How Much Did Apple Just Make From Your Fancy New iPhone?


The short answer? A LOT. While you were crying with happiness over your brand-new hipster machine (and by you, I mean me), Tim Cook was sitting in his Cupertino spaceship imagining your teardrops turning into green portraits of Ben Franklin.

Alright, so that may have been a little dramatic…nevertheless, the iPhone is undoubtedly one of the most popular and desired electronics ever to be invented, and they are truly fantastic – except for that whole “maps of doom” issue. So how much does Apple make every time you pony up for the newest iPhone? I bet that you the numbers…will SHOCK you :O

Note: Apple does not disclose its costs or profit margins on a product-by-product basis; therefore, most of the figures and analysis explained below is estimated based on inferred data and some guesses made by people much nerdier (and much smarter) than I am.

The Company

First off, let’s take a look at Apple’s financials: the company pulled in $108.6 billion in revenue in 2011, with a profit of $25.9 billion. This means that all of Apple’s activities had a 23.8% profit margin, higher than the average for every other industry. As of this writing, Apple’s stock is trading at $509.64 per share – a substantial slide from the $700 mark it broke a short time ago. Still, it remains the world’s most valuable company in terms of market capitalization (the number of outstanding shares of stock multiplied by current share price) at around $500 billion. Exxon Mobil is the next closest at $400 billion, followed by Wal-Mart, Google, and Microsoft all at around $230 billion. Not only this, but Apple has zero debt and has been sitting on a mountain of cash for several years now.

Now, let’s compare iPhone’s performance to Apple’s as a whole. The graph below shows a running breakdown of each of Apple’s products as a share of their quarterly revenue. Astoundingly, the revenue gained from the iPhone accounts for at least half of Apple’s revenues annually. Half. That means over $55 billion worth of iPhone sales in 2011 alone. So how about profit margins? While estimates vary by model, the consensus puts iPhone profit margins at a whopping 60% – 75%. That means that Apple materialized between $33 and $41.3 billion of pure profit from iPhone sales in 2011 – and that isn’t even counting revenues from sales of apps and other products from iOS.

The Phone

At this point, the speculation thickens. As described above, Apple does not disclose a cost basis for each products; luckily, the folks as market research firm IHS have broken down the iPhone, identified every individual component, and estimated the cost of each based on public data. Based on this, we can estimate that the average cost of components and assembly for an iPhone 5 is $205. Here are a couple of common parts and what they cost:

  • Flash memory storage: $10.40 – $41.60, depending on which size you buy.
  • Cellular components: $34
  • Battery: $4
  • Retina display: $44
  • Getting drunk and cracking your screen the day after you got it: Priceless.

I’m looking at you, ladies! Just kidding…sorta.

Anyways, now that we think we know how much it cost Apple to build the thing, let’s compare the cost for the consumer. The $199 iPhone you get from your carrier after renewing your contract isn’t actually sending only $199 to Apple; the cost is subsidized by your carrier. That means that instead of expecting the common peasantry to shell out $599 – $799 for a new iPhone, the wireless companies pay the difference to Apple in order to get you to sign a contract. Since a wireless carrier’s cost of operating their network is actually extremely low relative to the amount of revenue they gain from your monthly plan, it turns out to be a great business decision for them to shell out for your iPhone now in order to guarantee themselves two years of monthly payments from you.

In fact, carrier subsidies for the iPhone five will cost them an estimated $10 billion. This is the reason why wireless carriers take a financial hit whenever a new iPhone goes on sale but have profits skyrocket the next several quarters after. Whatever though – you get a new iPhone for cheap, so everybody is happy! Like that guy…

The Payday

Bottom line, Apple makes a profit of $400 to $600 for every iPhone they sell – two to three times what it cost them to build it in the first place. Of course, this does not factor in the cost of software development or research and development, but you get the picture. Love them or hate them, with margins like these, it isn’t difficult to see how they are one of the most successful tech companies in the world.

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2 thoughts on “How Much Did Apple Just Make From Your Fancy New iPhone?

  1. Pingback: Only How Make Iphone

  2. where are the taxes

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