Thank you! Here\'s the short article: The researchers at IHS have torn apart the

Question

Thank you! Here's the short article:

The researchers at IHS have torn apart the latest iPhone 6 and concluded that it cost Apple around $200 to build. Given that an iPhone 6 with 16GB carries a retail price of $649, that means Apple will earn an astounding 69 percent on the phone before accounting for things like software, warranty and support costs. Perhaps more remarkable, though, is the consistency in that figure over the past several years. From the introduction of the iPhone 4’s through the 6, Apple’s phones have come to market with a build cost of between $195 and $207 while gaining capabilities every year. That this year’s model is around the middle of that range speaks to both Apple’s ability to manage its supply chain and also the relentless price declines of some key iPhone components as time passes.
Then and now
The 4’s, when it came to market 3 years ago in 2011, lacked many features of the current models. It didn’t have 4G LTE, lacked the TouchID fingerprint sensor and had just a 3.5-inch touchscreen. Still with a much less capable radio and much smaller display, the iPhone 4’s have direct cost of $196 to make. Of that, Apple was spending $19.20 on flash memory to store your pictures, music and apps and $9.10 on RAM to allow you to run those apps.
Move ahead to today and that $28.30 has been sliced to $15. With the extra $13,
Apple has been able to spend $8 more on the display ($45 vs. $37) and more on the processor ($20 vs. $15). Those two components provide many of the performance gains that have occurred over the past 3 years, allowing apps to run faster and, obviously, allowing you a better view of what you’re doing.
The positives (without many negatives)
Some major changes should allow Apple to capture even higher margins this year than in the recent past. While the 5.5-inch iPhone 6 Plus is unlikely to sell in anywhere near the volumes of the 6, it will capture many more margin dollars for every unit that moves. IHS says the incremental build cost is just $15.50, with half of that coming from the big screen and a bit from the optical image stabilization in the camera. Apple charges $100 more, of course, for the larger model.
That could mean that upselling to the Plus now overtakes what had been the most profitable part of the Apple empire: Upselling to larger amounts of storage on iPhones. In past years, Apple got an extra $100 to move you from 16GB to 32GB and then $100 more to go to 64GB. This year, the first $100 takes you all the way to 64GB.
With IHS speculating that Apple is paying 42 cents per gigabyte, that makes the cost of the extra flash $20.16. And the 64 to 128 upgrade runs Apple $26.88. Back in the 4’s days, those figures were $20 and $40. Apple makes more margin today offering you a boost from 64GB to 128GB for $100 than it did offering the upgrade from 32GB to 64GB back in 2011.  
What’s especially noteworthy is that iPhone gross margins tend to be lower early in the new product cycle and improve late.

(6) There is 1 universal characteristic about gross margin mentioned in the article that is true in the real world, what is this statement and why so? Statement: Reasons:

Explanation / Answer

Answer)

Statement: Apple's ability to manage its supply chain.

Reasons:By better management of supply chains, efficiency can be maintained through which raw material can be purchased at lower cost.This helps in determining what quantity of material is to be purchased at what price in what time without any excess or deficiency in the material which helps in decline of storage costs of holding the raw material.

Along with it,by maintaining a healthy relationship with the supplier there will be scope of availing the discount on the volume purchased.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.