Estimate Points to Costlier iPhone 5 Components

Thinner, lighter and faster translates into more expensive–or at least that’s how one research firm views the innards of the new iPhone 5.

UBM TechInsights, known for studying the internals of mobile devices and other products by disassembling them, on Wednesday came up with a preliminary analysis in advance of taking the new handset apart. The bottom line: Apple AAPL +1.19% is paying about $167.50 for hardware components in a 16-gigabyte iPhone 5, versus $132.50 for the iPhone 4S.
But don’t fret about Apple’s profit margin on the device, which should remain healthy. Keep in mind that the company gets considerably more from carriers than the $199 that customers pay with a service contract. (Exactly how much they pay isn’t disclosed, but the unsubsidized price of the handset is expected to be $649, the same as the iPhone 4S).
Not surprisingly, one of the most dramatic jumps in component cost relates to adding the fourth-generation cellular technology known as LTE. UBM puts the cost of the necessary circuitry at $25, versus $14 in the prior iPhone.
Apple says the communication technology is crucial to reducing the new device’s size. Making a LTE-capable “world phone” that can work on many networks usually requires two chips, but the iPhone combines them into one.
“This is one of the real breakthroughs that enables the iPhone 5′s thin design,” says Bob Mansfield, an Apple senior vice president, in a company video accompanying the launch.
Allan Yogasingam, a UBM technical marketing manager, and other analysts believe the chip’s supplier is Qualcomm QCOM +0.74%–which previously displaced the former Infineon business now part of Intel in Apple products.
Another jump in estimated component cost comes from the faster Apple-designed A6 processor chip in the iPhone 5, which UBM puts at $28 compared with $21 for the A5 chip in the iPhone 4S Samsung Electronics has produced all such chips for Apple so far, but rumors abound that at some point some such chips may be manufactured by Taiwan Semiconductor Manufacturing Co ., Yogasingam says.
The switch to a high-resolution display adds about $3 to the cost to make the iPhone 5, UBM estimates.
Other likely chip suppliers for the new device, based on past patterns, include Broadcom BRCM -1.11% and Cirrus Logic CRUS -4.13%, says Doug Freedman, an analyst at RBC Capital Markets.
One issue that might gripe some consumers, Freedman says, is the fact that Apple charges $100 more for a 32-gigabyte model with a contract–while he estimates the memory chips required for the additional 10 gigabytes cost Apple less than $10. Apple is not exactly “motivating their customer base” to buy the extra storage capacity, he says.