The new iPhone SE is the most affordable iPhone yet, but is it a bargain at $399?
According to a teardown by market research firm IHS, the 16 GB model of the iPhone SE, which comes equipped with some of the same hardware used in the top-of-the-line iPhone 6S, costs Apple around $160 to build. The iPhone 6S Plus, the most expensive option available, costs $236 – an extra $76 which is equivalent to a 48 percent cost premium.
The retail price of the 6S Plus however, is $350 higher than the price of the entry-level iPhone SE. That means the customer pays an 88 percent premium for a product that is just 48 percent more expensive to build.
From Apple’s point of view, this type of price discrimination does make sense. Those interested in an entry-level iPhone are likely to be more price-sensitive than the target demographic of its top-of-the-line models. Hence the higher profit margin on the more expensive product.
The Economics Behind the iPhone SE
Description
This chart compares the manufacturing costs and retail prices of the iPhone SE and iPhone 6S Plus.
