Though the exact figure of how much it costs to manufacture an iPhone is not a matter of public knowledge, a rare peek inside Apple’s factory in China granted to ABC News reporter Bill Weir provides significant clues to that number.
The rare footage inside the famous company’s manufacturing facility from 2012 was produced for “Nightline” and gave viewers insight into the lives of the laborers who mostly hand make Apple’s products.
Apple contacted Weir about this unprecedented tour some time after the company’s image was tarnished in 2010 by a shocking number of worker suicides at the Foxconn factory, one of Apple’s top Chinese suppliers, located outside of Hong Kong.
Weir was invited to tour by company reps during a first-ever audit by the Fair Labor Association. He wrote in his article for ABC News:
“In a three-golf cart convoy, both Apple and Foxconn reps took us around to a half dozen production lines in Shenzhen and Chengdu, and there were always five to six people with us as we toured the factories and dorms.”
Though Apple products are labeled “designed in California” by the Cupertino based company, the products “would be nothing without the relentless, repetitive work of hundreds of thousands of Chinese and Taiwanese workers like Liang Juan,” writes Weir. He noted that a majority of the laborers in the factory were in their late teens to twenties.
Weir reported that the workers are paid $1.78 per hour and that it takes approximately 24 hours to assemble an iPhone. Drawing from that information, industry analyst Horace H. Dediu arrived at a number of conclusions on the costs of manufacturing an Apple iPhone. Dediu wrote in his analysis that since six to eight hours are spent on the “burn-in” to install and test the software automatically, that leaves 17 hours for labor input. The math implies:
“17 hours of labor input would imply $30 labor cost per iPhone. That seems a lot higher than the industry.”
Of course, his quote does not account for costs like material, shipping or marketing. Weir went on give more exact calculations as the ABC report mentioned that there were presumably 141 labor work steps in the production of an iPhone. Dediu continued:
“For example, if each step in the human assembly process took 2 minutes then human hands will touch the iPhone for 423 minutes or about 7 hours. This would imply a labor cost for an iPhone of about $12.50.”
Though these estimates aren’t confirmed, a few intriguing observations can be made by the clues offered by ABC’s tour. According to Dediu:
“Manufacturing costs for the iPhone are likely to be much higher than comparable devices. This is partly because of the design of the product and partly because of the quality testing needed.
“Those costs are likely to range between $12.50 and $30 per unit. The iPhone manufacturing costs are likely to be twice or three times the average. Labor costs are still a small part of the overall cost structure at between 2% and 5% of sales price.”