A few weeks ago, I wrote a column in the Gdn called “iPhone is more than the sum of its parts” which looked at the peculiar way in which iSuppli, whose purpose seems mostly to be to tear stuff apart and price it using metrics nobody quite understands, had priced the iPhone’s components even before the iPhone had been released.

[iSuppli] reckons that the hardware and manufacturing costs for an 8GB model is $265.83 (£131.97) – meaning that at the retail price of $599, a whopping 55% is pure profit. All depending, of course, on the meaning of “pure” and “profit”.

In January, iSuppli had estimated – without even dismembering one – that an iPhone’s hardware and manufacturing costs were $264.85. That’s only 0.3% variation in its estimate, which means it’s either brilliant or that these analyses completely miss the point.

I concluded: The problem with these analyses is that they assume that these products fall out of a clear blue sky, their design realised by morphic resonance (where everyone suddenly understands something simultaneously), and that Apple – and other companies, for Toshiba’s creation of the miniature hard drive for the original iPod accounts for a lot of the product’s rocketing success – just sits around deciding where to buy advertising spots. That’s rather like saying that the bodies that medical students practise on have all the same content as live ones. It’s obvious that isn’t true, because when alive, those bodies had that something extra, the gestalt, which made them alive, not dead.

Now, John Gruber has laid into iSuppli:

Searching in Google News, I’ve found several dozen stories from the past month about Apple’s supposedly exorbitant iPhone margins, but not one citing a source other than iSuppli.


The total cost of a product’s physical components is not the total cost to produce the finished product. Build quality, packaging, shipping, warranty costs – none of these are taken into consideration by iSuppli.

For once, it’s nice to feel I kept ahead of Gruber on at least one part of the curve, which is more like a manifold when it comes to figuring out what is going on in the Uniappleverse.

Next, to figure out what this “product transition” thing coming up next quarter is. Except – damn, Gruber’s already been there. [Thanks, TechnicolourSquirrel for pointing out the need for a better link]