Apple is known to keep its profit margins and production costs confidential. However, the company does report its overall products’ gross margin, which in Q1 2023, was reported to be 37%. This figure is relatively stable for Apple, with only minor fluctuations over time.
Recently, data from Counterpoint Research was analyzed by 9to5Mac, which revealed some interesting insights into the production costs of the iPhone 14 Pro Max. The report showed that the iPhone 14 Pro Max is approximately 3.4% more expensive for Apple to produce than the iPhone 13 Pro Max. The main reasons for this increase are the new 48MP rear camera and always-on display.
Despite the increase in production costs for the iPhone 14 Pro Max, the prices for certain components have decreased this year, with one of the most significant price drops impacting cellular components. The report states that due to the rising popularity of 5G cellular technology, the blended cellular group cost share for the iPhone 14 Pro Max dropped to 13% compared to its predecessor.
It’s essential to keep in mind that these cost numbers are just one aspect of the bigger picture. Apple works closely with its suppliers and finalizes component costs well in advance, which only covers the materials and doesn’t include other production expenses such as assembly, packaging, or distribution. Apple also invests heavily in research and development, sales, and marketing, which contribute to the overall cost of producing its products.
- Apple incurs an additional $11 cost per unit for the A16 Bionic chip compared to the A15 Bionic chip;
- The “processing” category, including the A16 Bionic chip, accounts for a significant 20% of the total material cost;
- Apple’s in-house components account for a higher percentage of the total bill of materials (BoM) cost of the iPhone 14 Pro Max compared to the iPhone 13 Pro Max;
- The production cost of a 128GB iPhone 14 Pro Max mmWave smartphone reaches up to $474;
- The cost of producing a sub-6GHz 128GB iPhone 14 Pro Max comes in at $454.
Interestingly, despite the slight increase in production costs, the iPhone 14 Pro Max costs the same as the iPhone 13 Pro Max, which shows how these component costs can fluctuate and impact the company’s pricing strategy.
One of the most significant year-over-year cost increases was reported between the iPhone 11 and the iPhone 12, where component costs reportedly increased by 26%, primarily due to the addition of 5G modems.