iPhone 8 Build Costs Rise on Faster Chip and Cameras

Apple’s iPhone 8 and iPhone 8 Plus,have more expensive parts, but the company will still make significant profits because it raised prices for the devices, according to Bloomberg, citing research firm IHS Markit.

A base model iPhone 8 with a 4.7-inch screen and 64 gigabytes of storage includes material costs of $247.51, up from $237.94 for the 32 gigabyte base model iPhone 7 from last year, an analysis by IHS found.

However, the new device costs $699, while the previous year’s iPhone started at $649 for the 32 gigabyte version. That means the iPhone 8 bill of materials equals about 35 percent of the sales price, about the same as last year. That excludes other costs, including manufacturing, software and research and development.

The story is similar with the iPhone 8 Plus. Its components cost $288.08, including a new camera system that costs $32.50. That’s up from $270.88 in the iPhone 7 Plus, IHS estimated. The new version starts at $799, compared with $769 for last year’s model.

The most expensive components in the iPhone 8 models are the screens and mechanical enclosures, which were both upgraded. The glass backs on the new devices allow for inductive charging that requires a new controller inside that’s supplied by Broadcom Ltd. That part increases power-management costs by about $2, according to IHS.

Both models cost more to build than the last generations because of their improved cameras, larger starting storage capacities, and more advanced chips. The larger base storage capacity costs Apple $6 more per unit, while the new A11 Bionic processor costs about $5 more per unit, IHS said.