Mumbai: In a recent report, research firm IHS revealed that the iPhone SE, which will retail at Rs 39,000 in India starting April 8, costs only Rs 10,700 ($160) to manufacture.
A teardown of the smartphone under the supervision of Senior Director of Cost Benchmarking services at the firm, Andrew Rassweiler, showed that the 16GB variant of the device is purposely priced at Rs 39,000 to encourage customers to buy the higher 64GB variant.
According to Rassweiler, the new iPhone SE is an amalgamation of the iPhone 5S, iPhone 6, and the 6S merged into a compact body.
“The iPhone SE represents an amalgamation of three iPhone generations -- iPhone 5s, iPhone 6 and iPhone 6s–rolled into something altogether new,” said Rassweiler. “Despite its physical resemblance to the iPhone 5s, the resulting product is far superior. In fact, the only significant tradeoffs a consumer would make with the iPhone SE against the iPhone 6s is smaller size and lower screen resolution,” he added.
He also pointed out the 16GB version of the new smaller iPhone is the company’s attempt to get consumers on the “lower rung” of the Apple-product ladder; however, their main focus is on selling the 64GB variant.
According to the firm, Apple approximately makes an incremental profit of Rs 6,000 for each iPhone SE 64GB as compared to the 16GB model.
“Apple is willing to drop its gross margin on the low end to induce sales–though it is likely counting on many consumers upgrading to the more profitable 64 gigabyte SE model,” said Wayne Lam, principal analyst, mobile devices and networks, IHS Technology.
“When the profit machine that is Apple capitulates to the market forces of a maturing industry, it shows its tacit acknowledgement that even it is not immune to the dynamics of the global smartphone slowdown,” he added.
The IHS teardown also revealed that the falling component costs keeps “Apple’s profit engine purring”.
The report explained that one of the costliest subsystems in the iPhone SE is its 4-inch Corning Gorilla Glass Display with integrated, in-cell touch sensing. However, the 20 dollar BOM cost is less than half the cost of the same one used in the 2013 iPhone 5S.
“Pricing is a moving target, and Apple improves its margins on its products over time,” Rassweiler said. “Whatever the margin is on a display or other subsystem today, it will always be better in a year or two, as component costs decline,” he said.
Last but not the least, IHS also found out that on an average, 40 per cent of iPhone displays are sourced from Japan Display, 35 percent from LG Display, and 25 percent from Sharp.
“Because the iPhone display is difficult to manufacture, Apple has qualified three suppliers to ensure an adequate and ongoing supply,” said David Hsieh, senior director, displays, IHS Technology.