Apple\u2019s latest smartphones, the iPhone 8 and iPhone 8 Plus, have more expensive parts, but the company will still make significant profits because it raised prices for the devices, according to research firm IHS Markit.<\/p>\n
A base model iPhone 8 with a 4.7-inch screen and 64 gigabytes of storage includes material costs of $247.51, up from $237.94 for the 32 gigabyte base model iPhone 7 from last year, an analysis by IHS found.<\/p>\n
However, the new device costs $699, while the previous year\u2019s iPhone started at $649 for the 32 gigabyte version. That means the iPhone 8 bill of materials equals about 35 percent of the sales price — about the same as last year. That excludes other costs, including manufacturing, software and research and development.<\/p>\n
“The added value went to memory, camera, and processing. That\u2019s where we can materially identify where they\u2019ve improved the overall product, and hence why they can command a higher price for it,” according to Wayne Lam, an analyst at IHS.<\/p>\n
“The iPhone 8 represents an evolutionary upgrade to the tried-and-true iPhone business formula,” he added. “We anticipated very little changes inside the devices, so the bulk of changes will come with the iPhone X.”<\/p>\n
The iPhone X, Apple\u2019s tenth anniversary phone, is a more-advanced device that\u2019s expected to be in strong demand when it hits stores in November.<\/p>\n
The iPhone business represents about two-thirds of Apple\u2019s revenue, and the product\u2019s unit sales, margins, and average sales price are critical to the company\u2019s results.<\/p>\n
Analysts estimate Apple\u2019s gross margin across all its businesses will be about 38 percent in coming quarters, according to data compiled by Bloomberg.<\/p>\n
The story is similar with the iPhone 8 Plus. Its components cost $288.08, including a new camera system that costs $32.50. That\u2019s up from\u00a0$270.88 in the iPhone 7 Plus, IHS estimated.<\/p>\n
The new version starts at $799, compared with $769 for last year\u2019s model.<\/p>\n
The most expensive components in the iPhone 8 models are the screens and mechanical enclosures, which were both upgraded from the iPhone 7 line. The glass backs on the new devices allow for inductive charging that requires a new controller inside that\u2019s supplied by Broadcom Ltd. That part increases power-management costs by about $2, according to IHS.<\/p>\n
Both models cost more to build than the last generations because of their improved cameras, larger starting storage capacities, and more advanced chips. The larger base storage capacity costs Apple $6 more per unit, while the new A11 Bionic processor costs about $5 more per unit, IHS said.<\/p>\n
Apple chief executive officer Tim Cook commented on component breakdowns on the Cupertino-based company\u2019s fiscal second-quarter earnings call in 2015 by stating he has \u201cnever seen one that is anywhere close to being accurate.\u201d<\/p>\n