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In the wake of an ongoing budget smartphone movement, Apple’s new iPhone 7 seems decidedly expensive starting at $649. That’s the same amount you would have paid for an entry-level iPhone 6s last year although this time around, you do get twice as much local storage at.
What’s often difficult for some to swallow isn’t how much a smartphone costs but how little it costs to manufacture. Such is the case with the iPhone 7 as IHS Markit estimates the bill of materials (BOM) to be $219.80. Factor in five bucks for basic manufacturing and the total estimated cost to produce a 32GB iPhone 7 comes out to $224.80.
According to IHS Markit, this preliminary estimate is $36.89 higher than the final analysis of last year’s iPhone 6s.
At least one of the reasons why this year’s iPhones are more expensive to make has to do with Apple’s jump from 16GB to 32GB in the base model. Other expensive bits include the A10 Fusion chip at $26.90 and the display at $43, the report indicates.
Andrew Rassweiler, senior director of cost benchmarking services for IHS Markit, said the total BOM costs for the iPhone 7 are more in line with what they’ve seen in teardowns of competing flagship phones from rival Samsung. That said, Apple still makes more margin from hardware than Samsung, Rassweiler notes.