It’s been proven that the key to Apple’s financial success in the mobile space has been its high margins. It is able to manufacture the iPhone for under $200, but charges $650 for the cheapest model. Most users end up spending much less than that due to carrier subsidy, but the carriers have paid close to MSRP for the unit in the first place; regardless of who purchases the iPhone, Apple’s margins are high.
The same cannot be said of the newly-released Nokia Lumia 900, which actually costs more to manufacture than the iPhone 4S despite its modest internal specifications. The bulk of the difference is in the touchscreen, which costs Nokia $21 more to purchase from its supplier than Apple’s Retina Display. This is likely because Apple has better deals in place with its suppliers, but also because the Retina Display, in spite of its high pixel density, is a mature two-year-old product with an efficient production line. Numbers don’t hurt either, as Apple sells millions of iPhones every quarter, reducing individual component costs due to volume purchases.
The infographic above details just how difficult it is for other OEMs to compete with high-margin devices such as the iPhone 4S and Samsung’s upcoming Galaxy S III, both of which are able to charge premium prices but, due to their command of the supply chain, build their products cheaply. The profit, as it turns out, is in the margins.