The 32GB variant of the Apple iPhone 7 officially sells for $649 or roughly P31,000, but did you know that making the device costs only about 35 percent of that price? If IHS Markit is to be believed, that is.

The research firm said iPhone 7 components are valued at $219.80 or P10,500 and manufacturing at $5 or P240, bringing the total amount to $224.80 or P10,740. That’s $36.89 or P1,800 higher than its estimated total cost of making the iPhone 6s base model even with the lack of of headphone jack in this year’s iPhone.

The cost breakdown by component provided by IHS Markit can be seen below.

At first glance, it may seem that Apple’s making a huge, $424.20 (P20,260) profit off of its latest smartphone, but the ballpark figure does not take into account other factors that can drive prices up, such as research and development, software, marketing, shipping, and warehousing. We’re not saying Apple is not enjoying a handsome profit off of each unit as well. Remember that 95 percent of the smartphone industry’s profits still belong to Apple.

The estimated cost does not take into account other factors that can drive prices up, such as research and development, software, marketing, shipping, and warehousing.

All we’re saying is take IHS Markit’s estimate with a grain of salt, as Apple CEO Tim Cook was once quoted as saying that he has yet to see one that is “anywhere close to being accurate.”

ADDITIONAL TAKE: I understand Tim Cook. About a third of my time working as digital marketing manager at OPPO, some market-research companies published supposedly OPPO sales figures that were not even close to how many units we had actually sold, hence our decision to work closely with these firms.

MY PARTNER RAMON LOPEZ’S THOUGHTS: Apple makes two-thirds of its profit selling iPhones. If it’s getting less earnings on every iPhone 7 sale, then that means it has to sell more of the new iPhone to catch up with past trends. Here’s the thing, though: iPhone sales are flagging because developed markets are getting saturated, meaning people in the U.S. and Europe are upgrading less regularly. Apple’s magic seems to be wearing off in China and India as well. Never mind the EU’s intention to tax Apple’s earnings retroactively for the last decade. That said, unless the Apple flagship does much better than expected, I don’t see how Apple can crawl out of its financial slump without making huge changes to its iPhone strategy.

Related video

The Apple iPhone 7 teardown in 90 seconds, via iFixit

Main image via Business Insider

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