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© apple Analysis | October 13, 2016

Iphone 7 – here comes the BOM

The bill of materials (BOM) for an iPhone 7 equipped with 32 GB of NAND flash memory carries USD 219.80 in bill of materials costs, according to IHS Markit.
After USD 5 in basic manufacturing costs are added, Apple’s total cost to manufacture the iPhone 7 rises to USD 224.80. The unsubsidized price for a 32GB iPhone 7 is USD 649. There hasn’t been a teardown analysis on the larger iPhone 7 Plus from IHS yet. But this preliminary estimated total is USD 36.89 higher than the final analysis of the iPhone 6S published by IHS in December 2015.

“Total BOM costs for the iPhone 7 are more in line with what we have seen in teardowns of recent flagship phones from Apple’s main competitor, Samsung, in that the costs are higher than in previous iPhone teardown analyses,” said Andrew Rassweiler, senior director of cost benchmarking services for IHS Markit. “All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past.”

Same shape. No jack.

While the overall shape and physical design of the iPhone 7 is similar to the iPhone 6S that preceded it, the new display has wider color gamut, including DCI-P3 as well as traditional sRGB, which improves the rendering of photos and videos. The device’s haptic engine, which provides the “click” feel for users, has also been improved for longer-duty cycles and better dynamic response. The home button is now static and mimics the MacBook in terms of a solid-state button design.

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Apple has also eliminated the 3.5 millimeter headphone jack, allowing a larger battery and haptic motor. “Where there was an audio jack in the previous design, Apple replaced it with a symmetrical grill – not for speakers, but for the waterproof microphone, leaving more room for the larger battery and Taptic Engine,” Rassweiler said.

Increased base-model storage

Apple has increased the iPhone 7’s storage density. For the first time, the base model starts at 32 GB – which is only the second time Apple has upgraded the base storage in the iPhone. From a cost perspective, the shift from 16GB/64GB/128GB iPhones to 32GB/128GB/256GB is a big jump.

The return of Intel

The Intel design win, and six years of absence that Intel had from the iPhone, is important to note. Even so, Intel still shares the processor business with Qualcomm. “Whereas Apple strives to have ‘one iPhone model for all carriers and markets,’ there are a number of different hardware permutations supporting various countries and carriers,” Rassweiler said. “Apple will likely look for ways to simplify the design moving forward, which means one supplier – whether Intel or Qualcomm – will likely dominate, as part of supplier and SKU streamlining.”

According to Wayne Lam, principal analyst of smartphone electronics, IHS Markit, “Largely left behind in the 4G LTE market, Intel has finally worked itself back into the iPhone, which is a huge win, but not one that is going to be financially significant in the near term for Intel.”

The baseband thin modem has been moved next to the A10 processor. Prior to the iPhone 7, the thin modem was always on the other side of the SIM card receptacle. “This is a subtle change but likely shows us where Apple wants to take this,” Lam said, “eventually putting the thin modem right on the apps processor package or even integrating it into the A-series processor.

The battery has been increased to 1960mAhr capacity from 1715mAh in the previous iPhone 6s. This change is consistent with Apple’s claims of improved battery life.

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Picture and data© IHS Markit

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