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How the Apple iPhone 5S AND iPhone 5C are making more profits for Apple than ever and why the iPhone 5 was discontinued

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iphone graph

Profits are calculated on top of the cost price and with regards to the official selling price

Ever since Apple introduced their new iPhones almost a month ago, one of the biggest questions people have been asking is why Apple would introduce the iPhone 5C if it wasn’t the long rumoured, and still missing, ‘cheap’ iPhone, but merely an iPhone 5 replacement? Then there is a question as to what kind of profits Apple investors can look forward to seeing. Well, I have the answers right here. I did some digging and some in depth analyses and came to some darn good conclusions, which shows us just how clever those bigwigs at Apple headquarters are.

For years now we have seen the iPhone taken apart each year after the latest variant is launched, the cost of the parts and manufacturing is calculated and we are presented with a not-so-shocking truth; Apple makes a killing on their iPhone line. The original iPhone, launched in 2007, was the company’s most expensive model to make and least profitable, but the iPhone 4S was the exact opposite, it’s Apple’s most profitable iPhone to date, and most likely the best selling unit too. The newly launched iPhone 5S, which has quite a lot of improvements than it’s given credit for, will be the company’s second most profitable iPhone to date, at least if their profit margins are taken into account.

In 2011, a day prior to the company’s iconic leader’s passing, when the company launched the Apple iPhone 4S, they raised the asking price for the base model of their latest flagship at the time by $50 to $649. The higher asking price and low cost price of $196 ensured that the iPhone 4S would rake in $453 of clean profit for every unit sold, which is quite a feat. Even six months after the iPhone 5′s launch, the iPhone 4S accounted for 33% of iPhones sold by the company each quarter, and after the iPhone 5S’ announcement, the iPhone 4S will continue noteworthy sales thanks to its even lower price tag.

Interestingly enough, the iPhone 5S will be the company’s second most profitable device to date, with profits of $450 per device. The iPhone 5S, despite featuring quite a few enhancements including a new 64-bit SoC, a larger battery and a fingerprint sensor, costs $8 less to manufacture than its predecessor, the iPhone 5, did at just $199. With the many similarities between the iPhone 5 and iPhone 5S, the company needed to ensure higher sales on its flagship, while still offering a more affordable device above the now entry level iPhone 4S. The iPhone 5 was expensive to make and would certainly be more bang for buck than the iPhone 5S, thus it had to go.

Apple’s answer was the iPhone 5C. A thicker, plastic-covered, improved version of the iPhone 5. Its colours would make it appealing, but not too appealing as to steal the show from the iPhone 5S. At $173, the iPhone 5C would be significantly more affordable to manufacture than the iPhone 5 and it would not be as appealing to consumers as the iPhone 5 would have been if put next to the iPhone 5S. It should also have raked in about $20 more profit per device than the iPhone 5 would have, had it not been replaced by the iPhone 5C. Apple would make an estimated $376 on every iPhone 5C sold, while the iPhone 5S would still rake in loads of cash more and still $4 more profit than the Original iPhone made when it launched.

The Apple iPhone 4S will most likely still garner a fair amount of attention, especially since its price has been slashed to $0 on contract in the US, and Apple will still make an estimated profit of $250 on the device. The iPhone 5C will take its place as the second choice for iPhone buyers, and rake in more than enough profits if it can obtain 30% of all iPhone sales each quarter for the next year or so, until it gets a price cut, making it once of the biggest bargains this century. The iPhone 5C is also meant to bridge the gap that the iPhone 4S’ success created after the iPhone 5′s launch, as Apple needs users to adopt its new larger screens, and different aspect ratios, to keep developers, as well as their own, lives a bit simpler.

So, the iPhone 5S is still one of the most profitable devices Cupertino has spewed out, ever, and it is likely to make quite a lot of profit if its success continues on the same path as its uber successful launch weekend showed. The introduction of the Gold iPhone should satisfy the need for iPhone users that want some brightening up, that is if they aren’t heading for the colourful iPhone 5C. The discontinuation of the iPhone 5 ensures that the company doesn’t compete with their latest flagship, while still offering users enhanced features and something unique. The iPhone 5C is actually a better deal as it features a larger battery, more LTE bands and of course better iOS 7 performance over what the iPhone 5 would have, despite a plastic body.

Say what you will, Apple’s new flagship is a hefty improvement. The iPhone 5S is leading benchmarks, which ironically enough Samsung has been caught cheating on twice already. Performance isn’t the only enhancement though, the iPhone 5S packs an improved camera, and no megapixels don’t count, not even in your case Nokia, a larger battery, better screen protection, improved connectivity capabilities and some extra battery juice. Even if it makes Apple a ton of cash, it’s still worth the tons of cash we’re forking out to afford one…

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Written by Dion Guillaume

October 2nd, 2013 at 2:45 pm