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$649 iPhone 5s Costs Apple $199
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Ian Page
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Ian Page,
User Rank: Apprentice
9/24/2013 | 6:57:35 PM
re: $649 iPhone 5s Costs Apple $199
This analysis wilfully perpetuates the myth that the cost of parts and manufacture are the only costs involved in producing the iPhone. Hmm - I guess that would be the case if we all bought our iPhones without an operating system, or apps, or servers, or support, or warranty, or shipping (from China!), or cables, or charger, or, or or or....

AND in addition, Apple could be a zero-overheads corporation operated by slaves with non-existent systems. (Unless of course the shareholders could be convinced to run Apple at at a permanent loss...)
ANON1252009151911
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ANON1252009151911,
User Rank: Apprentice
9/24/2013 | 7:30:55 PM
re: $649 iPhone 5s Costs Apple $199
Each 64GB version sold could pay for both the manufacture AND purchase of a new 16GB. I sincerely doubt that profit margin is due to overhead.
ggiese87101
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ggiese87101,
User Rank: Apprentice
9/25/2013 | 4:18:18 AM
re: $649 iPhone 5s Costs Apple $199
I'm sure they spent millions coming up with just the right shade of gold...
iamhungry
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iamhungry,
User Rank: Apprentice
9/25/2013 | 4:34:39 AM
re: $649 iPhone 5s Costs Apple $199
Exactly. The correct title should be "The raw materials in a $598 iPhone cost $199."

I think Apple spend a bit on sales and marketing too.
JoshuaS993
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JoshuaS993,
User Rank: Apprentice
9/24/2013 | 6:58:27 PM
re: $649 iPhone 5s Costs Apple $199
Delete - duplicate
JoshuaS993
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JoshuaS993,
User Rank: Apprentice
9/24/2013 | 7:00:27 PM
re: $649 iPhone 5s Costs Apple $199
The article should be titled "$649 iPhone 5s Costs Apple $199 to manufacture." By including the line "It's a shame Apple is only marking the price up by (a minimum of) 326%." you show how biased you are. The cost to manufacture the phone doesn't include any of the other costs such as R&D and marketing - which are significant. To not even mention these shows that you are merely looking for clicks, and couldn't care less about accurate journalism. Apple's gross margins are around 30-35% over recent quarters. They'd love your math to be the reality - but it simply isn't.
ANON1252009151911
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ANON1252009151911,
User Rank: Apprentice
9/24/2013 | 7:33:56 PM
re: $649 iPhone 5s Costs Apple $199
People will twist themselves into knots to justify Apple's prices. Seriously, what makes Apple so special that they have an outsized margin, yet they're the largest company on the planet? Talk about math, this just doesn't add up.
iamhungry
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iamhungry,
User Rank: Apprentice
9/25/2013 | 4:37:15 AM
re: $649 iPhone 5s Costs Apple $199
>what makes Apple so special that they have an outsized margin

You've got it the wrong way round. That they can charge an outsize margin is proof that Apple, as a company, are special.
Frank_Truth
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Frank_Truth,
User Rank: Apprentice
9/24/2013 | 7:56:02 PM
re: $649 iPhone 5s Costs Apple $199
Sadly, Apple does not spend that much for R&D anymore. Other companies like Microsoft and Google spend over 10% of their profits for R&D. Apple spends virtually nothing. They are now content to milk their existing consumer base.
JoshuaS993
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JoshuaS993,
User Rank: Apprentice
9/24/2013 | 8:03:42 PM
re: $649 iPhone 5s Costs Apple $199
You have no idea what you're talking about. Apple spent $3.4 billion on research and development during its last fiscal year. Google spent $6 billion and Microsoft spend $9.8 billion. All of those numbers are significant.
Frank_Truth
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Frank_Truth,
User Rank: Apprentice
9/24/2013 | 8:10:13 PM
re: $649 iPhone 5s Costs Apple $199
As a percent of profit and earnings, Apple spent less than 3% for R&D, while Google and Microsoft both spent over 10%.
ggiese87101
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ggiese87101,
User Rank: Apprentice
9/25/2013 | 4:19:18 AM
re: $649 iPhone 5s Costs Apple $199
Most of that R&D was for their fancy new offices...
Michael Endler
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Michael Endler,
User Rank: Author
9/25/2013 | 1:38:47 PM
re: $649 iPhone 5s Costs Apple $199
"Sadly, Apple does not spend that much for R&D anymore."

