How Apple makes the iPhone 5s for the same price as the iPhone 5

The newest iPhone flagship packs advanced technology, yet costs just $2 more to build

Apple makes most of the profits in the mobile industry, and one reason is that it keeps its manufacturing costs relatively low. The iPhone 5, for example, costs less to make than its chief rival, the Samsung Galaxy S 4. But the big surprise is that the cost of making the new iPhone 5s is just $2 more than making the iPhone 5, though the iPhone 5s packs a 64-bit processor, a fingerprint scanner, and a new type of very fast memory module called LPDDR3, all of which Apple is the first to use.

IHS Suppli, which analyzes the bill-of-materials costs for a wide range of devices, estimates that the 16GB model of the iPhone 5s costs $199 to make ($191 in parts and $8 to assemble) versus $197 ($189 in parts and $8 to assemble) for the iPhone 5. To compare, a Galaxy S 4 costs $233 in parts alone.

IHS iSuppli's iPhone 5s teardown reveals that the new tech raised Apple's costs by $14.50 -- $6 more for the processor, $1.50 more for the RAM, and $7 more for the fingerprint sensor -- but Apple was able to save $12.50 on other parts, resulting in the net materials increase of just $2.

  Details 16GB 32GB 64GB
  Pricing without contract $649.00 $749.00 $849.00
Implied margin   69% 72% 74%
Total materials cost   $190.70 $200.10 $210.30
Manufacturing cost   $8.00 $8.00 $8.00
Total production cost
  $198.70 $208.10 $218.30
Flash memory
  $9.40 $18.80 $29.00
RAM 1GB LPDDR3 $11.00 $11.00 $11.00
Touchscreen 4-inch Retina display $41.00 $41.00 $41.00
Processor 64-bit A7 Processor + M7 motion processor $19.00 $19.00 $19.00
Cameras 8MP rear + 1.2MP front
$13.00 $13.00 $13.00
Cellular radio
Qualcomm MDM9615M + WTR1605L + front end $32.00 $32.00 $32.00
User interface and sensors
Includes fingerprint sensor assembly $15.00 $15.00 $15.00
Wi-Fi, Bluetooth, GPS
Murata Dual-Band Wireless-N Module $4.20 $4.20 $4.20
Power management Dialog + Qualcomm $7.50 $7.50 $7.50
Battery 3.8V ~1560mAh $3.60 $3.60 $3.60
Mechanical and electromechanical (switches and buttons
  $28.00 $28.00 $28.00
Box contents   $7.00 $7.00 $7.00

This story, "How Apple makes the iPhone 5s for the same price as the iPhone 5," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow on Twitter.