iPhone 16 Series Production Costs Rise, but Apple Still Forecasts Strong Sales

iPhone 16 Series Production Costs Rise, but Apple Still Forecasts Strong SalesAnalysts report that the iPhone 16 series is experiencing a few dollars higher production costs compared to its iPhone 15 counterparts, driven by rising component costs. This cost increase isn't entirely unexpected, as the iPhone 15 Pro Max also saw its production cost rise by approximately 12% compared to its predecessor, the iPhone 14

iPhone 16 Series Production Costs Rise, but Apple Still Forecasts Strong Sales

Analysts report that the iPhone 16 series is experiencing a few dollars higher production costs compared to its iPhone 15 counterparts, driven by rising component costs. This cost increase isn't entirely unexpected, as the iPhone 15 Pro Max also saw its production cost rise by approximately 12% compared to its predecessor, the iPhone 14.

Data from TDCowen reveals that the bill of materials (BOM) for a 256GB iPhone 16 Pro Max is around $485, encompassing components, packaging, and assembly processes. In contrast, the iPhone 15 Pro Max had a BOM of $453, making the new model about $32 more expensive. Non-Pro models also see price hikes, with the iPhone 16 BOM reaching $416, while the iPhone 15s BOM sits at $395, a difference of roughly $21 per device.

For the iPhone 16 Pro Max, the priciest components are the display and rear camera module, both priced at $80 and contributing 16% to the total cost. The camera is also the component experiencing the largest price jump compared to the previous generation, with a $10 increase. While the memory and storage capacity on both Pro Max iterations remain unchanged, their cost increase is the most significant. Both saw a $5 rise, reaching $17 and $22 respectively.

In the iPhone 16's BOM, the display is the most expensive component, coming in at $65 and accounting for 16% of the total BOM. Similarly, the biggest price increase in terms of cost is seen in the memory, jumping from $9 for 6GB in the iPhone 15 to $17 for 8GB. Other significant cost changes in the iPhone 16 BOM include: the A18, priced at $45 compared to the A16 at $35. Additionally, the addition of camera controls and action buttons has raised the price of sensors by $3.

Despite these rising costs, analysts remain optimistic about the sales of the iPhone 16 series. TDCowen's predictions for iPhone production in the third quarter remain unchanged at 45 million units, and the fourth quarter is projected to produce 80 million units. The iPhone 16 series is expected to account for approximately 65 million units. Analysts believe that the iPhone 16 Pro and Pro Max will represent a higher proportion of sales in the latter half of the year compared to the iPhone 15. The iPhone 16 Pro and Max are purportedly expected to make up 66% of the mix, a bump from the 58% that the iPhone 15 Pro and Max held last year.

However, analysts also point out a softening sentiment in the market. Apple Intelligence is showing weakness, partly due to the several months of launch. There are also competitive headwinds in the Chinese market, with the foldable Huawei Mate XT faring better than anticipated. Surveys indicate that analysts believe iPhone sales in China held steady in July at 24.2 million units, representing a 30% year-over-year increase. However, market demand has softened starting in September.

Despite these challenges, Apple still anticipates success for the iPhone 16 series, driven by its enhanced performance and capabilities. Moreover, the high sales proportion projected for the iPhone 16 Pro and Pro Max suggests a continued strong demand for high-end models.