The True Cost of the iPhone

The True Cost of the iPhone


This video is sponsored by Brilliant! The first 200 to use the link in the description
get 20% off the annual subscription. 2018 was a rollercoaster year for Apple. In August, its stock hit two-hundred and seven
dollars, making it the first trillion dollar company in history. Then, in a dramatic few months, it lost $450
billion as Microsoft, Amazon, and Alphabet passed it by. And for the first time in fifteen years, the
company announced it would make less money than expected. The problem? Fewer people buying iPhones. The reasons are many: China’s slowing economy,
sticker shock, market saturation. But there’s also another big factor: Apple
has a new competitor. Not Samsung. Not Google. Not Huawei. …Apple! The iPhone is increasingly competing with
itself. One, because we’re all holding on to them
longer. But also because it doesn’t cost what you
think it does. As the price of an iPhone goes up, something
new is happening to its value, and it’s shaking up Apple’s entire business model. To understand what’s really going on, we
need to calculate the actual, hidden price of the iPhone. Generally speaking, there are two ways you
can get rich selling things to people: One, you can play the numbers game – Sell
a gazillion small things for a few cents profit each. Think: Gas stations, grocery stores, and,
on a good day, Amazon. Sure, you’ll probably lose money at first,
but sell a few more and now you have the power of scale. Lower costs, higher margins. Look at you! Or, you can sell a few really expensive things. Ever wondered why your town has like three
mattress stores for every one person? They’re always empty and yet somehow still
keep the lights on. Well, that’s because a few feet of foam
doesn’t cost thousands, or even hundreds, of dollars. 50, 60, 90 percent of a mattress is pure,
king-sized profit. It only takes a few sales a month to stay
in business. And, therefore, disruption. But a few companies, the really, really successful
ones, manage to do both. If you can make hundreds of dollars on each
item, sell it thousands of times an hour, and convince those same people to buy again
in 12 months, AND make us want to line up with a smile on our face for the privilege
of doing it, well, now you have a $265 billion a year business. The iPhone is, arguably, the most successful
subscription service in history. You can bet Apple will announce a new model,
or three, every September, like clockwork, just as surely as you know they’ll name
it something weird. The problem is, technology is getting really
good. So good that a lot of people are thinking
“Why do I need a new one?” Some of us care about Portrait Mode and dual
optical image stabilization, but, for most people, checking Twitter and using WeChat
is the same on the Phone XS as the X, and 8, and 7. You’re invited to the blue bubble club regardless. According to analysts, the average person
waited three years to upgrade their smartphone in twenty eighteen. This year: four. Of course, phones are a little bit weird in
this respect because so are humans. The iPhone isn’t just a tool, it’s a status
symbol. According to researchers at the University
of Chicago, the best predictors of wealth in 1992 were: owning an automatic dishwasher,
a fireplace, and oooh, a garage door opener. Hi-tech! Today, it’s owning a passport, an iPhone,
and iPad, which have a 70% chance of correctly guessing whether you have a high income. Owning the newest model signals you have a
grand of disposable income to spend every year. Add some AirPods and you won’t even hear
the sound of the money leaving your bank account. But that only works if this year’s iPhone
looks different from last, and Apple only really changes its design every other year. So, here we are. People are losing their appetite for frequent
upgrades, but Apple certainly hasn’t lost its appetite for money. Which means, of course, higher prices! Selling half as many phones isn’t such a
problem if they’re all twice as expensive. The cheaper iPhone has slowly crept from $649,
to 699, to 749, today. The more expensive XS now starts at nine ninety-nine
and goes all the way up to $1,449. Of course, that’s only if you’re lucky
enough to live in the U.S. And yet, revenue is still down. Something’s missing. To make sense of this, we need to answer the
question: How expensive is the iPhone, really? There’s plenty of back-and-forth on whether
the iPhone is, quote, worth it, but what isn’t really debated is that, in general, it’s
higher-priced than most other smartphones from most other brands. Being selective about which price segments
it sells to is pretty much written in Apple’s DNA. There’s no $300 MacBook not because it’s
impossible but because that’s just not what it’s about. And with prices going up even higher, it would
seem that’s never been more true. But sticker price isn’t the best way to
measure actual cost. In fact, it’s pretty misleading. Phones aren’t consumable. Unless you pull a Black Mirror, they’re
still worth something in a year or two. The price of something like a house accounts
for how much it’s expected to gain or lose in value. Usually, the structure itself depreciates
– styles change and wood rots, but the land underneath it appreciates. Which, side note, is why tiny houses aren’t
investments. The land they sit on is often leased, not
owned, and therefore, it only loses value. Basically, you’ve just bought a house-shaped
RV! Anyway, unless your phone was signed by the
ghost of Steve Jobs himself, it’s more like a car – its value goes down. And fast. But not all phones are the same. On average, iPhones lose 45% of their value
in the first 12 months. Samsung phones, 62%. and Google, 81. That may sound a little unfair – Apple only
