What it costs to build the iPhone 4

29 Jun 2010

The iPhone 4 16GB version carries a bill of materials of US$187.51, according to iSuppli, which means Apple can maintain the kind of margins that have allowed it to build up a colossal cash reserve.

Clocking sales of more than 1.7 million in just three days, Apple CEO Steve Jobs said the iPhone 4 was the most successful product launch ever for the company even though the demand outstripped the supply and the amount sold would have been even higher had their been more stock available.

The iPhone 4’s design may be radically different — but the strategy remains the same, with the latest member of the product line carrying a bill of materials (BOM) that should continue to generate high profit margins for Apple Inc., according to iSuppli Corp.’s Teardown Analysis service.

The iPhone 4 16GB version carries a bill of materials of US$187.51, based on a preliminary cost estimate derived from a physical teardown of the product.

“Just as it did with the iPad, Apple has thrown away the electronics playbook with the iPhone 4, reaching new heights in terms of industrial design, electronics integration and user interface,” said Kevin Keller, principal analyst, teardown services, for iSuppli.

“However, the BOM of the fourth-generation model closely aligns with those of previous iPhones. With the iPhone maintaining its existing pricing, Apple will be able to maintain the prodigious margins that have allowed it to build up a colossal cash reserve — one whose size is exceeded only by Microsoft Corp.”

iSuppli estimated the BOM of the 3GS 2009 at US$170.80; the 3G in 2008 at US$166.31 and the first iPhone in 2007 at US$217.73.

Housing complex

One of the most apparent examples of the iPhone 4’s design innovation is its completely redesigned housing. Unlike the unibody housing of previous models, the iPhone 4’s enclosure is composed of multiple pieces, allowing it to accommodate a considerably larger battery as well as the much-discussed integrated antenna.

“The metal housing of the outer enclosure serves as a physical antenna, a tough task to design and manufacture because antennae pieces have to be insulated from other parts, and yet be rigid around the perimeter,” Keller said.

“This adds more complexity and cost, but elegantly uses every possible cubic millimetre of the iPhone for function, and not just form. The tight intertwining of form and function is an area where Apple has always excelled.”

Less is more in wireless

The wireless subsection of the iPhone 4 is far smaller than in previous members of the line because of greatly increased integration of the Radio Frequency (RF) functionality into the core chipset components, despite the presence of an additional air standard: High-Speed Uplink Packet Access (HSUPA), which allows the uploading of bandwidth-intensive HD video.

“Out of the nearly 300 cell phones torn down by iSuppli, the iPhone comes the closest to integrating the entire wireless interface — including all the supporting Radio Frequency (RF) modules — on a single chip,” Keller said.

“This further enhances the iPhone 4’s space efficiency and serves as yet another testament to the advanced state of Apple’s design.”

Design winners

The LCD display represents the single most expensive component in the iPhone 4, costing $28.50 and accounting for 15.2pc of the product’s total BOM. The 3.5-inch display uses advanced low-temperature polysilicon (LTPS) and in-plane switching (IPS) technology, and features a 960 x 630 resolution — four times that of the iPhone 3GS.

While the display is not labelled, iSuppli believes the most likely supplier is LG Display. Toshiba Mobile Display (TMD) also could serve as a source for the part.

The next most expensive single component is the NAND-type flash memory. In the 16GB version of the iPhone 4, the NAND costs US$27 and accounts for 14.4pc of the BOM. In the individual iPhone 4 torn down by iSuppli, the NAND flash was supplied by Samsung Electronics Co. Ltd., although Apple could be employing other sources, as well.

Samsung also supplies the next costliest part, the 4Gbits of mobile double data rate (DDR) SDRAM, priced at $13.80, or 7.4pc of the BOM.

Following on the value ranking is the baseband integrated circuit (IC), at $11.72, or 6.3pc of the BOM. Infineon Technologies AG is the supplier of this part, iSuppli’s teardown reveals.

Next on the component cost countdown is the A4 applications processor, manufactured by Samsung but using Apple’s Intellectual Property (IP). iSuppli estimates the cost of the A4 at $10.75, or 5.7pc of the iPhone 4’s BOM.

Other parts and suppliers

Subsequent on the cost list is the capacitive touch screen with reinforced glass, at $10, or 5.3pc of the BOM. While the supplier of the touch screen is not labelled and thus cannot be determined through a teardown analysis, iSuppli believes the source is TPK and/or Balda.

The main camera on the iPhone, a 5-megapixel autofocus device, costs $9.75, and accounts for 5.2pc of the BOM. Like the touch screen, the camera cannot be identified from a teardown.

The Wi-Fi Bluetooth controller IC, priced at $7.80 and representing 4.2pc of the BOM, is supplied by Broadcom Corp.

Other parts in the iPhone 4 include:

·        The US$5.80 battery, with an unknown supplier

·        NOR flash, supplied by Intel Corp./Numonyx; and double data rate (DDR) mobile DRAM, provided by Elpida Memory Inc., at a combined cost of US$2.70.

·        A US$2.60 Microelectromechanical (MEMS) gyroscope, supplied by STMicroelectronics

·        Infineon’s US$2.33 quad-band GSM/Edge transceiver

·        The US$2.03 main power-management IC from Dialog Semiconductor

·        A global positioning system (GPS) chip from Broadcom, costing US$1.75

·        Texas Instruments Inc.’s touch screen controller IC, at US$1.23

·        Cirrus Logic’s US$1.15 audio codec

·        An e-compass from AKM Semiconductor Inc., at 70 cents

·        The accelerometer, provided by STMicroelectronics, and costing 65 cents.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years