There were actually a bunch of articles last month that said Apple was modestly increasing R&D spending. They're supposed to have a ton of people working on a smartwatch, which could explain some of the upsurge.

Anyway, looking at Apple's R&D spending as a percentage of their profits doesn't tell the whole story.

Apple's profits have exploded over the last decade. Insane, insane growth. This is naturally going to drive down the percent of R&D:profit ratio.

Suppose, for example, that one year, Apple made $5 and spent $1 on R&D. The next year, suppose that Apple made $50 but spent $2 on R&D. In this scenario, R&D actually increased by 100%, year over year, but as a share of profit, it dropped from 20% to 4%.

This is an exaggerated example, of course. And I also have been a little disappointed when I see that Apple's marketing budget has increased so much faster than its R&D budget. But the ratio of R&D to profits can drop even if R&D and profits are both increasing; it just means that R&D isn't growing as fast as profit.

In other words, I don't see anything that implies "Apple does not spend that much for R&D." In real dollars, Apple seems to spend more on R&D than ever. It's only the percentage that has dropped, and though it would reassure some Apple fans to see them invest more in research, this sort of drop isn't the same thing as actually spending less.
TelsaI845
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TelsaI845,
User Rank: Apprentice
9/24/2013 | 7:27:53 PM
re: $649 iPhone 5s Costs Apple $199
Only 3 times? No way. A wild guess would put the cost at under a $100 or less. That would put the markup at a more realistic 6 and 8 times the cost, 10 times the cost would be more like it.
Ian Page
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Ian Page,
User Rank: Apprentice
9/24/2013 | 7:40:11 PM
re: $649 iPhone 5s Costs Apple $199
Why in heaven's name do you think your "wild guess" is more credible than the detailed breakdown and costing presented here by people who know what they're doing, and obviously do it a lot?
ANON1252009151911
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ANON1252009151911,
User Rank: Apprentice
9/24/2013 | 7:29:44 PM
re: $649 iPhone 5s Costs Apple $199
It's 4.25x the manufacturing cost. People are fools.
Frank_Truth
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Frank_Truth,
User Rank: Apprentice
9/24/2013 | 7:45:07 PM
re: $649 iPhone 5s Costs Apple $199
The bottom line is this. I wouldn't care if the Apple phone cost $0.00 to manufacture. The sad fact here is Apple has refused to use its windfall profits from the iPhone to make it better, and deliver more value. Instead Apple has chose to buy back their stock. Shareholders would have been better served if Apple used their cash to make the iPhone a better product. There are so many things Apple could easily have improved. And iOS7 is a clownish design was design for bubblegum-chewing, unicorn-loving little girls, not a classy, elegant design for executives.

Actually iOS7 looks like it was designed by a male hairdresser using MS Paint for flaming queens, and Prince. Can't look at iOS 7 and not think of Raspberry Beret or the psychedelic 60's.

Look at the new camera icon and the old camera icon.

There are B&W icons, lots of icons with white backgrounds, then lots of icons with green backgrounds.

Apple chose a font with thin, hard to read characters on a phone that is already smallest in the smart phone universe.

The new flat design looks like Apple is following Android and Windows 8 tiles. The real world is 3-D. The engineers who designed the new interface think in abstract symbols not 3-D images.

Steve Job's skeuomorphism was classy, not cheesy or cheap. There is reason expensive watches are analog, not digital.

Finally, Apple should have come out with two different size phone for people who have different size hands. A adult male has much larger hands than a female tween. One size does not fit all. iPhone owners are leaving Apple in droves permanently because they want a bigger phone, even though there are many Apple customers perfectly happy with the phone size the way it is.

