Apple (AAPL) is one of the most popular companies in the world and produces one of the most ubiquitous smartphones. Apple has one of the most sought after products in the world, and as of the end of 2021, Apple was first in market share for smartphones, often trading places for the number one spot with Samsung.
Apple controls 22% of the global smartphone market share, while Samsung controls 19% and Xiaomi controls 12% as of the last quarter of 2021. In terms of profits from smartphones, Apple is also the leader. The company took 75% of the industry's profits and 40% of revenue in Q2 2021.
Apple makes such large profits through a sizable markup on its phones.
- Apple's iPhone has the largest market share of any smartphone manufacturer, followed by Samsung.
- In addition to having the largest market share, Apple also captures the largest operating profits of any smartphone manufacturer.
- In order to capture such high profits, Apple has a sizable markup on its smartphone.
- The iPhone 13 Pro retails between $999 and $1,449 but costs only $570 to make.
iPhone 13 Pro Cost
The iPhone 13 is Apple's latest phone and comes in various iterations as previous models have. The iPhone 13 pro, depending on storage size, costs between $999 and $1,449. It's quite a hefty price tag, especially when it's estimated that the actual cost of all the components to make the phone amounts to approximately $570.
The iPhone is primarily assembled in China by Taiwanese companies, such as Foxconn. The average salary for an iPhone worker is $10 an hour. The top earners make approximately $27 an hour while the 25th percentile makes $12 an hour.
According to Tim Cook, the CEO of Apple, the reason to build in China is not because of the lower labor costs. If this were the case, Apple could make its phones in even cheaper locations. The main reason, according to Cook, is the skill required in tooling engineering. He claims that the specific skill set is no longer available in the U.S., but in China, the expertise is prevalent.
Apple is the largest company in the world by market capitalization, with a March 2022 market cap of $2.8 trillion.
In addition, logistically, China makes the most sense to ship a product around the world as the country has seven of the world's largest 10 ports. If Apple were to build the iPhone in the U.S., it would only be able to build a small amount a year at a significantly higher cost.
In the early days of iPhone production, there were reports that labor conditions for workers were awful; however, this seems to have improved over time. According to some employees at Foxconn, the conditions are no worse when compared to other factories in China, and sometimes better.
Outside of the big cities in China, most of the country is still underdeveloped and the cost of living is low, resulting in wages that may appear low when compared to Western society. The issue, really then, is not the wages, but the conditions employees endure to earn those wages.
How Much Does It Cost to Make an iPhone?
The cost of making an iPhone 13 Pro, Apple's latest iPhone, is $570. Components to make a phone include the screen, the phone casing, the camera, the battery, software, chips, and more. Apple charges a sizable markup on its phones.
How Much Revenue Does Apple Make in a Year?
Apple's 2021 revenue was $365.8 billion. In 2020, its revenue was $274.3 billion, an increase of 33.3%.
How Much Does a Samsung Galaxy S Phone Cost to Make?
The Samsung Galaxy S21 costs approximately $508 to make. It retails for approximately $1,049.
The Bottom Line
Apple is a very successful company, and as consumers, we pay a premium price for the products the company makes. Some people purchase Apple products to become part of the 'trendy' Apple brand, and for Apple to maintain its high profits and low manufacturing costs, the company will continue to manufacture its phones in China and other low-cost locations.