies before and it is sad. I'm happy to say that my iPhone has actually made life easier for me.
  18. 9mmXDm

    9mmXDm Suspended

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    Not to mention the cool FREE apps that involve guns and different explosion devices like grenades, semtax, C4 and flashbangs.
  19. ArkansasHunter

    ArkansasHunter G&G Newbie

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    My son recieved his Droid today. Is it different than a Iphone ? He found a site on the net and got a great deal and a box full of accessories and a free cell phone came with his Droid.
    I'm very Impressed with this contraptions LOL
  20. 9mmXDm

    9mmXDm Suspended

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    The Droid is just like an iPhone just made by a different company and offered on a few different carriers.
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