A recent tear down project from renowned research firm, IHS Supply, shows that the 16 GB iPhone 5s costs only around $199 USD to make, which is approximately equal to the minimum $205 USD needed for building an iPhone 5. For the larger 64 GB 5s model, whose unsubsidized retail price is $849 USD, the cost is revealed by IHS to be only slightly higher, at $218 USD.
Judging solely by the cost figures and overwhelming 5s demand, it’s not entirely unreasonable, at least at this point, to expect another strong Q4 performance from Apple. Through the current high-end prices that it charges, the Cupertino company can be expected to secure a gross margin of at least 300% for all of its existing 5s models. This is notably higher than the margins earned by Samsung’s flagship Galaxy S4 smartphone, whose bill of materials (BOM), according to informationweek, is nearly $237 USD.
For the other major iPhone line, the iPhone 5c, the financial outlook appears to be equally strong. IHS’s tear down reveals the 16 GB’s cost to be at somewhere around $173 USD, and the 32 GB’s at approximately $183 USD. With the retail prices of the two above products set at $549 USD and $649 USD, respectively, Apple will essentially be able to derive from the iPhone 5c a much higher profit margin than that of the iPhone 5. Looked at from both the cost saving and marketing perspectives, this makes the decision to completely replace the iPhone 5 an extremely wise move on Apple’s part.