Apple last week released the iPhone SE, which is largely an iPhone 6s that's packed into a compact iPhone 5s design and that sports a price that’s characteristic to mid-range to high-end Android handsets. In other words, Apple finally delivered the one iPhone model many have asked for: an affordable yet powerful device that doesn’t have a huge screen.
But that’s not the only reason for Android device makers to worry. The iPhone SE spells trouble from a different point of view.
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According to reports, Apple can still turn a relatively nice profit off each iPhone SE sale. The company said that last year it sold some 30 million 4-inch devices, which were not sporting last-gen specs. The iPhone SE should become even more appealing considering it’s going to deliver the same raw power as the iPhone 6s models.
IHS data says the $399 16GB iPhone SE costs Apple just $156.20 (in parts) and less than $4 (in labor) to manufacture, Fortune reports. The $400 64GB model is just $11 more expensive because it has more storage than the base version. That means Apple can generate a profit of $239 and $328, respectively, on these models. Multiply that by tens of millions, and you end up with a nice number for Apple.
But what’s amazing here – and disastrous for Android device makers that sell incredibly cheap Android handsets at cost – is that Apple turns a healthy profit on a “cheap” iPhone.
IHS says the costliest iPhone SE parts are the screen ($20), the A9 chip ($22) and the wireless modem ($15). The battery, meanwhile, costs just $2.15 to make.
Driving down costs, however, doesn’t mean Apple is compromising on build quality. For the screen alone, Apple enlisted three suppliers, including Japan Display, LG Display, and Sharp.
Assuming the numbers are accurate, imagine what Apple could do regarding pricing in a few years. That’s something no Android device maker can pull off. For starters, other than Apple, nobody else recycles older device models. By combining parts from different iPhone generations, including shells from old models and brand new chips from last-gen iPhones, Apple could create even cheaper iPhones in the future beyond the iPhone SE.