How much would Apple Inc. have spent to produce the base (16GB)
version of the iPhone 5 that it sells at $649 (without the contract)?
Research firm IHS iSuppli, in a press release dated 18 September, said
after its preliminary virtual teardown, it pegged the iPhone5's bill of
materials (BOM) at $199 for the low-end model with 16GB of NAND flash memory.
After adding $8 as manufacturing cost, the cost to produce the iPhone 5 rises
to $207, according to IHS. For the 32GB version of the iPhone 5, the BOM cost
increases to $209.00, while the 64GB version is estimated at $230.00.
Please note that these teardown assessments are preliminary in nature,
account only for hardware and manufacturing costs and do not include other
expenses such as software, licensing, royalties or other expenditures, IHS
qualified in its press note.
The virtual teardown information is based on an analysis of the
specifications announced by Apple, combined with information regarding known
components and suppliers. IHS said it may revise the numbers after the "actual
physical teardown of the device".
"With the base model carrying a $199 BOM, the iPhone 5's components are
expected to be slightly more expensive compared to the iPhone 4S model," said
Andrew Rassweiler, senior principal analyst, teardown services, for IHS. "The
low-end iPhone 4S with the same memory density as the base-model iPhone 5
carried a BOM of $188, according to a preliminary estimate issued by IHS in
October 2011. While the price of some components, such as NAND flash, has
fallen during the past year, the iPhone 5's overall BOM has increased mainly
because its display and wireless subsystems are more expensive compared to the
iPhone 4S."
As in previous models, the costliest subsystem in the iPhone 5 is
estimated to be the display with integrated, in-cell touch sensing. At $44,
this subsystem is pricier than the combined total of $37.00 for the iPhone 4S
display with separate touchscreen based on pricing from October 2011. This is
due to the iPhone 5's larger display -- at 4.0 inches diagonally, compared to
3.5 inches for the iPhone 4S -- and the inclusion of the new in-cell
touchscreen technology.
"The iPhone 5 makes a big evolutionary step in technology that we have
not seen elsewhere with the use of in-cell touch sensing," Rassweiler said.
"Most other smartphones LCDs (liquid crystal display) use a completely
distinct capacitive touchscreen assembly that is physically separate and
placed on top of the display. The iPhone 5 partially integrates the touch
layers into the display glass, making the product thinner and reducing the
number of parts required to build display that senses touch without the need
for a separate capacitive touch layer."
In the past, smartphones with capacitive touch technology employed
different suppliers for the display and touchscreen. However, Samsung made the
first advance beyond conventional capacitive touch with what is known as
on-cell touch. All of Samsung's Super AMOLED screens employed in smartphones
use on-cell technology, which is sold as a single integrated
display/touchscreen unit from Samsung. When smartphone makers buy Super AMOLED
displays from Samsung, they come with touch capability integrated. This
simplifies smartphone product designs and also makes them thinner, said IHS.
Apple's in-cell technology represents the next step beyond on-cell by
integrating the touch sensing feature into the display. No separate
touchscreen assembly is involved; instead, a single unit comes directly from
the iPhone 5's three known display suppliers -- LG Display Co. Ltd, Japan
Display Inc and Sharp Corp.
The addition of high-speed 4G LTE technology is estimated to have driven
up the cost of the wireless section of the iPhone 5, at $34.00, compared to
about $24.00 for the iPhone 4S.
"We believe that Apple is implementing LTE in a particularly novel way,"
Rassweiler said. "Apple ideally would like to sell one iPhone in all markets.
However, there are so many different LTE frequencies that must be supported
around the world that this has become a difficult thing to do. For most
smartphone manufacturers, the solution is to build different variations of
their smartphones for each carrier, so that they won't spend extra money on
superfluous components. However, this is not the Apple way."
Another major upgrade of the iPhone 5 is the use of the A6 processor,
compared to the A5 in the iPhone 4S. The A6 is estimated to be slightly more
expensive, at $17.50, compared to $15.00 for the A5, based on pricing at the
time of the iPhone 4S's introduction.
According to preliminary information, the A6 has a dual-core processor as
well as several graphics-processing units to boost performance. Samsung is
expected to be the manufacturer of the A6. However, since this is an
Apple-designed chip, Samsung is expected to produce it on a foundry basis,
rather than acting as a semiconductor supplier for Apple. IHS speculates the
A6 is manufactured using at least 32nm process geometry, and perhaps even the
more advanced 28nm technology. This will be determined during the IHS iSuppli
physical hardware teardown.
The 16Gbytes of NAND flash in the iPhone 5 is estimated to cost $10.40,
down dramatically from $19.20, based on pricing in October 2011.
"NAND flash continues to come down in price as manufacturing processes
for these memory chips become more advanced," Rassweiler said. "And because it
is the world's largest buyer of NAND flash, Apple gets preferential pricing.
Apple's massive leverage in this market is reflected in our price estimate,"
said the IHS note.
In its earlier teardowns of other phones, IHS had pegged the building
cost of Nokia's Lumia 900 at $209, and that of Google's Nexus 7 tablet cost at
$152.
