How Much It Costs To Manufacture An iPhone

Apple, who are well known for keeping their cards close to their chest, gave ABC a rare glimpse into their Chinese factories. ABC news reporter Bill Weir got a look into the iFactory but his report unwittingly gave more information than it perhaps intended.

Although we all know full well how much an iPhone costs to buy, we are completely unaware of the cost of making one. The report, which was produced for Nightline, was about what life is like for workers, however in the process it gave us some clues about how much it costs Apple to produce their mobile phones.

Horace Dediu, who is known for his analysis of Apple’s business strategy, observed the report and came to a conclusion about the cost of producing an iPhone. He started with two key pieces of information which were mentioned in the report: that it takes 24 hours to build an iPhone and that workers earn $1.78 per hour.

According to CNET Dediu took the cost of labour and other factors into account and came to the following conclusions:

1. Costs are likely to range between $12.5 and $30 per unit

2. Labour costs are still a small part of the overall cost structure at between 2 percent and 5 percent of sales price.

3. The high level (141 steps) of human interaction in the process could be automated. However, the fact that it isn’t implies that the cost of automation would be higher and the flexibility of the automated process would be lower.

So what does this mean?

It means that even at the higher end of the prediction scale, an iPhone could cost $30 to manufacture, which is the equivalent of around £21. So what exactly are you paying for when you buy an iPhone? The warranty. Which I suppose would be fine, if it lasted for more than a year.

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