iPhone SE Could Be One Of Apple’s Least Profitable Handsets

March 22nd, 2016 by Trefis Team
-8.75%
Downside
250
Market
228
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Apple

Apple (NASDAQ:AAPL) launched a new 4” smartphone dubbed the iPhone SE as it looks to stay relevant in the mid-range of the smartphone market. The new device is visually similar to the iPhone 5S, although its innards have been largely overhauled to provide performance comparable to Apple’s current flagship iPhone 6S. Moreover, Apple has priced the device competitively at $400 onwards, marking the lowest-ever launch price for an iPhone. That said, the combination of near flagship-level specs and a low price point will likely prove a drag on Apple’s iPhone margins – which we believe are a key lever of the company’s valuation.

Below, we estimate the potential cost of producing the new device from tear-downs and bill of materials analysis for the iPhone 6S and the iPhone 5S devices that it is largely based on. While the numbers may diverge from the actual costs that Apple incurs, it should give us a sense of how margins will compare to those of other iPhones.

iPhoneSE3

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References:

Apple iPhone 6 Teardown, Techinsights

Apple iPhone 6S Teardown,  Techinsights

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Apple

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