TrendForce：Lower iPhone 5 Production Costs Pave Way for Improvements and Higher Profits

Having finally been revealed on September 12, Apple’s much anticipated iPhone 5, currently the lightest and slimmest iPhone product out there, is set to become the center of focus within market. According to TrendForce, the component costs for the new handset is much lower compared to those of the 4S, which gives the Cupertino firm more flexibility in terms of creating a better, more advanced iPhone. The iPhone 5 should be able to rake plenty of revenue for Apple despite the plummeting global economy and the potential criticism consumers may have towards its 4-inch screen.

Analyzing market-related statistics and numbers, one of the most interesting facts TrendForce found, as mentioned earlier, is that the iPhone 5’s production cost is much lower than those incurred by the 4S model. Other than using Japan Display’s and LG’s high-resolution 4-inch display (1366 x 640), Samsung’s A6 processor, a new set of Wifi chips, and a re-designed aluminum casing, Apple could be said to have taken advantage of the other components’ lower costs to improve upon the handset’s structure. The A6 chip used by Apple likely runs on two ARM Cortex-A15 processor cores, which means that the OEM cost may have been higher than that of the A5x.

Given Apple’s large Mobile DRAM purchases, the price it received is likely to be lower than the contract prices of the DRAM market, with the 1GB chips received from Japanese and Korean manufacturers centering at around the $7 USD range. With regards to the NAND Flash provided by US, Japanese, and Korean manufacturers, due to the large quantity purchased, the 16GB NAND flash is priced at around $10 USD, whereas the 32GB and the 64GB are priced at $18 USD and $35 USD, respectively. The cost for the iPhone 5’s LED component is also lower compared to the previous amount. On the whole, while the BOM for the 16GB iPhone 5 is not too different from that of the 16GB iPhone 4S, for the 32GB and the 64GB versions, the cost difference is more immense and noticeable. This means that the profit earned for the two models will be higher than those for the 4S counterparts.

One key factor that should be noted is that the iPhone 5’s battery life is an issue. As before, the phone’s lithium battery utilizes the polymer core provided by Japanese and Chinese manufacturers. Due to the emphasis placed on lightness, not much development has been directed towards increasing the handset’s battery power capacity. Further, with the use of the higher resolution, in-cell 4 inch display, and the incorporation of LTE chipsets, the 3G network time is up to 8 hours form iPhone 4S's 6hours, it is really a huge improvement combine these latest technology in such small form factor case.

While the iPhone 5 processor is power efficient, due to the handset's increased screen resolution, and due to the need for more LED components, Apple has ended up using 8 units of 0.6t LED backlight chips for each iPhone this time around.
One of the iPhone 5 special features that is worth noting is the camera's sapphire crystal lens. The component only absorbs light better, but also protects the camera more effectively with its natural sturdy quality. A widespread utilization of such lens is likely to benefit the sapphire industry, and allow various vendors to find new business opportunities.

According to TrendForce, by the end of 2012, the iPhone 5 shipment quantity from Apple's supply chain is estimated to be between 30 million to 35 million units. For September alone, the iPhone 5 pre-orders and actual purchases may number to around 6 million. With regards to the end of 2012 and the first quarter of 2013, it is predicted that the total iPhone 5 sales figure will amount to 24 million and 30 million units, respectively.

Because Apple uses parts of the same LCD and hardware components for iPod Touch and iPhone 5, it would be interesting to see how the company would differentiate the two products from one another. It is forecasted that by the end of 2012, the total amount of iPod Touch purchases should at least be at around 5.1 million units.

Source：TrendForce