Samsung makes many different size phones. Moreover, the IPhone has fallen behind in many important areas. The Sony phone is more water resistant. The Lumina has a much better camera. The Motorola Droid Maxx has much better battery life even though it has a much bigger screen, and it is more durable.

There are still areas where the iPhone is ahead of its competition, but those areas are shrinking as Apple has been too slow in improving the iPhone.

The iPhone should have NFC (Near field Communication), a consumer replaceable battery, and consumer upgradeable memory.

Some one wrote me consumers can replace the battery on their own, if they take a special course in cell phone repair, and buy special tools. This is the kind of insane nitpicking people have with my messages.

I am an iPhone owner, and have always appreciated Apple's products. But it looks to me like Apple is lost. They should not have fired Scott Forestall. Apple is being run by a supply chain guy, not a visionary who understands what consumers want, and it shows.

Don't be fooled by the fact the Apple 5s sold so many units and sold out so fast. Apple is still coasting. Apple still has a lot of momentum from the iPhone 4. But eventually the Apple will fall back down to Earth like Blackberry, AOL, Nokia, and Motorola.

Gizmodo showed the 5 takes better pictures than the 5s even though the 5s has better specs. Gizmodo proved this by taking identical photographs with the 5 and 5s. Fair Trade showed the 5s is more likely to stop working after a fall. And Consumer Reports showed the iPhone in general has poorer phone call reception than most smart phones.
JoshuaS993
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JoshuaS993,
User Rank: Apprentice
9/24/2013 | 8:05:35 PM
re: $649 iPhone 5s Costs Apple $199
The iPhone is not designed for executives you moron.
Frank_Truth
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Frank_Truth,
User Rank: Apprentice
9/24/2013 | 8:11:05 PM
re: $649 iPhone 5s Costs Apple $199
Thank you for agreeing with me.
Becca L
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Becca L,
User Rank: Apprentice
9/24/2013 | 10:49:44 PM
re: $649 iPhone 5s Costs Apple $199
I do agree about the bubblegum design, it is something many people have commented on and I'm surprised Apple is catering to this market. Maybe that opens them up to new (paid) features that makes it more masculine, just like your suggestion of different phone sizes. At this point they can't lose money if they try.
ggiese87101
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ggiese87101,
User Rank: Apprentice
9/25/2013 | 4:28:57 AM
re: $649 iPhone 5s Costs Apple $199
The same people willing to pay the "Apple premium" are the ones falling for the "iOS 7 waterproofs your phone" hoax. Unbelievable how many lemmings are out there. If people realized they shouldn't line up on day one to get a new model and waited Apple out for a couple weeks or months, or even try a different brand for a change, Apple would start charging them a lot less for the product and the "Apple premium" would evaporate, making smart phones a lot cheaper for everybody. Apple is turning into the Microsoft of 5-10 years ago - fat and happy and clueless about how to compete. Blackberry should be a lesson to them, and they should go read "The Innovator's Dilemma". If the lemmings ever figure things out, they're in trouble.
Eric Zeman
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Eric Zeman,
User Rank: Strategist
9/25/2013 | 12:48:38 PM
re: $649 iPhone 5s Costs Apple $199
All - The original article contained two sentences regarding the difference between manufacturing cost and the final sale price. The comments were meant to be flippant and outlandish on purpose. I thought it was clear I was being snarky. Turns out some readers thought they were being misled on the facts. This article is about the cost to manufacture the devices only, which include the raw component cost when the parts are purchased at volume and the cost of piecing those components together. That's where IHS got its $199/$173 figures.

I did not intend to imply that the $199 price estimated by IHS represented the entire cost of developing, engineering, manufacturing, shipping, or transporting the iPhone. Obviously those factors are significant and boost the final cost to Apple by a wide margin.

With respect to the headline, the one I submitted with the article included the words "To Make" at the end. The headline was shortened for the sake of brevity and not to mislead readers or bait them into clicking on the article.


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