Sign in with
Sign up | Sign in
Your question
Closed

iPhone 5 Costs $199 in Parts; Sells for $649 Off-contract

Last response: in News comments
Share
Anonymous
September 19, 2012 6:26:39 PM

TOTALLY WORTH IT!

(can I thumbs down my own post?)
September 19, 2012 6:27:18 PM

Only in mobile devices does $30 of extra NAND sell for a $200 premium.
September 19, 2012 6:29:17 PM

Since this is Tom's, I expect a thousand anti-Apple comments here, but I'd like to try to get a mature and neutral analysis on this article.

Apple company/logo aside, if any company was doing this stuff, I would be very upset with them. I can understand having to recoup marketing and research and stuff, but a 300+% markup!? There is no way they aren't just upping the price for pure profits, and the sad part is: they'll still sell an insane amount of them. Corporate greed like this sickens me.

So according to my neutral analysis of this article: Apple is a greedy company that sells underpowered devices for ridiculous prices. It's always nice to take a step back, check to see if your convictions hold any ground, and be re-assured.
September 19, 2012 6:31:34 PM

They buy this stuff in HUGE quantities surely the volume pricing is MUCH lower than this.
September 19, 2012 6:35:46 PM

A 326% mark up for Crapple? Those are some loyal customers. At least the Foxconn employees are well provided for...
September 19, 2012 6:40:26 PM

I like how they are charging a $100 and $200 premium for the upgraded memory when the costs have dropped considerably. Apple is only doing this because "They Can"...... Greed Bastards. I guess that is why there stock is breaking $700.
September 19, 2012 6:41:35 PM

JohmamaApple is a greedy company that sells underpowered devices for ridiculous prices.


Who is to blame for this? Buying customer or the company? Being greedy is in the nature of any company. They take money from anyone who is willingly give it. People should be more aware of the choices and what suits them best.
September 19, 2012 6:43:11 PM

There is already reports of Iphone5s selling for $1100 on ebay. Obviously some rich person that "has to have it NOW".
September 19, 2012 6:46:50 PM

Look at the markup. You already know it's apple.
September 19, 2012 6:47:21 PM

jrm59TOTALLY WORTH IT! (can I thumbs down my own post?)

I'll do it for you!
September 19, 2012 6:51:40 PM

JohmamaSince this is Tom's, I expect a thousand anti-Apple comments here, but I'd like to try to get a mature and neutral analysis on this article.Apple company/logo aside, if any company was doing this stuff, I would be very upset with them. I can understand having to recoup marketing and research and stuff, but a 300+% markup!? There is no way they aren't just upping the price for pure profits, and the sad part is: they'll still sell an insane amount of them. Corporate greed like this sickens me.So according to my neutral analysis of this article: Apple is a greedy company that sells underpowered devices for ridiculous prices. It's always nice to take a step back, check to see if your convictions hold any ground, and be re-assured.

The red flag in your comment is the fact you said you were doing a "neutral" analysis twice, yet there was nothing neutral about it, much less mature.

I am no Apple fan myself, but you make the comment "corporate greed" making your bias obvious from the beginning. That right there means you are not coming from this in any neutral way. You also do not even try to make any sort of educated estimate on what Apple's R&D and marketing costs are. That means your "neutral" analysis is not mature.

Are they upping the price for pure profit? Of course they are, THEY ARE IN BUSINESS. Do you insist only making enough in salary to pay your bills? Do you have any left over to put in savings or to make a personal profit? If so, your personal greed sickens me.

The fact is, no company will ever be successful by charging more than the market can bear. If their product is too expensive, it simply will not sell. If someone else wants to spend their money on the product, that is their business. How someone spends their money is no business of yours. You also ignore the fact that this is non contract pricing. Pricing for non contract phones will always be on the high side to make it attractive to be on a contract. Your "neutral" analysis provides no educated estimates of just how much of a percentage of iPhones will actually be sold off contract.