makes premium devices, while Samsung’s average might be skewed by a few low-end outliers. So, let’s look at specific models. A year later, the Samsung S8 lost 58% of its
value. The Google Pixel XL, 82, and the OnePlus One
94%. Meanwhile, the iPhone 8 still lost only 45. That’s a difference of hundreds of dollars. And that’s before the record-setting iPhone
X. In September 2018, only a week before the
XS was set to be announced, the X was still worth $679. It lost only 32% of its value. Taking this into account, we can calculate
a rough Total Cost of Ownership. A thousand dollars upfront, minus 679 for
selling it a year later, gives us a real cost of $320. That’s $26 a month to always have the latest
and greatest. Now, to be fair, sticker price does matter. If next year’s iPhone cost $20,000, and
sells 12 months later for $19,900, it would be a bit disingenuous to call it a $100 phone. But, of course, resale value is still very
important. And here’s why: Because used iPhones are
now worth more, more people are selling them. Higher supply. Meanwhile, more people want the new design
but don’t necessarily want to spend a whole month’s rent. Higher demand. The result: a huge, thriving, secondary market. Amazon and eBay are flooded with iPhone X’s. Which means the new phone has to compete with
its still-pretty-good last generation. In other words, Apple is, increasingly, competing
with itself. And the better today’s iPhone, the harder
it’ll be to compete against, used, next year. Now, if you’re an investor, this all sounds
pretty bad. Like, sound-the-alarms bad. Remember, the iPhone alone accounts for 60%
its revenue. Any other company would fight this tooth and
nail. So, what’s Apple doing? Not only are they not fighting it, they’re
actually embracing it, making the iPhone last even longer. Instead of buying a whole new phone because
you can’t get 3 hours on a charge, they’ve made it easier than ever to just replace the
battery. And while Android phones often receive only
two years of software updates, iOS 12 runs on all these devices, going all the way back
to the 2013 iPhone 5s and the first iPad Air. Even better, it actually speeds up your phone,
it’s no longer a tradeoff of slow-as-molasses for new features. Or, let’s be real, pressing “Update”
so it’ll stop bothering you. All of this is awesome for you and I, but
isn’t it a terrible business idea? Not necessarily. Unless you buy from Apple.com, second-hand
phones don’t directly put any money in its pockets, but Apple has other ways of making
a profit. New or used, you still buy apps, You still
subscribe to Apple Music, Apple Video, iCloud, and so on. The iPhone is a gateway to things like the
iPad, Apple Watch, and AirPods. Even if you buy none of these things, you’re
still useful to Apple. Google, for example, pays an estimated $9
billion a year just to be your default search engine. Nine BILLION. That’s the GDP of Haiti for one switch to
be flipped. User base means control and control, ultimately,
means money. In other words, things like services can make
up for lost sales. It’s sort-of the in-app purchase model applied
to the iPhone as a whole. In the long term, Apple needs to move its
focus away from the iPhone and towards new platforms entirely. Augmented reality glasses are the future. As we saw in 2018, this transition won’t
be easy. But it’s the best, and really only path
forward. Because, the truth is, what’s happening
now is normal. Everything before was an anomaly. A very profitable one. An easy one for companies to get used to. But, still, an anomaly. From 2007 until fairly recently, the stars
were perfectly aligned – technology was moving incredibly quickly but still always left enough
to be desired for next year. The smartphone was in its growth period. But the average people buying a new phone
every year or two just isn’t sustainable. Not economically. And not environmentally. Phones should last years and years, go through
two or even three owners, and then, gracefully, be recycled. The future is one where a few of us buy the
latest phone, take good care of it, and then give it back to Apple, or sell it second-hand. The problem is, selling your phone is, kinda
the worst. How do you know when to sell? And for how much? So it ends up just sitting in a drawer somewhere. Dave, over on Here’s the Bad Version has
an idea for a solution: An app. You’d scan your phone when you buy it, tell
it how often you wanna upgrade, and then it sends you a notification when it’s the best
time to sell. I’m 100% serious when I say I think this
could be a multi-million dollar startup, someone just needs to program it. You could design the app to make predictions
about how the value of your phone might change in the future, for example, with the machine
learning course on Brilliant, which teaches you, step by step, intuitively, with its computer
science and math courses. Their Computer Science Algorithms course will
teach you the concepts behind how you might design the app to scan the iPhone’s barcode
and then generate an eBay listing when the user is ready. In my programming classes, I noticed that
I learned a lot faster when I was actually making something versus when I was just studying
arbitrarily. Plus, it’s just more fun to make something. Brilliant thinks the same way – instead of
“Here’s this new concept, now just store it in the back of your head”, its Daily
Problems give you a real, interesting problem to solve using your new skills. Use the link in the description to sign up
for free and get started today. The first 200 people to do so will also get
20% off the annual premium subscription so you can view all the Daily Problems and take
all their problem-solving courses. And after you sign up, don’t forget to go
watch Dave’s video.

