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Apple sets plate for iPhone price war?

January 23, 2007

We’re getting a better picture on how much this Apple iPhone is going to cost — both for us and for Apple.

applephone fish

ExtremeTech (via Fox News) reports that Apple could make a 50 percent profit off of its $599 8GB iPhone, based on an iSuppli analysis of the parts used in the phone, scheduled to arrive in June.

The article notes that the iPod Nano makes Apple a 45 percent profit margin for the company, so this is in a similar range.

This opens up a great opportunity for Apple to price cut their product as the holidays arrive.

Heck, even when a new similar product is launched (see the LG KE850) , they could trim their margins temporarily to squash a competitor. Or offer rebates to other smart phone users ($100, maybe?) to get them to make the switch.

But still, we don’t know what Cingular, or soon-to-be AT&T, will offer users for voice and data plan contracts. That’s still my sticking point on whether or not I make the switch.

From the article:

“With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward,” said Jagdish Rebello, director and principal analyst with iSuppli, in a statement.

Specifically, the 4-gigabyte model will carry a gross margin of 50.7 percent, iSuppli estimated, while th 8-gigabyte iPhone will earn Apple a 53.1 percent margin, the firm said.

In terms of cost, the most expensive component will be either the four or eight gigabytes of flash memory, which provides the local storage for music and other data.

At an estimated $35 for the 4-Gbyte version and $70 for the 8-Gbyte model, the cost outstrips even the flashiest element of the iPhone, the 320×480 touch screen, which is estimated to cost $33.50 for both models, and slightly less than $35 if a controller chip is added in.

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