Analysis of the iPhone 15 deconstruction shows components that are 10% more expensive compared to the flagship of 2022

Analysis of the iPhone 15 deconstruction shows components that are 10% more expensive

Analysis of Apple’s iPhone 15 series teardown reveals that the production costs for the highest-tier model have increased by approximately 10% compared to the flagship of 2022. This marks a record high for the second consecutive year, with Apple absorbing most of the increased component expenses. However, analysts speculate that Apple may pass on these higher component costs to its customers in 2024.

In collaboration with Fomalhaut Techno Solutions, a research company based in Tokyo, disassembled and examined the costs of the four iPhone 15 models released in September: the iPhone 15, iPhone 15 Plus, iPhone 15 Pro, and iPhone 15 Pro Max. The analysis focused on models with the smallest built-in storage capacity.

The top-of-the-line 15 Pro Max features a telephoto camera with 5x optical zoom and a newly designed semiconductor device produced using advanced 3-nanometer processing technology. The estimated production cost of this model, calculated by summing the costs of all parts used, amounts to $558, representing a 12% increase compared to the 14 Pro Max model released in 2022.

From 2018 to 2021, parts costs for the Max series ranged between $400 and $450. Fomalhaut CEO Minatake Kashio noted that by 2021, every possible step to easily enhance device performance had been taken, which has led to inevitable cost increases in improving performance. Last year, component costs surged by about 20% compared to the previous year, a trend that persists with the latest models.

The cost-to-price ratio for the 15 Pro Max, calculated by dividing the cost of the parts by the phone’s price, stands at 47%, a 1 percentage point increase from the 14 Pro Max. The cost of the telephoto camera, which now supports 5x optical zoom, has risen to $30, marking a 3.8-fold increase compared to the 14 Pro Max released in 2022. This increased cost contributes to a design that extends the focal length while keeping the lens compact.

The new frame, constructed from lightweight and durable titanium, costs $50, a 43% increase over a traditional stainless steel frame. The primary supplier of the frame is Foxconn Technology, the iPhone assembler for the Foxconn Group in mainland China.

The latest A17 Pro chip, developed in-house and utilized in the top-tier Pro Max and Pro models, has a cost of $130, representing a 27% increase compared to the A16 used in last year’s top-end models. Apple outsources the production of its in-house designed chips to Taiwan Semiconductor Manufacturing Co. (TSMC), and the rising prices of extreme ultraviolet (EUV) lithography machines required for extremely precise circuit manufacturing have contributed to more expensive chips.

Conversely, the prices of NAND flash memory chips used for internal storage have decreased due to weak demand. Even though the lowest-priced model of the 15 Pro Max is equipped with 256 gigabytes of memory, twice that of the 14 Pro Max, the cost has only increased by 5%.

Apple discontinued the 128-gigabyte model for the 15 Pro Max and set the minimum price at $1,199, a $100 increase. During the launch of the new iPhone 15 range in September, Apple emphasized that the new entry point did not constitute a price hike, as the 2022 version of the Pro Max with the same memory capacity had the same cost.

Despite the doubling of NAND flash memory, the overall cost remained relatively stable. Apple appears to have balanced rising camera and semiconductor costs with falling memory prices.

Regarding the origin of most primary components, 29% of them, by value, were sourced from South Korea, an increase of approximately 5 percentage points. LG Group provides components that influence the structure of the telephoto camera, while Samsung Group supplies the display.

The United States contributed the highest share of primary components at 33%, with Qualcomm and Broadcom supplying communication chips. Japan’s share remained unchanged at 10%.

The cost-to-price ratio was more pronounced in the United States, where the direct sale prices of the three models other than the 15 Pro Max remained unchanged. The component cost of the cheapest iPhone 15 rose by 16% compared to the iPhone 14, amounting to $423, as semiconductor devices became more expensive. The cost-to-price ratio for the low-end model increased by 7 percentage points, reaching 53%.

The component cost of the 15 Plus increased by 10% to $442, and that of the 15 Pro grew by 8% to $523. Their cost ratios were 49% and 52%, respectively, marking a 4-point increase from the 2022 models.

In a time when prices for everyday essentials and various services are increasing worldwide, it’s surprising to analysts that Apple has maintained U.S. prices for its latest iPhones, except for the top-tier model. These pricing decisions suggest that Apple’s management is cautious about implementing price hikes that could impact sales.

However, if Apple continues to absorb the rising costs without passing them on to consumers, the company’s profitability may be affected in the long run. Fomalhaut CEO Kashio suggests that Apple might consider raising prices next year, particularly for models other than the Pro Max. When Apple unveils the iPhone 16 series in about 11 months, there will likely be significant attention on the tech giant’s pricing strategy.