100 Comments

  1. PolyMatter says:

    After you check out Brilliant: https://brilliant.org/Polymatter don’t forget to watch Dave’s excellent video here: https://youtu.be/pVsXf9wH7Q0

  2. iJayTheArtïst 28 says:

    I use to be team iPhone till I took the chance with the note 8 then realized that apple was never the future. I use to jailbreak my iPhones only to realize that on the note 8 I could just do without having to jailbreak anything 😑. If your going to pay $1000+ for a phone make sure you get your money worth unless you just want a simple phone then by all means go with apple.

  3. WickedWabbit says:

    Lol, easier than ever to change battery and software updates makes the older models faster. I died! :)))))

  4. Boofsquad says:

    Le'slave labor

  5. packetcowboy says:

    Clickbait… nothing but a 12 min commercial for Brilliant, and reported as misleading.

  6. EDDIE LEAL says:

    People do know that iPhones can be financed when you sign up with a carrier. You dont have to pay full price on the phone before you get it. That being the case Im not sure I agree that this is a status symbol. Just means your credit may be good enough to be approved for the purchase. Could be struggling to make the monthly payments afterwards.

  7. Derpy Potato says:

    And the fact that they are made in chinese sweatshops with workers being paid none for 8 hour overtime?!??!??

  8. Whiskers & Dog hair says:

    Title seems a bit misleading. I expect a $1000.00 iPhone probably (the manufacturing process) is likely about a $20.00 cost. Any other cost would be marketing and administrative. So totally monster profit on each unit.

  9. Juswhy says:

    You know all 10k dislikes are hard core apple fans

  10. CodeDive says:

    So the TL;DR is that developers haven’t come up with demanding enough applications yet

  11. Neroco 12 says:

    Note it's almost impossible to repair an Iphone or even replace it's battery safely due to the permanent glue in it as shown in many repair channels on YT also form Ifixit site

  12. SNKRhead Games says:

    Ummm I’m insulted he forgot to say it is the same on iPhone 6 too 😢

  13. SNKRhead Games says:

    Honestly we all might be upset that it was kind of a clickbait, but WOW! That advertisement he threw out of nowhere got me good! I want to download brilliant now. But your gonna need a Tesla v100 to make that ML app

  14. RetroProGamer says:

    You are all Loosers. You think you are cool because you buy a $500 Phone with a Picture of a Fruit on it? Well guess what. They cost 8 bucks to make and i pee on everyone. I have made a fortune of you chums and i invested it all in Microsoft. Now my Boyfriend Bill Gates kiss each other on a pile of your money.

  15. Jim Tamim says:

    Man youtube really like this video, it keep recommending to me.