Not to mention have you ever seen how much an Android phone costs off contract? $649....
http://smartphones.techcrunch.com/q/197/4792/How-much-d...
Hm, that seems to be the exact same price since the Razr Maxx comes with a base 16GB storage.

The fact is, the off contract prices for the iPhone 5 is nothing out of the norm for high end cell phones sold off contract.
Anonymous
September 19, 2012 6:54:12 PM

I'd like to see how much VzW, Sprint, etc. pay for the phones. I would guess a very small percentage sell for the retail prices listed in the article.
September 19, 2012 6:55:35 PM

If you don't like the absurd profit scalping, frivolous lawsuits, crap OS, locked down hardware/OS, cheesy garbageware on iTunes, etc etc...
Then do what I do:

Don't buy the damn thing...
September 19, 2012 6:57:07 PM

I won't deny that this markup is high, but the Nexus One was $175 to build and retailed for $529 http://www.pcmag.com/article2/0,2817,2357924,00.asp

The Ipad is more reasonable:
http://www.isuppli.com/Teardowns/News/Pages/New-iPad-32...

So is the Nokia 900:
http://wmpoweruser.com/ihs-isuppli-tears-down-the-nokia...

Before you start hating one company more than others you should look up the costs of these builds.
http://www.isuppli.com/Pages/Home.aspx (use their search function)

Also I would like to state I hate all corporations about equally. :) 

September 19, 2012 7:00:03 PM

I wonder where the so called 99%'rs are at on this. Banks don't even begin to have as much of a profit margin as apple does even on their wildest days...
And don't give me that crap about "ur comparing a computer company to a bank!"
Wrong! MOFO!
It's two businesses... both providing a service that you pay for!
Only one is screwing you over at a higher percentage than the other...
Think about it... when you buy a house with a LOAN, from a bank, you get to do whatever you want with it right? Add another bathroom, paint a different color, etc etc...
You can do that with an iPhone right? WRONG MOFO!
Ur screwed and can't do anything with it! And if you do, you risk getting thrown in JAIL!
Grab ur ankles MOFO!
September 19, 2012 7:03:36 PM

Seeing this makes me sad.. cause it means Apple will have even more money to pay for more and better lawyers than ever and continue to bully their competitors! :( 
If there's any justice in the world, HTC, Samsung and others will succeed in Suing Apple over the LTE patents and get $200 per phone in damages! I'm taking a roll of pennies down to the wishing well.. who's with me??
September 19, 2012 7:09:08 PM

memadmaxI wonder where the so called 99%'rs are at on this. Banks don't even begin to have as much of a profit margin as apple does even on their wildest days...And don't give me that crap about "ur comparing a computer company to a bank!"Wrong! MOFO!It's two businesses... both providing a service that you pay for!Only one is screwing you over at a higher percentage than the other...Think about it... when you buy a house with a LOAN, from a bank, you get to do whatever you want with it right? Add another bathroom, paint a different color, etc etc...You can do that with an iPhone right? WRONG MOFO!Ur screwed and can't do anything with it! And if you do, you risk getting thrown in JAIL!Grab ur ankles MOFO!

And exactly what can you do with your iPhone that will get you thrown in jail, aside from phoning in a bomb threat or some other activity like it? You do realize it's not illegal to jailbreak an iPhone right? Will it void your warranty? Likely so, but guess what, Android phone makers do the same to people rooting an Android phone.

And no one is screwing anyone over. Are you forced to buy an iPhone? No, you aren't, therefore you aren't being screwed over. What someone sells a product for and what someone else chooses to spend their money on does not affect you. And if you choose to buy one, then you have taken the responsibility to choose to buy it so haven't been screwed over.
September 19, 2012 7:12:35 PM

This is why we can't have nice things.
September 19, 2012 7:12:51 PM

That doesn't include R&@ costs or software dev/maintenance costs either. Pretty childish 'analysis' and conclusions here IMHO.
September 19, 2012 7:17:55 PM

You'd think that with a 70% profit rate they'd be able to pay their workers more than $200 per month for working 60 hours a week, but hey, who am I to question the great imperium of the Apple?
September 19, 2012 7:21:39 PM

wildkittenYou also do not even try to make any sort of educated estimate on what Apple's R&D and marketing costs are.


