Saturday, August 13, 2011

Apple doesn't make the iPhone

Contrary to popular belief, Apple doesn't actually make the iPhone. The iPhone is actually mostly manufactured by Samsung.

Apple neither manufactures the components nor assembles them into a finished product. The components come from a variety of suppliers and the assembly is done by Foxconn, a Taiwanese firm, at its plant in China.

The “teardown” part of this graphic shows who makes what inside the iPhone, and how much the various bits cost.

Samsung turns out to be the most important supplier of parts. Samsungs builds all of the phone’s most important components: the flash memory that holds the phone’s apps, music and operating software; the working memory, or DRAM; and the applications processor that makes the whole thing work.

These account for 26% of the component cost of an iPhone.

Note: Most iPhone accessories aren't made by Apple either. Accessories are typically made by independent companies with little or no affiliation with Apple.

This puts Samsung in the unusual position of supplying a significant proportion of one of its main rival’s products, since Samsung also makes smartphones and tablet computers. This is actually part of Samsung’s business model: acting as a supplier of components for others gives it the scale to produce its own products more cheaply. For its part, Apple lets other firms handle component production and assembly, which leaves it free to concentrate on heavy advertising.

Stranger still, Apple sued Samsung in April over the design of its Galaxy S smartphone and its Galaxy Tab tablet computer, claiming that they copied hardware and design features from Apple. Samsung counter-sued. But the two firms’ mutually beneficial trading relationship continues. Seems fishy, doesn't it?

I'd say Samsung has Apple by the balls.

What it makes you realize is that as the “total cost” part of the graphic shows that, beyond manufacturing and component charges, the lion’s share of the iPhone’s $560 price tag goes to Apple, and most of that is just product markup.

So Apple does not actually make the iPhone, but Apple does make a lot of money from selling what is essentially a Samsung product.

The Apple iPhone: Samsung Inside.

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