When Apple unveiled the iPhone X, its $999 retail price attracted criticism. But the iPhone X comes with a high price tag for Apple, too.
The iPhone X’s bill of materials — the total cost of the smartphone’s components — is the highest ever for an Apple
smartphone at $370.25, according to a report from IHS Markit
released Wednesday. Comparatively, the bill of materials was $255.16 for an iPhone 8 and $237.94 for the iPhone 7. Apple declined to comment on the report.
Two features of the new device drive its higher manufacturing cost, according to IHS Markit principal analyst Wayne Lam: The improved screen and the Face ID technology.
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The full-screen display features an Amoled (active-matrix organic light-emitting diode technology) panel with a “force touch” sensor underneath. The screen has the highest pixel density and contrast ratio of any iPhone — two factors that contribute to the device’s enhanced picture quality.
But the screen doesn’t come cheap: It alone costs $110, versus the $41.70 display for the iPhone 8 and the $51.90 screen for the iPhone 7. The screen is manufactured by Samsung, the only company that currently makes it, which limits Apple’s purchasing options.
“Many times Apple has multiple sources for its components, but that’s not the case here,” Lam said.
That difference alone helps to explain why the materials used to build the comparable Samsung Galaxy S8 only cost $302, IHS Markit noted. That device retails for $720.
Additionally, Apple replaced the Touch ID fingerprint scanning technology with Face ID, a facial recognition system. The Face ID technology requires special components that are more complex to assemble, Lam said. At $16.70 per phone, it’s roughly three times as expensive as Touch ID in earlier iPhone models.
Overall, Apple’s gross margins for the iPhone X are in line with what it received from the sale of previous models. IHS Markit estimates that Apple will take in 46% of the retail price of the iPhone X, nearly $460, in gross margins once manufacturing and other costs are added in.
“It falls in line with what we’ve been seeing from other iPhone profit margins,” Lam said. “There’s opportunity for Apple to drive down costs from operational and manufacturing improvements.”
Much like the retail price of the iPhone X, Apple hiked repair costs. Replacing the screen on an iPhone X costs $279 if the phone is out of warranty, well above the $169 price tag to fix the display on an iPhone 8 Plus, 7 Plus or 6S Plus.
And repairs other than fixes to the screen or battery on an out-of-warranty iPhone X cost roughly 1.5 times what the smartphone’s parts are worth, at $549.
But comparing repair costs with the bill of materials is indeed like “comparing apples to oranges,” Lam said. The relatively high cost to fix the iPhone X is a reflection of the specialized hardware and extensive labor involved with taking apart the cutting-edge device and reassembling it.
“These products are designed to be built, not to be serviced,” Lam said. “The servicing fees are higher due to the complexity of the design.”
Of course, that may be of little comfort to those who have discovered how easily the iPhone X can break.