The cost to build and assemble Apple’s iPhone SE runs to about $160 for a device that sells for a starting price of $399 without a contract, according to an analysis by the research firm IHS released today.
The firm conducted a teardown analysis of a 16-gigabyte version Apple’s newest phone to determine the identity of suppliers and to assess the approximate cost of the components used. The implied cost rises to about $170 for a 64GB phone, which sells for $499 without a contract, assuming a doubling of the cost of flash memory chips inside the phone.
IHS analyst Andrew Rassweiler, who supervised the teardown, suggested that the 16GB version is priced specifically to encourage consumers to opt for the 64GB version when making their buying decision. “The potential profit margin on the 16-gig phone is lower than it is on the 64-gig version,” he said. “Apple is selling the phone with the higher storage for $100 more but only about $10 in additional cost.”
The phone represents the latest attempt by Apple to offer its customers an entry-level phone in a price band lower than its mainstream phones, the iPhone 6s and 6s Plus. While Apple has often done this by continuing to sell its prior-generation phones at reduced prices, it has done this with a separate model at least once before with the iPhone 5c in 2013, now considered a rare Apple flop.
The iPhone SE contains parts that have been used in three other iPhone models, Rassweiler said. While externally it looks very much like the iPhone 5s, which was Apple’s primary phone starting in mid-2013, it contains the same chips for connecting to cellular networks as the iPhone 6 and the same Apple A9 processor as the iPhone 6s.
Chipmaker Qualcomm supplied the cellular chips, adding $15 in cost. Apple designed the A9 processor which added $22 to the final bill for parts. The chip is built by two companies: South Korea’s Samsung and Taiwan Semiconductor Manufacturing Corp.
Apple is also benefitting from reusing a prior generation’s display technology. The four-inch display, built by LG Display, cost $20, less than half the $41 it cost when Apple used it on the iPhone 5s in 2013. Apple is thought to also use Sharp and Japan Display Inc. as suppliers.
The display suggests a decision by Apple to manage the risk that the iPhone SE may not succeed in the marketplace. “It’s very much in Apple’s interest to control costs if it’s not sure this its latest approach at this market niche is going to work,” Rassweiler said. “This is a low-risk way to test the waters of a lower price band of the market.”
Here’s IHS’s always cool-to-see “exploded view” of the iPhone SE. Click to make it bigger.
This article originally appeared on Recode.net.