Lol, I'm sure coming up with "rectangles with rounded corners" must have cost them a fortune in R&D money (which is tax deductible). How come all of Apple's competitors get by with a lot less mark up?
September 19, 2012 7:23:56 PM

exar333That doesn't include R&@ costs or software dev/maintenance costs either. Pretty childish 'analysis' and conclusions here IMHO.

Very true. And most in their bashing of Apple (and for the record, I am not fan of Apple products) seem to choose to ignore the fact that other manufacturers do the same and have for years. I remember my father buying an original Motorola flip phone, ON CONTRACT, for $700 about 20 years ago. I already linked how the Razr Maxx is the exact same price as the 16GB off contract iPhone.

The Samsung Galaxy S3 16GB model is $600 off contract...
http://www.androidauthority.com/verizon-may-sell-the-sa...

There are legitimate things for people to criticize Apple over. Doing so over something that is nothing new and done by every phone manufacturer is silly.
September 19, 2012 7:24:00 PM

What is the point of talking about retail prices when people buy these types of phones discounted with a new contract?
Anonymous
September 19, 2012 7:24:52 PM

Apple could have easily doubled the nand flash for their iPhone 5 and still made huge proffits, but why didn't they?

Because millions of iPhone's will sell without it and it leaves something to WOW people with when the iPhone 5(s) comes out.

Apple could sell the iPhone for less but why should they? Because people will buy them at the current price and still praise apple on the way out of the store.

I'm sure if consumers had to pay these off contract prices for the iPhone they wouldn't be buying them in these same quantities. The carriers are partly to blame and you can't discount their own "greed" in charging high premiums for data usage and these 2 year contracts.

The bottom line is that the iPhone is still the best made and most desired phone on the market. Competition brings down prices. Until another company creates a phone with the same rigorous manufacturing and design standards as apple, they don't have to compete and thus can charge a premium.

September 19, 2012 7:28:15 PM

GulliLol, I'm sure coming up with "rectangles with rounded corners" must have cost them a fortune in R&D money (which is tax deductible). How come all of Apple's competitors get by with a lot less mark up?

So they don't do any R&D except on corners? Intelligent analysis there. And do you bother to read the links showing that indeed Apple's competitors do in fact have the same kind of markup?

Samsung is selling the Galaxy S3 16GB model for $600, but their percentage of markup may be higher since Samsung makes many of the components used in their phones so have to purchase less from 3rd party vendors who have their own profit margins built in. I doubt highly Samsung, who supplies other companies with things like screens and memory purchase these components from someone else for their own products.
September 19, 2012 7:37:42 PM

Marketing, shipping, warranties, unsold inventory, assembly, R&D, licensing fees for IP, software, store fronts.
September 19, 2012 7:41:42 PM

wildkittenSo they don't do any R&D except on corners?


Pretty much, it's one of the few things they sue other companies over so that indicates they don't much else worth copying. Like it's competitors Apple also doesn't develop hardware, the cost of hardware R&D is included in what they pay their contractors who actually develop and build the hardware.
September 19, 2012 7:48:11 PM

This is 100% normal and every cell phone (that's worth anything) has a bill of materials like this and retails for $600+, this is because of R&D and don't say apple doesn't do any R&D, the A6 is apples own custom designed core. The only other company that does that is qualcomm. Every other company uses "off the shelf" designs from ARM.
September 19, 2012 7:48:16 PM

GulliPretty much, it's one of the few things they sue other companies over so that indicates they don't much else worth copying. Like it's competitors Apple also doesn't develop hardware, the cost of hardware R&D is included in what they pay their contractors who actually develop and build the hardware.


