Apple Engineered Huge Margins Into Its iPhone

The first few attempts at understanding the guts of the iPhone have started emerging. Here are 2 pieces that take a crack at the topic from EETimes and TechOnline.

Key points on the iPhone’s components are below:

• A Samsung chip, which is a three stacked die package containing an ARM processor (S5L8900) and two 512 Mbit Mobile DDR SDRAM dice.
• A Broadcom (BRCM) part (BCM5973) which probably provides the I/O controller used for the video interface to the touch screen.
• 2 Infineon (IFX) parts, the PMB8876 S-Gold 2 multimedia engine with EDGE functionality provides the iPhone’s baseband, and the second Infineon part appears to be the GSM RF transceiver.
• A National Semiconductor (NSM) 24-bit RGB display interface serializer.
• Possibly, a Texas Instruments (TXN) power-management device, although there is differing opinion about who provides the power management unit. Could also be National Semiconductor. Whichever company provided it, it must have some very advanced engineering, to be able to deliver the level of battery life that the iPhone is claiming.
• Amperex Technology Limited supplied the Li-Poly battery [possibly multi-sourced, though.]
• STMicro provides the LIS302 accelerometer.
• Micron (MU) got the 2-megapixel CMOS imager win.
• Samsung’s 65-nm 8-Gbyte MLC NAND flash (K9MCG08U5M) was used in the iPhone as one of the main storage devices for songs, pictures and videos. [iPod repeat component.]
• Marvell (MRVL) has a wireless connectivity device (88W8686 is a 90-nm WLAN part).
• Balda, a German company, scored the design win with the touch screen.
• The iPhone also implements Intel wireless flash with 32 Mbytes of NOR coupled with 16 Mbytes of SRAM for code execution.

We will look at the iPhone’s component eco-system in further detail shortly. Over the weekend, 0.5 Million iPhone units have already moved. This means, the momentum is superb, and Apple’s target of selling 10 Million units before the end of the year may well be on target. We will review the beneficiaries in the days to follow.

According to Austin-based Portelligent, the cost of components for Apple is only $220. The most expensive part is the touch screen by Balda. The estimated cost of the screen is around $60. The production cost of the much less popular 4 GB version of the iPhone is $200. Apple, therefore, has engineered tremendous margins into the product, very unlike the rest of the cellular handset business!

Comments

[KeriChristenfeld]

Seems like Apple has financed a lot of advertising and marketing expenses into its first model; this leaves room to introduce less expensive models in future years when word of mouth and momentum will allow it to reduce advertising expense and still make excellent margins. Reminds me of Nike's strategy--but they're starting out with Air Jorden, not introducing it several years after going public.

[Oh Blah DeeBlah Dah]

Apple's target is to sell 10 million iPhones by the end of 2008, NOT "before the end of (this) year!"

[Brewer]

@ Keri:

What marketing expenses? Apple hardly advertised the iPhone at all. They didn't have to. When you have a product this cool, this revolutionary, the press will hype it for you. This is exactly what happened. If you ask me (and I realize you didn't) Apple didn't hype the phone at all. All they said about it was absolutely true, not hyperbolic. In fact, there was a lot of great things they didn't even mention.

Apple has had extremely conservative guidance. For years and years, they have far exceeded any wall street estimates. It's a JOKE among the Mac fans out there. What used to happen routinely is that they would triple or quaduple earnings estimages, and the stock would then go down on profit taking. Like clockwork.

Apple is finally getting the reputation they deserve. But still, writers often refer to the 'Apple faithful' etc... Sure, they have a lot of fans, but it doesn't take 'faith' to be an Apple fan nowadays. It would take faith to have any expectation that Microsoft would ever produce anything original or even usable (compated to the Mac alternative).

This fall, you will see an explosion of Apple fortunes. This is because they will take over the #1 PC sales position by licensing WIndoze and including it with their new OS X 'Leopard'. At that point, Windows is just a 'layer' not an operating system. All defaults will be set by Apple. All ad revenues from internet browsing, etc... will push Apple earnings through the roof.

[Tom B]

"But still, writers often refer to the 'Apple faithful' etc... Sure, they have a lot of fans, but it doesn't take 'faith' to be an Apple fan nowadays. It would take faith to have any expectation that Microsoft would ever produce anything original or even usable"

Beautifully said.

[Sebhelyesfarku]

Faithful? Yes it's not the best term. Dumbass Maczealots are like Jehovah's Witnesses.

[advocater]

Apparently you know nothing about Jehovah's witnesses or you woud not have made such an ignorant comment.....What do you know about the faith of Jehovah's Witnesses...they are the most honorable and trustworthy group out there.

[advocater]

Before you dishonor a religion that you apparently know nothing about, you should know what the faith of Jehovah's Witnesses are based on,...Jehovah's Witnesses can provethe basis for their faith, can you?


On Jul 04 02:05 PM Sebhelyesfar ku wrote:

> Faithful? Yes it's not the best term. Dumbass Maczealots are like
> Jehovah's Witnesses.