The iPhone 5 costs about $200 to build
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The iPhone 5 costs about $200 to build

The new iPhone 5 carries a bill of materials (BOM) of US$199 for the low-end model with 16GB of NAND flash memory, according to a preliminary virtual teardown conducted by the IHS iSuppli Teardown Analysis Service (www.isuppli.com).

When the $8 manufacturing cost is added in, the cost to produce the iPhone 5 rises to $207. For the 32GB version of the iPhone 5, the BOM cost increases to $209, while the 64GB version is estimated at $230.

Note that these teardown assessments are preliminary in nature, account only for hardware and manufacturing costs and don't include other expenses such as software, licensing, royalties or other expenditures.   

"With the base model carrying a $199 BOM, the iPhone 5’s components are expected to be slightly more expensive compared to the iPhone 4S model," says Andrew Rassweiler, senior principal analyst, teardown services, for IHS. "The low-end iPhone 4S with the same memory density as the base-model iPhone 5 carried a BOM of $188.00, according to a preliminary estimate issued by IHS in October 2011. While the price of some components, such as NAND flash, has fallen during the past year, the iPhone 5’s overall BOM has increased mainly because its display and wireless subsystems are more expensive compared to the iPhone 4S."

As in previous models, the costliest subsystem in the iPhone 5 is estimated to be the display with integrated, in-cell touch sensing. At $44, this subsystem is pricier than the combined total of  $37 for the iPhone 4S display with separate touchscreen based on pricing from October 2011. This is due to the iPhone 5’s larger display -- at 4.0 inches diagonally, compared to 3.5 inches for the iPhone 4S -- and the inclusion of the new in-cell touchscreen technology

"The iPhone 5 makes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing," Rassweiler says. "Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer."

In the past, smartphones with capacitive touch technology employed different suppliers for the display and touchscreen. However, Samsung made the first advance beyond conventional capacitive touch with what is known as on-cell touch. All of Samsung’s Super AMOLED screens employed in smartphones use on-cell technology, which is sold as a single integrated display/touchscreen unit from Samsung. When smartphone makers buy Super AMOLED displays from Samsung, they come with touch capability integrated. This simplifies smartphone product designs and also makes them thinner. 

Apple’s in-cell technology represents the next step beyond on-cell by integrating the touch sensing feature into the display, according to iHS iSuppli. No separate touchscreen assembly is involved; instead, a single unit comes directly from the iPhone 5’s three known display suppliers—LG Display Co. Ltd., Japan Display Inc . and Sharp Corp.

The addition of high-speed 4G LTE technology is estimated to have driven up the cost of the wireless section of the iPhone 5, at $34, compared to about $24 for the iPhone 4S.

"We believe that Apple is implementing LTE in a particularly novel way,”" Rassweiler says. "Apple ideally would like to sell one iPhone in all markets. However, there are so many different LTE frequencies that must be supported around the world that this has become a difficult thing to do. For most smartphone manufacturers, the solution is to build different variations of their smartphones for each carrier, so that they won’t spend extra money on superfluous components. However, this is not the Apple way."

Instead, the Apple way is to pack all of the features needed to support as many carriers as possible with a single product, he adds. Still, that will be tough to do in this situation. For now, IHS believes there are at least two different versions of the iPhone 5 -- each with multiband filters that will allow Apple to support as many global markets as possible with as few versions of the product as feasible.

"In some ways this is an expensive way to do business, but by maintaining the fewest numbers of variations possible, Apple is playing to its strength in product design," Rassweiler says.

The iPhone 5 is expected to  use a similar LTE wireless subsystem found in the iPad 3, but with at least one major enhancement. The iPad 3’s  wireless section is based on Qualcomm Inc.’s first-generation LTE baseband processor, the MDM9600, and its RTR8600 RF transceiver. However, in the iPhone 5, Apple is expected to employ Qualcomm’s second-generation MDM9615 baseband processor, which is made with a more advanced semiconductor manufacturing technology, reducing power consumption.

Another major upgrade of the iPhone 5 is the use of the A6 processor, compared to the A5 in the iPhone 4S. The A6 is estimated to be slightly more expensive, at $17.50, compared to $15 for the A5, based on pricing at the time of the iPhone 4S’s introduction.

According to preliminary information, the A6 has a dual-core processor as well as several graphics-processing units to boost performance. Samsung is expected to be the manufacturer of the A6. However, since this is an Apple-designed chip, Samsung is expected to  produce it on a foundry basis, rather than acting as a semiconductor supplier for Apple.

IHS speculates the A6 is manufactured using at least 32nm process geometry, and perhaps even the more advanced 28nm technology. This will be determined during the IHS iSuppli physical hardware teardown.

The 16GB of NAND flash in the iPhone 5 is estimated to cost $10.40, down dramatically from $19.20, based on pricing in October 2011.

"NAND flash continues to come down  in price as manufacturing processes for these memory chips become more advanced," Rassweiler says. "And because it is the world's largest buyer of NAND flash, Apple gets preferential pricing. Apple’s massive leverage in this market is reflected in our price estimate."

 
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