A teardown of the iPhone 4 reveals that Apple spent nearly $188 in materials and electronics to create a device that's highly profitable and reflects the company's design prowess, a research firm says.
Apple's bill of materials for the new iPhone is a continuation of the company's ability to hold down costs, as reflected in previous versions of the smartphone, iSuppli said in releasing its teardown analysis Monday. However, what makes the iPhone 4 "radically different" is the design.
"Just as it did with the iPad, Apple has thrown away the electronics playbook with the iPhone 4, reaching new heights in terms of industrial design, electronics integration and user interface," iSuppli analyst Kevin Keller said in a statement.
Apple's BOM of $187.51 for the fourth-generation iPhone is in line with those of previous versions, Keller said. "With the iPhone maintaining its existing pricing, Apple will be able to maintain the prodigious margins that have allowed it to build up a colossal cash reserve -- one whose size is exceeded only by Microsoft Corp."
In previous teardowns, iSuppli estimated the BOM of the 2009 iPhone 3GS at $170.80; the 2008 3G at $166.31 and the first iPhone in 2007 at $217.73. While the iPhone 4 offers better performance and more capabilities than its predecessor, the starting price remains the same at $199.
The most expensive component of the iPhone 4 is the 3.5-inch LCD screen that Apple calls a "retina display." The component features a 960 x 630 resolution, four times that of the iPhone 3GS. The cost of the new display is $28.50, iSuppli said.
While the screen is unlabeled, it was most likely made by LG Display. However, iSuppli said Toshiba Mobile Display could also be a supplier.
Apple's most apparent innovation in the iPhone 4 is in the redesigned housing, iSuppli said. Unlike the unibody housing of previous models, the new phone's enclosure is composed of multiple pieces, making it possible to accommodate a larger battery and turn the metal sides of the enclosure into an antenna.
"This adds more complexity and cost, but elegantly uses every possible cubic millimeter of the iPhone for function, and not just form," Keller said. "The tight intertwining of form and function is an area where Apple has always excelled."
While innovative in design, the iPhone 4 antenna has not met the expectations of many Apple customers. Buyers have reported that the new smartphone drops its signal if the bottom left corner of the device is covered by the palm of the user's hand, a common occurrence if the phone is held by lefties. Apple is reportedly preparing a software patch to fix the flaw.
Another innovation in the iPhone 4 is the far smaller wireless section of the device, which is the result of integrating more functionality into the core chipset components.
"Out of the nearly 300 cell phones torn down by iSuppli, the iPhone comes the closest to integrating the entire wireless interface -- including all the supporting Radio Frequency (RF) modules -- on a single chip," Keller said. "This further enhances the iPhone 4's space efficiency and serves as yet another testament to the advanced state of Apple's design."
A new component in the smartphone is a gyroscope supplied by STMicroelectronics. The 3-axis digital component makes it possible for the iPhone 4 to record movement three dimensionally for more realistic game play. The component cost $2.60, iSuppli said.
A teardown analysis released last week by InformatonWeek's sister company, UBM TechInsights, found that the gyroscope is likely slated for the next-generation iPad as well. TechInsights senior analyst Steve Bitton said there's an almost-perfect spot for it, located right beside the iPad's accelerometer.
The global positioning system used in navigation applications for the iPhone is made by Broadcom and costs $1.75, iSuppli said. Broadcom also made the Wi-Fi/Bluetooth wireless chip, which cost $7.80.
Other components include the Apple-designed A4 processor built by Samsung Electronics. ISuppli estimates the cost of $10.75.
The glass capacitive touch screen that overlays the iPhone 4 cost $10, ISuppli estimates. While the component is not labeled, the researcher believes it was built by Balda and/or TPK Holding.
ISuppli's overall cost estimates does not include the cost of labor, marketing, patent licensing or other non-BOM expenses. The latest teardown was the 16 GB version of the iPhone 4, which sells for $199. Apple also sells a 32 GB model for $299.
In the last quarter, the iPhone accounted for 40% of Apple's revenue.
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