Apple made a lot of improvements to the iPhone 7, and hence, the manufacturing cost of the device is higher than that of all the previous iPhone models, despite the fact that it lacks the headphone port that was in its predecessors. On Tuesday after a teardown, research firm IHS Markit revealed that Apple incurs an expense of $224.80 per unit on each iPhone 7 it orders.

Jet Black iPhone 7 Plus Apple
Image source: Apple

Increased cost no problem for Apple  

IHS said the components of the iPhone 7 cost $219.80, and $5 is the basic manufacturing cost. This cost is applicable to the 32GB model of the iPhone 7 and is based on the preliminary findings, suggesting that once IHS completes its final review, it might change the estimate, notes CNBC.

IHS says that at about $225, the 32GB iPhone 7 is relatively expensive compared to the iPhone 6s, which was launched last year and cost Apple $187.91 to produce.

Andrew Rassweiler, senior director of cost benchmarking services for IHS, said, “Total bill of material 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.”

The U.S. firm sees greater margins from hardware than Samsung, but material costs are higher now than they were in the past. Despite the increase in the cost, things are not too bad for Apple as it makes a good profit of $424 on each iPhone 7 unit, which sells at $649. IHS has yet to evaluate other iPhone 7 models to figure out the profit the company makes on the sale of each unit.

iPhone 7 demand exceeds supply

Apple unveiled the iPhone 7 and the 7 Plus at a launch event on September 7. The devices boast high-resolution cameras. The iPhone 7 and iPhone 7 Plus are water-resistant with IP67 certification, and some of the models use Intel’s latest modem for LTE connection. The LCD display used in the iPhone 7 is the best used in a smartphone to date, as per DisplayMate. The device uses the new A10 Fusion chipset, which is better than other mobile processors available in the market.

Apple has run out of the initial iPhone 7 Plus supply, and last week, it said the new jet black model of the iPhone 7 had been sold out as well. However, smartphone customers in China have lost a considerable amount of interest in the new phone as local brands are offering smartphones with improved designs and marketing them well, notes CNBC.