A6, dock connector, antennas, earpods. That's just the obvious things. Apple designs a lot of custom hardware that they integrate with off-the-shelf parts. Even then, the integration requires a lot of research and testing. Does the battery last long enough, does it get too hot, is it stable, etc.
September 19, 2012 7:50:42 PM

Nooo--Apple ripping off it's "loyal" customers? Couldn't be. Not Apple. < /sarcasm>
September 19, 2012 8:18:12 PM

As a member of the 47% I say that the government owes me one of these.
Anonymous
September 19, 2012 8:45:37 PM

I'm far from an apple fan, but you forgot few big things, like the marketing and the biggest part all the software production of the OS, some programmer can cost up to 200K$ per year. Sure the case doesn't cost much to make, but the case without the OS is nothing.
September 19, 2012 8:46:02 PM

What a total and utter ripoff.
September 19, 2012 9:17:16 PM

Not surprised in the least. This is why Apple can post record numbers in profits, they've been doing this for quite a while.
September 19, 2012 9:21:31 PM

I will never buy a phone for $649. Not just Apple. $300 is my limit.
September 19, 2012 9:34:36 PM

They invest too much on Marketing people , the people in R&D and after sales supprt deserves more. I've know some people on their technical support and They earned $250 - $300 a month. (im offshore bythe way)
September 19, 2012 9:36:13 PM

Off course the article fails to mention the components are from bulk orders which cut costs tremendously! Try getting prices low with small orders!!!
September 19, 2012 9:38:01 PM

Vorador2Not surprised in the least. This is why Apple can post record numbers in profits, they've been doing this for quite a while.


Yeah Apple is the only company to want a profit! lol. If you buy the iPhone without plan pay up the nose like any other smart phone. Thus get minor discount via 2 year plan.
September 19, 2012 10:27:24 PM

iPhone 5s are selling for 1500 + on ebay (not listed but sold, check completed listings). That is insanity.
September 19, 2012 10:35:31 PM

@wildkitten

WELL SAID!!!
September 19, 2012 11:19:11 PM

So I guess the only true cost of a product is the parts only. All the time in development of iOS should not be a factor here as those software designers and developers only make minimum wage, right? Apple spends almost nothing in marketing too, right? Employee benefits, cost of building and running operations… Stop bashing and THINK! Yes they make a profit, just like all the rest do, but it's NOT $450 a phone. No where near it. You don't like it, vote with your dollar. Just remember to look at the others and judge the same way before you vote for them with your dollar too.
Anonymous
September 19, 2012 11:46:02 PM

Apple fans are legendary loyal to Apple products, hence those are the people who will buy Apple iPhone no matter what. We have already seen this even during the bad times of Apple in the 1990s. Besides this group, there are other followers who just buy iPhone because the press and the news said so, who are run or somehow influenced by those above mentioned fans. This group is so called the "neutral" buyers who will buy the next phone if they heard different from the press or peers. The reason why Apple still has the market share they have at the moment is because the competition is still catching up. Eventually though, even the lower price segment of the competitor will be better than iPhone, and you will see market share of Apple shrinks to low percentage as expected by a premium price product. Apple cannot maintain the mark up forever if they want a bigger market share. It was just like back in the 80s when PC clones were cheap and Apple Mac was overpriced, and see what eventually happened when the "neutral" buyers switch to different products. In fact, this already happens in the smartphone category and the Android phone will continue to gain in market share while iPhone declines.
September 19, 2012 11:48:48 PM

All the phones are WAY overpriced and geared to force people into contracts. I will never buy a phone on contract and will never pay more than $200 for a phone. So Apple has no fear of ever having me as a customer, but then nor does the SIII.
September 19, 2012 11:55:48 PM

Are there other companies getting high markup on their top end smartphones when they are sold to carriers? Of course there are. Yet Apple is the only one who managed to accumulate over 100 billion dollars in unused cash in offshore accounts all over the world.

