e
Why "How Much Does It Cost to Make an iPhone" Analyses are Misleading to Consumers
Please explain this to your non-ID friends
Please circulate this among your friends who are not industrial designers. Because just when we think an awareness of our role has finally permeated society, we see we've still got a ways to go. Take, for example, the rash of "How Much Does It Cost to Make an iPhone?" videos. In a typical example, last year CTN Technology News broke down the cost of a 6S Plus, then breathlessly exclaimed that "[It] actually costs $236! [It] costs $749 in stores, but it's definitely not worth anywhere near that!" More recently, CNN Money broke down the cost of the 7:
So the materials cost is $292, and it retails for $749. I've noticed that people love circulating these videos on social media, and...
...the impression seems to be that for every iPhone 7 that Apple sells, $457 goes straight into their bank account and stays there.
Laypeople, please think this through. First off the materials cost of an individual unit is what's known as a Bill of Materials, or BOM, in our industry. (We don't expect you to have heard of that term any more than you lawyers can expect us to know what the hell tort reform means, but we're mentioning it here for the sake of edification.) Now consider what the BOM covers: All of the phone's parts. The ingredients list, if you will. That's it.
Let's step forward in time. What happens after it gets out of the factory? These iPhones go into boxes. Those cost a couple of cents, too. Then they get loaded onto trucks. Then ships and airplanes, then trucks again. People load and unload them. And unsurprisingly, there aren't any companies willing to provide fuel, vehicles, drivers, pilots and longshoremen for free.
Let's keep going. How did you hear about the iPhone? A lot of it probably came from blogs, news or social media, some of that tied back to Apple employees. Dozens or hundreds of people in Marketing running around creating materials, arranging photo and video shoots and drawing salaries.
Okay, let's go back in time. Before the factory workers are called in to start building the phones, a bunch of supply chain folks had to figure out where they can get those parts, and arrange for their delivery. And before that, a bunch of engineers had to figure out how all of the parts go together in the first place. And yes, all of these people draw salaries, too.
Let's go even further back in time. Before the engineers and supply chain folks had problems to solve, there was no such thing as an iPhone 7. It doesn't come out of thin air. R&D had to be done. A team of industrial designers sat down and started burning through paper and gigabytes to figure out what the hell an iPhone 7 is. And as smart as these people are, they don't get it right on the first sketch, the second mock-up, the third rendering, the fourth prototype. They spend countless hours producing iteration after iteration, sweating small details and traveling down countless paths that they will later have to abandon in favor of a more promising one.
All of that costs money.
Now, do all of those costs eat up all of the $457 differential? Of course not. Apple is a fabulously wealthy company that enjoys a hefty profit margin on each of their products, and that's their right. It's up to them to set the price wherever they want it, and it is up to us as consumers to decide to buy their products or not. If Apple is successful, it is us who have made them so; if they become irrelevant, it will be us who have decided so.
What I don't like is laypeople being misled into thinking that Apple enjoys a profit of $457 on each iPhone 7. That notion completely disregards the efforts of the hundreds or thousands of people who put in the time to make the product a reality.
-
oFavorite This
-
Q7Comment
Directory Company Profiles
Core77
Industrial Design
Resources
Industrial Design
Resources
-
Core77 Directory
Find the Best Industrial Design CompaniesGo -
TactileTactile is a product and UX design firm founded in 2004. Blending physical and digital design, we cr...
-
Spatial Dynamics
Spatial Dynamics is a hardware product design and development agency located in Cambridge, Massachus...
-
Architectural Cladding & Roofing
Architectural Cladding & Roofing (ArcClad) are a New Zealand based firm specializing in roofing prod...
-
Curve ID
Curve ID is a New York City based studio, offering a complete industrial design consultancy service....
-
Cardboard Helicopter Product Design
We are a boutique product development studio in Cleveland, Ohio, and we make ideas fly. Drop us a l...
-
HS Design
HSD believes the future is based on teamwork across many disciplines and collaboration with multiple...
-
Whipsaw
Whipsaw, under the leadership of design visionary Dan Harden, is a highly acclaimed strategy, indust...
K
{Welcome
Create a Core77 Account
Already have an account? Sign In
By creating a Core77 account you confirm that you accept the Terms of Use
K
Reset Password
Please enter your email and we will send an email to reset your password.
Comments
If those numbers were correct, they'd actually be low for consumer electronics. Generally you can expect a 4x markup from manufacturer to consumer. Apple can get away with less because the Apple Store takes the retailer's cut for many units. But again, that's assuming these numbers were even correct.
On a another level, it is also not how much those components usually cost for a lot of other small companies or start ups that are trying to make product. Apple in particular has the most and the absolute power to get to the lowest price from any suppliers, thanks to the 500+ millions of orders from consumer every year. That is perhaps great for consumer if Apple choose to reflect the cost saving on their retail price.
This is very irresponsible for CNN money or CTN news to claim a "logic board" is $74 and "other parts" are $117. There are probably hundreds of those components in the "board" / "other parts" that are produced by different companies around the globe and touched by thousands if not tens of thousands of people to bring it to life. The videos are not only misleading but also extremely unhealthy for consumer. We now think a piece of technology that so complex and involved tens of thousand of people around the globe should only cost you $236?! The inconvenience truth is that if we all want to make sure everyone involved get paid fairly and up to your standard, your phone might cost you thousands and a lot fewer people would probably buy those technology product. And perhaps that's what needs to happen so that we have a realistic view of how much it costs to make things.
Perhaps the industry or global supply chain will never change but as a product designer or developer in general, we can start by doing things differently with our partners, collaborators, suppliers, as well as our customers. For example, we can choose to show how things are made, be transparent, and show who is involved and whats their stories. We might not be able to change the industry but we can make changes around us. I think its the least we can do and its important.
Also there is the small matter of iOS, iCloud, and all the built-in apps! It's also weird to see how easily ppl disregard the software aspect of devices that would otherwise be a blank rectangle with a few buttons...
Apple probably has a decent deal on those boxes by now, but it's forcing other white product brands to spend $40 on the boxes that their products ship in.
Surely things are worth what people will pay for them?
Very well said.