A rough calculation based on the estimated values of these components show that the total hardware cost for a 256GB iPhone X Max is around $443, with the display the priciest single component at around $80. That doesn’t sound like much considering that particular model costs a wallet-thumping $1249.
Let’s do some quick napkin math here. Is Apple really making 182% profit on each sale? That’s daylight robbery – or so the headlines would have you believe.
Of course, the truth is a little more nuanced. Even if this bill of materials estimate is accurate (Apple CEO Tim Cook says they never are) it still only accounts for the basic material cost of each handset. Not included is the huge outlay Apple spends on research and development each year. Remember Apple designs much of its own hardware – like processing chips – from scratch to ensure the best performance possible. Oh, and of course all the work put into iOS doesn’t come cheap, and yet Apple’s software ships free with every device. Add to that costs like marketing, manufacturing, shipping, and you get a little closer to the true cost each of iPhone.
Apple doesn’t disclose full details of those other factors, but based on its quarterly earnings reports and its long history of product sales, we know that it usually pitches products at roughly 30% profit. Enough to help Apple become the first trillion-dollar company in history, sure, but not nearly as exploitative as the wild 182% profit margins we calculated earlier. iPhones may be expensive, but they’re not ripping you off.
Of course, you could always try spending $443 on materials yourself and building a smartphone from scratch…