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Apple Continues Familiar Design and Pricing Strategy with iPhone 5c, IHS Teardown Reveals
El Segundo, Calif. (Sept. 25, 2013)—Far from the major departure that many had expected, the iPhone 5c turned out to follow Apple Inc.’s familiar formula, combining premium pricing with a hardware design almost completely identical to the original iPhone 5, according to preliminary results from the Teardown Analysis Service at IHS Inc. (NYSE: IHS).
The low-end model of Apple’s iPhone 5c with 16 gigabytes (GB) of NAND flash memory carries a bill of materials (BOM) of $166, based on a physical dissection of the production. The cost rises to $173 when the $7 manufacturing expense is added in. The 32-GB model carries a combined cost of $183.
While this is considerably less than the $197 BOM and manufacturing cost for the original 16-GB iPhone 5 based on the final results of the IHS teardown conducted one year ago, it’s still on the high end for a smartphone. To attain the cost and pricing required to merit low-end pricing of $400, while maintaining Apple’s customary high hardware margin, the combined BOM and manufacturing expense for the iPhone 5c would have had to amount to about $130.
“Many expected Apple to take an affordable strategy with the iPhone 5c, producing a lower-cost smartphone that would be priced at around $400 in order to address developing markets, such as China,” said Wayne Lam, senior analyst for wireless communications at IHS. “However, the reality of the iPhone 5c is completely different, with Apple offering a phone with a $173 BOM and manufacturing cost, and a $549 price tag—without subsidies. Once again, Apple has stuck to its old tried-and-true formula of optimizing its iPhone hardware gross margins to attain maximum profitability.”
Table 1 attached presents the preliminary BOM based on a physical dissection of the iPhone 5c conducted by the IHS Teardown Analysis Service. Note that the teardown assessment is preliminary in nature, accounts only for hardware and manufacturing costs and does not include other expenses such as software, licensing, royalties or other expenditures.
Just one word: plastic
Just as Apple’s pricing strategy for the 5c is familiar, so are the phone’s electronic content and design.
“The iPhone 5c is basically an iPhone 5 in a plastic disguise,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “Just as in the original iPhone 5, the 5c uses an Apple A6 processor, a 4-inch retina display, and low-power Double Data Rate 2 (DDR2) DRAM—among other commonalities. Because of this, the iPhone 5c benefits from the normal cost reductions that typically occur for electronic devices during the period of a year. The combination of the design and component reuse—and the plastic enclosure—has allowed Apple to offer a less expensive version of the iPhone, although it’s still not cheap enough to be a true low-cost smartphone."
The display module in the 5c carries a cost of $41, down 7 percent from $44 one year ago.
“Maintaining the same specification and the same suppliers for the panels as the iPhone 5 has helped Apple hold the line on its display costs for the 5s,” said Vinita Jakhanwal, director of mobile and emerging displays and technology at IHS. “Japan Display Inc., LG Display and Sharp have been the main display suppliers for the iPhone 5 for more than a year, allowing Apple to provide them the opportunity to enhance their manufacturing yields and efficiencies.”
Getting the bands back together
The biggest difference between the iPhone 5c and the original iPhone 5 lies in the radio frequency (RF) transceiver, which has been updated to support more 4G Long Term Evolution (LTE) bands. The 5c uses Qualcomm’s WTR1605L RF transceiver, which supports up to seven simultaneous LTE connections during operations. The iPhone 5 used the older RTR8600L RF transceiver, also from Qualcomm, that supported only up to five active LTE bands.
iPhone 5c teardown in pictures
For pictures of the iPhone 5c teardown, please click on the links below
iPhone 5c teardown video
For a video review of the iPhone 5c and iPhone 5s teardowns, please visit Electronics360.
About IHS (www.ihs.com)
IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs approximately 8,000 people in 31 countries around the world. IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2013 IHS Inc. All rights reserved.