Apple Controls Supply Chain: iPhone Costs Not To Rise in 4 Years

"The iPhone's pricing model is that for any generation of iPhones, the average cost for three years is about $330, which is priced at 50% of gross profit, so the selling price is $649. No surprise. This model will continue." Cogobuy Zhu Jizhi, executive vice president, said in a meager manner.

Apple's ability to suppress iPhone 5 prices is the result of successful control of supply chain costs. "The iPhone's supply chain is called a seamless supply chain. Apple will integrate into all upstream component development, production, and manufacturing processes. This is why Apple's mobile phone prices have not changed much." A Financial Times said that Apple has fully owned the iPhone's pricing power and used to adjust its total gross profit margin. The iPhone maintains a gross margin of 45% to 55%.

"Normal consumer products procurement components will start purchasing from 80% of local companies. When iPhone enters suppliers, it will be about 20% to 30%. Apple will develop components as the development process continues. In the process of Apple's management of all suppliers, there is a principle that does not allow suppliers to produce any black box on it, and chips, antennas, headphones, etc. must all be fully controlled by Apple, and Apple will participate in the whole process." Zhu Jizhi said.

In other words, the iPhone's manufacturing process is actually manufactured by Apple together with all upstream component suppliers. This model is completely different from all other supply chains. The average company is more inclined to look for products already on the market. .

According to sources close to Apple's supply chain, many of Apple's mobile phone engineers will stay in factories every day, and they will develop with the factories that manufacture components. Apple's engineers are said to have the most people at the Foxconn factory with 2,000 people.

Zhu Jizhi stated that the iPhone’s entire product will be more than two years ahead of other products, and other manufacturers will begin to use it only two years after they mature. The iPhone will start to use when it is not mature, and the components that have run out of components will mature. "Compared to mature products a year later, the current iPhone's cost difference is about 20%, but according to the characteristics of Apple's mobile phone supply chain, the prices of suppliers will generally be discussed once in a quarter. With the increase in sales, Apple can It is very good to use this method to control the gross profit margin of products,” said Zhu Jizhi.

Recently, Apple announced that iPhone5 has released 5 million in the first week of sales, breaking the previous record of iPhone4S sales of 4 million in the first week.

In the new mobile phone, Apple has equipped the iPhone 5 with a "retina display" and lengthened the display. At the same time, the iPhone 5 is Apple's first smartphone to support high-speed 4G networks, and the 4G network uses Long Term Evolution (LTE) technology. standard.

According to IHS, a research organization, the total bill of materials for iPhone5 parts and Accessories is US$197, which is only US$9 higher than iPhone4S. "Most other mobile phones that support LTE technology are equipped with a much larger display screen, and other spare parts models are also large, and the cost of materials naturally rises." IHS report author Lyme that, but Apple successfully used other zero The advantage of reducing the price of accessories, so that the total cost of the entire assembly of components is only slightly higher than the previous generation.

However, as a long-term observer of the component industry, Zhu Jizhi has different opinions. The direct calculation of components and the specific supply cannot be calculated directly from market prices. In fact, Apple's manufacturing costs will not be so low.

He believes that most of the components of Apple's mobile phones are the latest products or special customization, only for one, there is no way to guess the cost and type. Even products of the same model cannot be measured at the market price given Apple's testing standards.

"If the cost is between 160 and 200 US dollars, Apple's gross profit will be much higher than the report, so it is not feasible." He said.

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