So what's different? Well, the other major players like Samsung actually design and make parts used in various industries. They spend quite a bit on expanding and streamlining their manufacturing processes and factories as well as on R&D for numerous products which eventually sell at various price points. They also spend on various humanitarian efforts around the world. Ultimately, they spend more widely than Apple does. Apple pours its R&D spending into just a tiny lineup of products which all use the same internal parts and are only released once a year. They manufacture nothing whatsoever themselves, they give nothing to charity, and they spend exactly $0 on designing cheaper products for the majority of consumers who insist on buying the most affordable technology.
September 20, 2012 12:15:45 AM

emjayyYet Apple is the only one who managed to accumulate over 100 billion dollars in unused cash in offshore accounts all over the world. So what's different? Well, the other major players like Samsung actually design and make parts used in various industries. They spend quite a bit on expanding and streamlining their manufacturing processes and factories as well as on R&D for numerous products which eventually sell at various price points.



Apple spends nothing on R&D? How about its own CPU? Own Operating System? Entirely custom phone design, computer design, MP3 player designs? The entire PC industry is releasing a flood of Ultrabooks after Apple advanced the ultra-slim concept to the current stage (Yes, other slim designs came before, Apple advanced the concept, didn't invent it). Apple also set off the Tablet wave now rocking the industry, and they have an entire cloud initiative tied into their iWorld ecosphere to share music and information instantly with others. Apple is spending hundreds of millions on a green energy data farm in North Carolina. Interface design, advanced materials research, custom ASICs, a bespoke industrial design wing, the continual replacement of toxic or harmful materials with environmentally friendly materials... the list is gargantuan.

What's more, the wave of R&D that Apple sets off in other firms in the industry each time its latest products come out amounts to a ripple effect of tens of billions of dollars globally.

So nice try, but you are just way too uninformed about the company.
September 20, 2012 12:39:23 AM

fujiappleApple fans are legendary loyal to Apple products, hence those are the people who will buy Apple iPhone no matter what. We have already seen this even during the bad times of Apple in the 1990s. Besides this group, there are other followers who just buy iPhone because the press and the news said so, who are run or somehow influenced by those above mentioned fans. This group is so called the "neutral" buyers who will buy the next phone if they heard different from the press or peers. The reason why Apple still has the market share they have at the moment is because the competition is still catching up. Eventually though, even the lower price segment of the competitor will be better than iPhone, and you will see market share of Apple shrinks to low percentage as expected by a premium price product. Apple cannot maintain the mark up forever if they want a bigger market share. It was just like back in the 80s when PC clones were cheap and Apple Mac was overpriced, and see what eventually happened when the "neutral" buyers switch to different products. In fact, this already happens in the smartphone category and the Android phone will continue to gain in market share while iPhone declines.



The competition is catching up? That's a laugh. The competition is advertising the latest iPhone as out of date.

Neutral people represent the majority of iPhone buyers, because Apple fans tell them to? Is your theory that they mind-control random people into a phone they don't want? Or do they use brain worms?

If Apple is already losing market share in the smartphone space, why can't anybody who claims this point to market research, while the trustworthy industry pundits point to market research showing iOS growth?
September 20, 2012 12:43:50 AM

Apple's margins shifting negatively last quarter and I believe that will be a growing trend as Android devices continue to increase the competition.

The corporate greed you speak of drives the innovation that provides you with the technology you know and love without the profit motive...well take a look at the Native Americans before the Europeans arrived.
September 20, 2012 12:45:08 AM

PapouI'm far from an apple fan, but you forgot few big things, like the marketing and the biggest part all the software production of the OS, some programmer can cost up to 200K$ per year. Sure the case doesn't cost much to make, but the case without the OS is nothing.


Yes, but the cost of replication is zero, it's the difference between fixed and variable costs.
!