There are very few companies that are able to produce an updated handset while at the same time keeping their prices the same and get higher profit margins. Apple happens to be one of the companies that have managed this with the iPhone 5 as cost estimates from iSuppli have shown us.
iPhone 5 cheaper to build than 4S
Of course you do have to bear in mind that the teardown of the costs is only for hardware and manufacturing. They do not take into account things such as licensing, software or any other outlays that Apple may have to make. iSuppli say that it costs around $207 to make the iPhone 5, while the costs for the iPhone 5 32GB is $217 and the 64Gb $238. Apple are selling the handsets for $649 for the 16GB, $749 for the 32GB and $849 for the 64GB, so they are making large profits, even with other costs taken into account.
Reports suggest that Apple saves around $15 in parts for their 64GB iPhone 5 than they did for the same sized iPhone 4S. The 16GB and 32GB cost just a little more to make. They will however receive a net gain if they sell as many units as they did with the iPhone 4S.
One of the biggest savings Apple made with the iPhone 5 was when they decided to move away from Samsung for flash memory. SanDisk memory was found in the iPhone 5 when it was taken apart and the difference in savings is large in comparison to the other parts. In the iPhone 4S the memory cost Apple $76.80, in the iPhone 5 this has dropped down to $41.60.
This not only shows how Apple have managed to control its parts prices, but it also shows why they are able to do so. Apple only have to concentrate on one design of phone, their competitors have multiple designs. These all come with components that vary in size.
This year the iPhone 5 has a larger display and there has been some design changes, however it is thought that the new display will remain in the future iPhones for some time to come. Therefore Apple is able to reap the benefits of what is sure to be superior management when it comes to supply chains.