Apple Boosts Margin On iPhone

The Apple iPhone is creating waves especially because it seems to redefine what a mobile phone can do. In Apple, technology runs side by side with business sense. An analysis of the new 3G Apple phone shows how the company is increasing its profits on one by lowering the price of the handset.

The iPhone 3G is a revolutionary phone with unimaginable features at the users fingertips. Fast 3G wireless technology, GPS mapping, features like Microsoft Exchange and App Store. The handset combines the work of three products, namely, a phone, a widescreen iPod and an internet service in one. The phone boasts of enhanced battery life and now, value for money shall also be added to its long list.

According to Jagdish Rebell, the director and principal analyst at iSuppli, the original 2G phone was sold at a price of $499, but the prices would be slashed for the new 8GB iPhone.

Estimations show that the new 8GB iPhone’s manufacturing costs is about $173, while the costs for consumers is about $199. The analysts believe that the network operators could provide subsidy per handset which could go as high as $300 per phone.

Rebell quoted, “At a retail price of $199 for the low-end 8Gbyte version of the new 3G model, wireless communications service carriers will be selling the product at a subsidized rate, using a common business model for the mobile-handset market.”

This implies that Apple will be selling the much more advanced 8Mbyte version of iPhone at the same price as the original handset, that is $499 per unit for this second generation phone.

The analysis state that the most expensive modules of the phone hardware were its NAND Flash and improved display, while the cheaper parts, the GPS module cost only $3.60 per unit.

Analysts further state that the previous models of the iPhone were priced at a 50% percent margin. Now with the subsidies provided by the network, the phone is showing to make higher profits at low costs.

Jagdish Rebello says that the most vital of Apple profits is its hardware. In fact two-thirds of Apple’s revenue is generated from hardware alone while the remaining from iTunes service and accessories.