Apple iPhone X priced at $999 reflects its special retail strategy

Inside of iPhone X smartphoneThe $999 price of Apple iPhone X model with 64 GB of NAND memory, which has a bill of materials (BOM) of $370.25, is reflecting the retail strategy, according to IHS Markit.

With a starting price of $999, the iPhone X is $50 more than the previous most expensive iPhone, the 8 Plus 256 GB.

Samsung’s Galaxy S8 with 64 GB of NAND memory, which is available for a retail price of around $720, has a BOM of $302.

“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,” said Andrew Rassweiler, senior director of cost benchmarking services at IHS Markit.

Apple’s retail strategy

Apple introduced iPhone X to celebrate the 10th anniversary of the release of the original iPhone by Apple founder Steve Jobs.

Apple is following a unique pricing strategy for the iPhone X. There is difference between its starting price and that of the most expensive iPhone 8 Plus model SKU.

Apple follows a staggered pricing strategy for various iPhone models to give a tradeoff between larger and smaller displays and standard and high-density storage to its customers.

“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,” said Wayne Lam, principal analyst for mobile devices and networks at IHS Markit.

Based on the BOM cost and retail pricing, IHS Markit believes that Apple is maintaining its typical hardware margins for the iPhone X. That gross margin may increase over time as manufacturing yields improve.

The main feature on the iPhone X is Face ID, a facial recognition system that takes the place of Touch ID for unlocking the phone and authenticating payments.

Sony / Foxconn has supplied iPhone X’s IR camera. ST Microelectronics has supplied silicon. The flood illuminator is an IR emitter from Texas Instruments that’s assembled on top of an application-specific integrated circuit (ASIC) and single-photon avalanche diode (SPAD) detector from ST Microelectronics. Finisar and Philips manufacture the dot projector. IHS Markit puts the rollup BOM cost for the TrueDepth sensor cluster at $16.70.

For the iPhone X, Apple utilizes a 5.85-inch 19.5:9 aspect ratio active matrix organic light-emitting diode (AMOLED) panel with a Force Touch sensor beneath the polarizer film.

IHS Markit estimates the cost of the display module, which includes the cover glass, AMOLED panel and Force Touch sensor, at $110.