Apple doesn’t need to charge $1,000 to make a killing on the iPhone X

iPhone X

With the entry-level 64GB iPhone X selling for $999 and the 256GB model retailing for $1149, the iPhone X is handily the most expensive iPhone Apple has ever released. And with good reason, the iPhone X houses more advanced technologies and complex components than Apple has ever managed to pack into a smartphone before. In turn, the iPhone X’s bill of materials (BOM) is also quite high. Citing data obtained from TechInsights, Reuters relays that the 64GB iPhone X costs approximately $357.50 to make. As a point of comparison, the iPhone 7 cost $220 to make while the BOM on the iPhone 4 checked in at $187.51.

Assuming that TechInsights’ estimate is even close to being accurate, Apple, not surprisingly, is making a killing with its latest flagship iPhone. With the $999 buy-in point, every iPhone X nets Apple a healthy gross margin of 64%, an incredibly impressive figure even by Apple’s standards. As a point of comparison, Reuters notes that the margin Apple enjoys on the iPhone 8 checks in at 59%.
As to the increased cost of the iPhone X, the primary culprit is the device’s brand new edge-to-edge display.

Several of Apple’s design choices for the iPhone X pushed up its price. In particular, its 5.8-inch (14.8 cm) edge-to-edge display and associated parts cost $65.50, compared with $36 for the iPhone 8’s 4.7-inch display, the analysis found.

That is largely because the iPhone 8 uses older LCD technology, while the iPhone X uses what is called “Super AMOLED” technology, which allows for more vivid colors and a thinner overall design.

Hardly a surprise, the display panel has long been the most expensive single component of every iPhone model, and seeing as how the iPhone X has a gargantuan OLED display, it’s not outlandish to see a price jump of 81% for the iPhone X display relative to the iPhone 8 display.

Other pricey components on the iPhone X include the device’s stainless steel chasis, which is about $15 more expensive than the aluminum used on the iPhone 8.

For what it’s worth, Apple has never been keen on BOM estimates. Not only has Apple said that most estimates are incredibly off-base, it’s worth noting that the cost of materials does not take into account manufacturing costs and, more importantly, research and development dollars. To this point, Tim Cook said the following during an earnings conference call two years ago: “Generally, there are cost breakdowns around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate.”

While Apple could have theoretically priced the iPhone X lower while still enjoying stellar margins, the incredible demand we’ve seen for the iPhone X thus far suggests that Apple priced it just right and, per usual, is now laughing all the way to the bank.