The 256-gigabyte iPhone XS Max costs Apple about $443 to build for parts and assembly, according to a new teardown report. That means that Apple has managed to bump up the profit margin substantially while cutting build costs for the 256GB model, which is likely the most popular configuration and retails for a hefty $1,249.
Roughly, that means the more expensive device costs about $47 more to build than last year’s iPhone X — which had an estimated build cost of $395.44 for the 64GB model.
According to TechInsights, the most expensive part of the iPhone XS Max is its 6.5-inch OLED display, which it estimates costs about $80.05 (just three dollars more than the 5.8-inch OLED display on the iPhone X).
Apple was able to shave costs on the larger OLED display by removing certain components related to 3D Touch. According to TechInsights’ Al Cowsky, Apple removed about $10 worth of components.
Along with the display, there were several other components that added to the iPhone XS Max’s cost, including the gigabit LTE modem, larger battery, upgraded RAM specs, and a larger and heavier stainless steel housing. The A12 Bionic, the first chipset using a 7nm process to hit the market, also likely pushed costs up.
Still, the iPhone XS Max offers Apple a healthy profit margin, and some consumers seem to be upset by that margin. India Times referred to it as “daylight robbery.”
Why This Isn’t a Big Deal
A product markup is not unusual for any successful industry, and the profit margin is not likely to be very accurate anyway.
- For one, the estimated Bill of Materials (BOM) report by TechInsights does not account for costs like research & development or marketing.
- Similarly, there’s an argument to be made about the accuracy of third-party BOM reports. Back in 2015, Apple CEO Tim Cook even slammed third-party teardown firms, saying that he had never seen a report that was “even close to accurate.”
TechInsights itself even notes that its costing analysis is largely based on assumptions and initial information available at the time of the teardown.
And Apple isn’t the only firm that has been bumping up its profit margins in recent years, particularly as we move into the era of high-end, $1,000+ smartphones.
Similarly, just take the Galaxy Note 9, a device that starts in the general price range as Apple’s iPhone XS and iPhone XS Max.
Android YouTuber Max Lee pointed out back in August that the Galaxy Note 9 sports a lot of identical hardware to the older Galaxy S9+. And according to a TechInsights report from earlier this year, the Samsung Galaxy Note 9 costs the South Korean tech giant just $379 to make.
Lee estimates that the Galaxy Note 9 only costs about $65 more to make than the Galaxy S9+, which rounds out to about $444 per device. Yet, it retails above the $1,000 mark.
Despite its high cost, the 256GB iPhone XS Max is proving to be an extremely popular device. The larger 512GB configuration may even see shortages due to the fact that Samsung is the only reliable supplier of compatible NAND memory.