Adding Value - How Much Profit is Made by the iPhone?

A simply fascinating piece of analysis by the respected Asymco website here which breaks down the costs of each individual element of what goes into an iPhone. Has there ever been a better example of added value to show students - though they may be somewhat surprised by how much contribution is made on each iPhone shipped!

The analysis provides a great deal of detail, but the numbers break down roughly as follows.

Average Selling Price / (Revenue) of an iPhone - $676 (remember - the analysis is based on the US market)

Cost of Materials / Components (e.g. battery, camera, processor, display, memory) $197

Manufacturing: $15

Other direct production & shipping costs: $97

Gross profit per unit $367

Direct overheads: $48

Operating profit (contribution) per unit: $319

You can see the data illustrated in this chart.

Quite stunning. What hits me immediately is just how little the unit manufacturing cost is. $15 per iPhone. Apple’s use of manufacturing in China is well documented and this statistic is an interesting part of the debate!

The operating margin (or effective contribution) per unit is almost 50% of the selling price. That is a stunning rate of profitability for a product.