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iPhone X Rings Up $370 in Materials Cost, So Why Does It Cost You $999?

The $999 64 GB Apple Inc. (NASDAQ: AAPL) iPhone X costs the company $370.25 in component parts, based on a preliminary teardown of the new phone by engineers at IHS Markit. The entry-level iPhone X costs $50 more than the previously most expensive Apple smartphone, the 256 GB iPhone 8 Plus.

According IHS Markit’s engineers, the Samsung Galaxy S8 with 64 GB of NAND memory has a bill of materials cost of $302 and retails for $720. The iPhone X also uses NAND flash memory.

IHS Markit senior director of cost benchmarking services, Andrew Rassweiler, said:

The iPhone X is the most expensive iPhone ever made, and it has the highest retail price tag of comparable flagship phones, catapulting the smartphone industry to an entirely new price point. While the iPhone X represents Apple’s biggest step forward in design since the iPhone’s debut in 2007, its underlying architecture is analogous to the iPhone 8 Plus. Both models share platform-common components, but the X’s superior screen and TrueDepth sensing set the phone apart and contribute to its higher cost.

The iPhone X sports a new Face ID system that uses an infrared (IR) camera supplied by Sony/Foxconn with a processor from ST Microelectronics. Texas Instruments supplies the IR flood illuminator on top of another piece of silicon from ST Micro. Total cost of the assembly is $16.70.

The active matrix organic light-emitting diode (AMOLED) panel with the Force Touch sensor and cover glass costs $110. David Hsieh, another IHS Markit director, said, “Apple’s use of AMOLED in its flagship smartphone is expected to evolve in the coming years — first by the removal of the notch in the display, and then to a smartphone/tablet combo form factor.”

And the high starting price for the iPhone X? That’s by design according to IHS Markit analyst Wayne Lam:

Typically, Apple utilizes a staggered pricing strategy between various models to give consumers a tradeoff between larger and smaller displays and standard and high-density storage. With the iPhone X, however, Apple appears to have set an aspirational starting price that suggests its flagship is intended for an even more premium class of smartphones.

More succinctly, if you want the top-of-the-line smartphone from the world’s best designer and maker of the devices, you had better prepared to pay up. Most folks will pay up and Apple knows it.