It might be common knowledge to some people that the cost of production is not usually reflected in the manufacturer’s suggested retail price (MSRP) of most items. We briefly hit on this in 2015 when we wrote an article about how Beats Headphones only cost $17 in parts, but they’ll run you $200 or more when you purchase them in-store. This is due to a variety of factors, including demand, branding, and R&D.
Apple just released its new iPhone 8 and 8 Plus, so financial services and business analytics company IHS Markit did a tear down of the devices to see just how much it costs (in parts) to bring the phone to your hands.
According to their findings, the bill of materials (BOM) for both phones has increased since each of their respective predecessors. The cost for the 5.5-inch iPhone 8 Plus with 64 gigabyte memory came in at $288.08, around $10 higher than the $277.66 cost of the iPhone 7 Plus. But the price for the iPhone 8 Plus is $799, which is $30 higher than its predecessor.
Meanwhile, the bill of materials cost for the iPhone 8 is $247.51, also around $10 more than the iPhone 7. The iPhone 8 has a starting retail price of $699, which is $50 more than the iPhone 7.
So in essence, the change in MSRP is greater than the change in BOM, leading to an increased profit margin for Apple on these devices.
“Our expectation is that Apple will absolutely maintain healthy margins. Apple likes to create the best products and a good return on them,” Ian Fogg, head of mobile at IHS Markit, told CNBC by phone Tuesday.