  16. Bill Kong says:

    Yay apple is not being an asshole

  17. tata mata says:

    samsung is for me better

  18. cammandoookhalsha skyblue captain junior says:

    iphone 10 isn’t launched yet
    motherf….king logic a….hole dumbass 😂

  19. azdzad dazddaz says:

    6:54 those numbers make absolutely no sense. No phone ever lost 80/90% of its value in a year. Those phones are way below 1000 usd, which means they'd be way below 200 usd (for the pixel) if we believe your numbers. Total BS!
    94% for the One Plus, I mean are you even serious? Do you even know what you're talking about? Even with a broken battery and screen a phone doesn't lose 94% of its value…

  20. Akira says:

    nobody that i know ever sells an old phone, they are mostly broken after 2 years and somewhere in a drawer (yes mainly iphones)

  21. Raw2929 Will says:

    The reason price price price

  22. jackal monkey says:

    no wonder there is 10k dislikes for this video

  23. Zeksteve says:

    And this why apple doesn't want their products repaired and intentionally sabotage them

  24. Rafael Goes says:

    Just a comercial, iPhone cost 250 -340$

  25. 96nairrA says:

    doesn't answer the title and advertises iphone instead

  26. Emma So says:

    Where’s my iPhone6s gang!!!

  27. M Detlef says:

    And NO pair of sneakers ON THIS PLANET cost more than EIGHT DOLLARS to make,

  28. M Detlef says:

    Starbucks pays THREE CENTS for the coffee beans used in each FIVE DOLLAR cup of Joe. SUCKERS!!!!!!

  29. Tiit says:

    I'm probably the *th person to post their negative opinion about Apple's products but here it goes…
    1) They don't give you as much freedom in customizing compared to their rivals.
    2) Way to expensive for the hardware and software.
    3) Custom cables and connectors + if you don't have "the original" cable or adapter, sometimes it just flat out doesn't work (doesn't matter how expensive) while for example almost every android phone has no problem using any version of it.

    People who need to boost their ego by bragging that they have an apple product, which allegedly portrays their higher status, aren't mentally mature and actually make themselves seem less intelligent in my eyes.

  30. Jeremiah Colgan says:

    I am sad now, I want my 370 dollars iPhone X

  31. Old Soul says:

    More and more people are leaving Apple every year. And then you have those people who are stuck on the brand just like some people are stuck on Chevy or Ford regardless of how good other cars are they just will only by those types so Apple will always have their brand loyal customers who also probably invested way too much of their life into apple and now they're stuck with it.

  32. Brian • says:

    Apple should make mid range IPhones

  33. Christian Hunt says:

    What your saying is phones are beginning to go into the automobile market type. lol

  34. Dhanu Saud says:

    So what is the true cost of iPhone. What you explained is not equal to tittle.

  35. jason sharma says:

    fuck off for wasting my time

  36. LykkeLasse says:

    I have an Samsung Galaxy, I've have it since 2015, I does'nt need to buy an IPhone for 2000$ for an new iPhone every year.

  37. Lawton File says:

    What the hell is up with all the random tangents? Why are we talking about these companies marketing strategies?? Tf fr.

  38. Chuckies R Us says:

    Apple can suck my dick. 🖕 you, Tim Apple

  39. Jensoo Chaelisa says:

    Samsung,huawei,google,LG and other android phones: laughs

    (I’m an apple user switching to Samsung on September)

  40. valentinvoinea00 says:

    Help, I think I got it wrong – OnePlus one lost 94% of its value after a year? So it was worth like 18 dollars? And the pixel xl 90 dollars? Where are these phones man, I'm buying them!

  41. Ognyan Ignatov says:

    Nice try spamming the stupid commercial at the end but remember I am f..king immune!

  42. kiki lu says:

    who's still using an iphone 6?
    Me!

  43. Guyzers says:

    Why does he call Google as alphabet?

  44. Jan Devriese says:

    sustainable and ecological business model: lease your phone and company stays responsible for damage, repairs and eventually end of life 'waste'

  45. J. P. says:

    Aren’t the automatic updates by Apple used to reduce your battery life? I would imagine Apple would do this to encourage consumers to upgrade.

  46. WWPTV says:

    The cost $370.25 for the parts. It is not the cost of the iPhone! It is higher due to facilities, lights, water, a/c, labor, packaging, distribution. I have 2 iPhones 6's that are just waiting for the 7's to break. No way I am turning them in.

