IHS iSuppli's Teardown Analysis Service has run through a virtual teardown of the iPhone 5. The resulting teardown bill of materials (BOM) information is not based on an actual teardown, but on a virtual analysis of the specifications announced by Apple in combination with known information regarding components and parts suppliers. What that means is that we'll need to take the analysis with a grain of salt; an actual physical teardown may very well result in some changes to the overall preliminary analysis. That said, enough is known about the iPhone 5 that the virtual teardown will likely be pretty much on target.
The resulting BOM teardown assessment takes into consideration only hardware and manufacturing costs. It does not include any other expenses -- software, licensing, royalties or other expenditures.
As a reference point, the 16 GB version of the iPhone 4S carried a BOM of $188.00, according to a preliminary estimate issued by HIS iSuppli in October 2011.
The new iPhone 5's initial BOM estimate comes in at $199.00 for the low-end model with 16 GB of NAND flash memory. When the $8.00 manufacturing cost is added in, the cost to produce the 16 GB iPhone 5 goes to $207.00. For the 32 GB version the BOM cost increases several dollars to $209.00, while the 64 GB version is estimated at $230.00. The 16 GB of NAND flash in the iPhone 5 is estimated to cost $10.40, down dramatically from $19.20, based on pricing in October 2011. That certainly makes one wonder about the $100 wireless carrier contract cost differential between each version of the iPhone 5.
The 16 GB iPhone 5 will have a new contract cost of $199, the 32 GB version comes in at $299, and the 64 GB version weighs in at $399. Keep in mind that the pricing here is based on what the carriers are willing to subsidize. The actual cost of the phones to the carriers begins at $649 (then $749 and $849 respectively) and as much as one might think the prices for the phones with more memory should scale according to actual memory cost differentials, well, that is simply barking up the wrong tree. The simple truth is that the 32 GB and 64 GB versions earn Apple significant additional revenue per device, and do not in any way translate directly to actual BOM costs. There is nothing Apple loves more than users buying up higher GB iPhones!
As with previous iPhone models, the display is the costliest subsystem in the iPhone 5. The new and larger display in the iPhone 5, which now is integrated with "in-cell" touch sensing, is estimated to be $44.00. This is $7 more than the cost of the iPhone 4S display subsystem, which has older generation technology with a separate touchscreen and a smaller screen. Based on 2011 pricing the 4S display is estimated at $37.00.
It is worth noting here that Samsung made the first advance beyond conventional capacitive touch with on-cell touch. All of Samsung’s Super AMOLED screens employed in smartphones use "on-cell" (not in-cell) technology, which is sold as a single integrated display/touchscreen unit from Samsung. This is one way that Samsung managed to slim down the Galaxy S III and also likely helped Samsung keep cost per device lower. Integrated on-cell touch will cost more per device in terms of actual unit cost, but the result is both a slimmer phone as well as a reduction in complexity, which ultimately translates to a reduction in manufacturing cost.
Apple’s in-cell technology represents the next step beyond on-cell by integrating the touch sensing feature into the display. No separate touchscreen assembly is involved; instead, a single unit comes directly from the iPhone 5’s three known display suppliers: LG Display Co. Ltd., Japan Display Inc. and Sharp Corp.
High-speed 4G LTE technology is estimated to have driven up the cost of the wireless section of the iPhone 5, which iSuppli pegs at $34.00, compared to about $24.00 for the simpler iPhone 4S radio.
The iPhone 5 is expected to use a similar LTE wireless subsystem found in the new iPad, but with at least one major enhancement. The new iPad’s wireless section is based on Qualcomm Inc.’s first-generation LTE baseband processor, the MDM9600, and its RTR8600 RF transceiver. However, in the iPhone 5 Apple is expected to employ Qualcomm’s second-generation MDM9615 baseband processor, which is made with a more advanced semiconductor manufacturing technology, which -- very importantly to Apple -- also reduces power consumption. Very high LTE power consumption is what has kept LTE out of the iPhone 4S.
Another major upgrade in iPhone 5 is its A6 processor, compared to the A5 used in the iPhone 4S. The A6 is estimated to be only slightly more expensive, at $17.50, compared to $15.00 for the A5, based on pricing at the time of the iPhone 4S’s introduction. The A6 will be non-trivially and notably faster than the A5, yet according to Apple the A6 consumes two times less power than the A5, another important issue related to how Apple has managed to maintain battery life in the iPhone 5.
Based on preliminary information, the A6 has a dual-core processor as well as several graphics-processing units to boost performance. Samsung is expected to be the manufacturer of the A6. It is, of course, a very interesting dynamic that revolves around all things Apple and Samsung given the legal issues the two companies keep spinning off against each other.
In the case of the A6, it is an Apple-designed chip. This means that Samsung is expected to produce it on a foundry basis, rather than acting as a semiconductor supplier for Apple. IHS speculates the A6 is manufactured using at least 32nm process geometry, and perhaps even the more advanced 28nm technology. This will be determined during the IHS iSuppli actual physical hardware teardown.
A parts estimate is provided in the following chart.
“The iPhone 5 takes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing,” notes Andrew Rassweiler, senior principal analyst, teardown services, for IHS. “Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer.”
Rassweiler also believes that Apple is implementing LTE in a particularly novel way. "There are so many different LTE frequencies that must be supported around the world that this has become a difficult thing to do. For most smartphone manufacturers, the solution is to build different variations of their smartphones for each carrier, so that they won’t spend extra money on superfluous components. However, this is not the Apple way. Instead," Rassweiler continues, “the Apple way is to pack all of the features needed to support as many carriers as possible with a single product."
That approach is simply tough to pull off however. Rassweiler believes there are at least two different versions of the iPhone 5 - each with multiband filters that will allow Apple to support as many global markets as possible with as few versions of the product as feasible. This is an expensive way to do business, but by maintaining the fewest numbers of variations possible, Apple is playing to its strength in product design.
We believe that Apple has pulled off a significant achievement overall - and the BOM strikes us as quite reasonable. One thing that becomes evident is that Apple has managed to reduce power consumption to the point that the iPhone 5 will, under most circumstances, last an entire day without need for a charge. For Apple this is a crucial piece of the end user experience. We wonder if NFC was kept out of the iPhone 5 for power reasons, though we also continue to believe NFC is being kept in reserve for an iPhone 5 upgrade.
It is also notable that Apple has retained an enormous level of overall quality. No vendor can match Apple's build quality, and that, to some degree, is an intangible value that can't be measured.
For an alternative albeit mostly similar though less expensive view of the iPhone 5 BOM (also referred to as cost of goods, or COGS) do check out our colleague Peter Bernstein's assessment as well.
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Edited by
Rich Steeves
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