Apple Expected to Achieve Manufacturing Margins of 70% with iPhone 4S

Last week, Apple  announced  a brand new version of its iPhone iPhone 4S.    The iPhone 4S features the new A5 processor, a redesigned antenna, an 8-megapixel camera that can shoot 1080p high-definition video, and supports AirPlay mirroring. People were expecting it to be the iPhone 5″ and folks weren’t expecting it to sell well. A few days after,  Reuters  reported  that AT&T is seeing an  extraordinary demandfor the new iPhone 4S, which became available for preorder at 12:01 am Pacific time on Friday, October 7th. AT&T revealed that  they have seen over 200,000 preorders for the iPhone 4S in the first 12 hours of sale.

iPhone 4S margins

Today,  Apple  announced  that the iPhone 4S sold one million preorders in its first 24 hours of availability (because they weren’t selling), setting a new record for the company. Now,  Analyst, Chris Whitmore, with Deutsche Bank  believes  that  Apple achieves a bill-of-materials cost of $170 for the 16GB iPhone 4S and $220 for the 32GB model. Whitemore also says that the new 8GB iPhone materials cost $140.

In addition, the company also  achieves a greater dollar subsidy from its carrier partners for iPhone purchases.  The 16GB iPhone 4S subsidy is estimated to be $450, while most competing devices are estimated to be less than $350.  “This suggests manufacturing margins on the iPhone 4S are 71-73% (vs. ~38% for iPod touch) and should support attractive corporate margins for AAPL for multiple quarters,” Whitmore said.

What’s interesting is that these subsidies allow Apple to reach a $199 price for the 16GB iPhone 4S with a new two-year service contract. That is at par with competing devices, and about $60 less expensive than 4G phones like the Samsung Galaxy S II ($229 with contract). I’m no analyst, but these numbers sound amazing! Pretty much this means that Apple is making more per handset against any other smartphone manufacturer, but wait! Marketshare means everything. NOT. As Kevin O’Leary would say, “It’s all about the money.”

Whitmore believes that the iPhone 4S will keep Apple the “smartphone gold standard,” and will allow it to keep the largest share of smartphone sales versus other hardware vendors. Also, the bank has suggested buying Apple’s stock, along with a targeted price of $530.

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Parth Dhebar

Parth Dhebar is a 18 year-old entrepreneur. He is the founder of Simple Reviews, a blog focused on reviewing iPhone and iPad applications. Parth is a recognized name in the industry, known for covering Apple news. He is an editor at Techie-Buzz covering news on Apple. You can follow him on Twitter @pdparticle.