  47. 1966bluemax says:

    I can’t stand his squeaky voice

  48. Lost Child says:

    lol thousand dollar phone. humans are fuckin stupid

  49. Tremor Drake says:

    @PolyMatter, Why are you comparing the loss in value of oneplus One with samsung s8? Wasn't oneplus 5 released that year or something?

    other than that great video..
    should've also mentioned a bit about chinese factories that manufacture these phones and inhumane conditions that are supported/ignored by American corporations that are in agreement with them.

  50. Edward SB says:

    Dude what horrible horrible horrible video

    What is the actual cost to apple of an Iphone ? Haaaaa

  51. Kickass79950 says:

    I wouldn’t call yourself lucky to live in the us

  52. Seem to have Forgotten my name says:

    IPhones suck. The end.

  53. Aphaily W.J KONAN says:

    I really appreciate your analysis (short and pertinent) and more your videos (animation are really beautiful 😍), the english voice and accent used is perfect for easy understanding. With all that, there is the possibility to use english substitle, very practical. Thanks

  54. Clout _boi23 says:

    Most people buy a iPhone only due to the fact they want to be “cool” and shit but in reality you’re average AF🤣

  55. carlos delgado says:

    Who else expected him to say it costs more not less

  56. Obsidian says:

    Umm cost? Cost to make?… Oh no, that was just implied, but not answered. The title should have been "How much does an iPhone really cost to own". Also the only reason they hold their value is due to them not going on sale lmao. I got $450 off my Pixel 3 XL, within 3 months into it's initial release. So you can't then sell it for anywhere close to the MSRP. This just shows how Apple actually costs you more, not less.

  57. majesticgaming says:

    cause its shit ha ha not worth anywhere near the price

  58. majesticgaming says:

    200-400 where u get this information send me link i am a wholesaler your wrong

  59. Cash Banooca says:

    yeah right. makes your phone faster. it is horrible on the iPhone 6

  60. Sirios Star says:

    💤💤💤

  61. Shibs says:

    The 10k dislikes are probably all corporate apple slaves

  62. Q Laqutis says:

    iPhone owners are all sheep.

  63. Q Laqutis says:

    iPhone owners are all sheep.

  64. No Expert says:

    Owning an iPhone or an iPad and an airpods shows to me that you are locked or one of the Sheep buying their stuff just because it's apple not because it's good but just because it's apple and you don't want to leave this club of owning an apple product. an apple product was always overpriced because of the design and the name even if it's good. to me I will not buy a apple product because it will show to the others that I'm one of the Sheep even if the product is good. even the Sheep, the iPhone sheep are waking up and seeing that they have been shafted by Apple selling them same phone just rebranding it as an S model. the sheep are waking up to that they don't need a new phone every year. I've seen it in my Apple friends. 5 years ago they were like oh a new iPhone is coming out it's going to be this and this and that, and now they're like it's the same phone I don't need those extras for another thousand pounds I can use my old phone. So many years they've been fucked in the ass and it's only now they're waking up😂 is better later than never. And it doesn't matter how much it cost as long as there are people who will pay the price you show them because you got them hooked on the apple Club

  65. drsnowmon says:

    damn this video sucked, that's what you get when you learn life through internet I guess

  66. HellaDre HellaDre says:

    That Whole Foods logo was right on spot

  67. Noname Noname says:

    Nice video… but "apple makes it easier to change your battery"?? For sure not as easy as the rest of smartphone providers. And "apple upgrades accelerate the speed of your old phone"?? Check your facts here: https://www.vox.com/2017/12/22/16807056/apple-slow-iphone-batteries Looks like PolyMatter is a fanboy of apple

  68. Yegor Alexeieff says:

    You suck stop trash talking so no one can get something good. Compare htc and a iphone. Naah bro stop lying.

  69. Ahsan A says:

    This video was useless

  70. wes says:

    That was a really good segway into the sponsor.

  71. Joe Pieczynski says:

    12 minutes of my life slightly inconvenienced

  72. Tony G says:

    And just like that I'll never watch another one of your videos 😂

  73. Piotr Działak says:

    The real price of the iPhone is child labour, war in Congo and suffocating oceans.

