Apple sees fat margins with iPhone, report says
'Teardown' analysis finds device is more profitable than iPod, Apple TV
By Rex Crum, MarketWatch
Last Update: 1:59 PM ET Jul 3, 2007
SAN FRANCISCO (MarketWatch) -- Hot on the heels of the iPhone launch, shares of Apple Inc. jumped to a new all-time high Tuesday following a report on the high profit margins the company is likely to earn from the device. Shares of Apple were up nearly 5% to close at $127.17 during a shortened trading session Tuesday, on a volume of 41.3 million shares. Normal daily average is 28.9 million shares.
That set a new closing high for a stock that has gained nearly 50% since the company introduced the iPhone in early January. The device went on sale Friday to long lines of customers, some of whom camped out on the street to save their place. The action followed a report earlier in the day by technology-research firm iSuppli, which found after taking apart an 8-gigabyte iPhone that producing the device costs Apple about $266 for the hardware. Based on the $599 price tag of the 8-gigabyte iPhone, the company stands to record gross margins of more than 55% for every unit sold, the report said. According to iSuppli, those profits would be even greater that the 40% to 50% margins Apple earns from the various versions of its iPod device. The company's new Apple TV set-top box has margins of about 21%, iSuppli added, after performing "teardown" analysis on those devices as well. Apple stands to record gross margins of more than 55% for every unit sold, according to iSuppli. Apple hopes to sell about 10 million iPhones within a year and claim 1% of the mobile-phone market. ISuppli estimates that Apple will sell 4.5 million iPhones this year and 13.5 million in 2008.
According to iSuppli, the iPhone's component suppliers run the gamut of semiconductor and other technology names. The research firm said that Samsung Electronics is "perhaps the biggest winner" among the iPhone parts suppliers, with its components making up $76.25, or about 30.5% of the parts in the 8GB iPhone. Samsung's contributions include the device's applications processor, NAND flash and DRAM memory chips. Infineon Technologies AG found its way into the iPhone with its digital baseband, radio-frequency transceiver and power-management technologies, and National Semiconductor Corp. supplies the chip that connects the iPhone's display to its graphics controller. ISuppli said the touch-screen, considered to be one of the iPhone's top selling points, is supplied by Epson, Sharp and Toshiba Matsushita, while the display module is provided by German company Balda and its Chinese partner, TPK Holdings.
Other companies in the iPhone include Marvell Technology Group with its Wi-Fi baseband chip; CSR PLC, which provides the iPhone's Bluetooth technology; and Wolfson Microelectronics, which makes the audio-processing chip. Also on Tuesday, media outlets reported that Apple's carrier partner AT&T Inc. has fixed the issues that caused some iPhone buyers long delays in getting their wireless service activated.