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Here it is alleged that the iPhone 4 has a large mark-up from manufacturing.

Are these figures true? What is the evidence behind this claim?

NB: I mean the manufacturing costs. Not including marketing-development-distribution.

  • 1
    This looks plausible to me - except that "cost" is only manufacturing and material cost. There is this expenditure called personnel that tends to cost a lot, though. How many iPhones does Apple have to sell to pay the annual salary of someone at the Genius bar? – Jonas Oct 27 '11 at 13:21
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    Yes of course and there is marketing and development involved. That is fairly natural. But that is not what is being asked. I am skeptical that that is the real answer(the real hard price), but if it is then so be it. But I want a proper source... – Joze Oct 27 '11 at 13:25
  • -1 I do not see what is to be skeptical of here. Is it that this is the exact price? That is going to vary but that sounds about right as an aggregate. This isnt really a skeptical claim so much as a call for source of data. – Chad Oct 27 '11 at 18:02
  • If you had asked what the manufacturing price of an iPhone 4 was, and an answer had said "$178" and cited this article in support, it would have been strongly voted up. The Economist is a reputable magazine. Do you have any reason to think it is incorrect? – DJClayworth Oct 27 '11 at 18:41
  • Ipod touch 4 is £100, Iphone 4s is £220. The are essentially the same product in terms of cost of production. The only missing components can be bought for £10 in a cheap mobile. Therefore a very large markup on the Iphone 4s seems very believable! – Nick Sep 17 '12 at 14:17
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This answer is circumstantial evidence, but perhaps it is enough to persuade you that the figures are plausible.

Apple make a number of products.

Looking at Apple's latest (at time of writing) quarterly results, we can see their figures in the three months ended 24 September 2011.

They received $28,270,000,000 in Net sales, and had a Cost of Sales of $16,890,000,000. That is, their Cost of Goods Sold for all of their products accounted for around 60% of their sale price. Presumably (non-Apple Store) retailers add their own margin on top of that, so the real figure by the time you buy it will be lower still.

Note the sources of error here:

  • All products, not just iPhone 4.
  • Doesn't include retailer margin.
  • Doesn't include other major costs, such as marketing, R&D, administrative.

On a personal note, these figures fill me with yawn. The Cost of Goods Sold is only part of a company's costs. The fact that a successful hardware manufacturer would have significant mark-ups isn't surprising or noteworthy.

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