  74. john kim says:

    Iphone became an art so now they can price it whatever they want to apart from it's actual value and people will buy it even if they price the new upcoming model as 8000$ mac book is fuck bullshit for that price and it always has been like that but it sold very successfully

  75. george kon says:

    Just selling …

  76. danny boone says:

    Your camera focus made me turn off

  77. MrGtoriginal says:

    The biggest problem facing Apple today is its own greed.

  78. Vivian Tristesse says:

    Maybe this is why they removed the headphone jack and added the screen notch. Apple is a pile of shit. What good is a phone that constantly frustrates and annoys you and presents a major inconvenience?

  79. Leo Ix says:

    That's not true.
    They have made it harder HARDER to change the battery.
    As a matter of fact there are reports of people who virtually brick their phones because apple SOFTWARE,
    software ids the batteries. AKA
    If your batter goes bad and you try to replace it without apple, your phone becomes trash.

  80. Tom 4444 says:

    Waffle

  81. Tsubaki13 says:

    People who buy apple products are really dumb 🤦🏽‍♂️

  82. John Macady says:

    Shit I clicked on this vid just hoping to see how much are the parts cost and how much it cost for an assembly but still was pretty interesting shit

  83. Chris Bourne says:

    Sound like a bunch of peasants❄️

  84. Fast Fizzi says:

    I upgrade every 3 years iPad mini 1 iPhone 4S iPhone SE iPhone 7

  85. Watching YouTube says:

    I always the last onwer of any phone i have

  86. pramod surya says:

    No one cares in india. It means no one see your video. Jai jio

  87. Dajdwazłote says:

    You pay not only for components but you pay for a function of device… That is what make phones different. Counting just price of parts is like Car price base on its weight. In general you pay for a know-how…

  88. siroliver0 says:

    You have no clue what are you talking about?Back in time when apple made they own hardware PC and phones quality was good now they are using Samsung all bunch of Chinese parts and making phones in mexico and china the quality is shit.Samsung keeps the value mach better also you have 600 billion options and you don't have to pay every month for service for each app tag another $400-800 you use.my galaxy s5 will beat all your apple phones in camera, speed, boot time battery storage you name it.You are blind brainwashed Apple puppet that has no clue about real world.Apple is become worst company in customer service 35 of my customers laptops almost got on fire doe the faulty power jack.It will cost you 2000$ to fix things in warranty they have no parts and make you wait.Only uneducated morons buy Apple you think you are different unique but in reality you are just another idiot that thinks he is special and all of you have apple so not so special anymore.Only bad thing is that Apple started giving away free pc to the schools and a lot of kids got use to it.

  89. Corvo Delinin says:

    I expected the costs of the phone but only remember that Google pays to have people use their search engine with 9 billion USD

  90. America is the best says:

    This is why they slow down their phones with updates. iPhone 7 has been feeling that.

  91. Jordan says:

    The true cost of this video: 13 minutes of your life you will never get back to hear a dude rambling about everything but the true cost of the iPhone. "iPhone is the true competitor of iPhone". lmao.

  92. Moi Hoi says:

    True. I knew that 10 years ago, in finnland🤦🏻‍♂️
    I dont need complicated and expensive brand, I just need a phone. Thats huawei or samsung. Few years ago one1 came up and simple the best of all. Because its desing to be only one, not that expensive commercial apple with very fucking weird system

  93. jax rammus says:

    iPhones are great at finding rich people because only a dumbass with money to burn, or worse a retard without the money to burn would ever buy one.

  94. siroliver0 says:

    https://www.youtube.com/watch?v=o2_SZ4tfLns

  95. Jazmine media says:

    dude i bought a 300$ samsung and kept it for 3 years, why would u pay so much and they all look the same?

  96. siroliver0 says:

    https://www.youtube.com/watch?v=MKJjLwMUPJI

  97. Jdog MPD says:

    The iPhone might not be but the Mac pro stand is

  98. ShakespeareCafe says:

    I would argue owning an iPhone, iPad, Air Pods doesn't make you appear rich, but poor after footing the bill. I know cause I own all three…

  99. goldtitan 337 says:

    Alot less than what there worth

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