Emerson1
07-02-2007, 01:42 PM
January 18, 2007 - Apple was out to prove a point last week when the company chose to launch the iPhone at the same time as CES. Though the company was no doubt successful in proving that a single new iProduct could trump the collective offerings of the entire consumer electronics industry, the move was also a rather blatant slap in the face to journalists and the broader industry, a significant statement that you're either with Apple or against it. Today we've learned that competitors and press aren't the only people Apple doesn't mind thumbing its nose at--the company has no problem doing the same to its own fans.
iSuppli Corp, the long standing source for cost-of-production figures on Apple products, announced its estimates of iPhone production costs. While the two iPhone models will retail at $499 and $599 for the 4 and 8 GB versions, their actual costs of production will amount to no more than $245.83 and $280.83, respectively. The markup on each model, which falls just under 50%, is one of the most aggressive in recent CE history. A 2-year service contract with Cingular will also be required for the purchase. Unlike most service plans, the agreement obviously does not subsidize the hardware cost.
The fact that Apple can enforce such a premium on its products is a testament to quality and business sense. Nonetheless, there is significant room for markdowns after the launch frenzy has subsided. Combined with eventual contract-subsides, the future of a $100 iPhone is certainly possible should Apple and Cingular feel the need to bring in more customers. Somewhat like the RAZER, which progressed from high-end to low-end on a very steep curve, the iPhone may not last long as the ultra-premium phone of choice. As they say, flaunt it while you've got it; just be aware a $600 iPhone may not have a long status-symbol shelf life.
iSuppli Corp, the long standing source for cost-of-production figures on Apple products, announced its estimates of iPhone production costs. While the two iPhone models will retail at $499 and $599 for the 4 and 8 GB versions, their actual costs of production will amount to no more than $245.83 and $280.83, respectively. The markup on each model, which falls just under 50%, is one of the most aggressive in recent CE history. A 2-year service contract with Cingular will also be required for the purchase. Unlike most service plans, the agreement obviously does not subsidize the hardware cost.
The fact that Apple can enforce such a premium on its products is a testament to quality and business sense. Nonetheless, there is significant room for markdowns after the launch frenzy has subsided. Combined with eventual contract-subsides, the future of a $100 iPhone is certainly possible should Apple and Cingular feel the need to bring in more customers. Somewhat like the RAZER, which progressed from high-end to low-end on a very steep curve, the iPhone may not last long as the ultra-premium phone of choice. As they say, flaunt it while you've got it; just be aware a $600 iPhone may not have a long status-symbol shelf life.