BlackBerry Torch 9800 versus iPhone 4 - which is more profitable?

iPhone maker Apple Inc. (NASDAQ.AAPL) may be the richest technology company in the world but BlackBerry maker Research In Motion (TSE.RIM) could be making more profit by selling its latest smartphone Torch 9800 than Apple is making by selling iPhone 4, suggests industry research firm iSuppli.

Though Apple's iPhone 4 (16GB model) and RIM's Torch 9800 are retailing for the same price - $199 - it actually costs RIM less to make Torch 9800 than it does to Apple to make iPhone 4, according to iSuppli, which has calculated the Bill of Materials (BOM) for making each device. The calculation does not include labor, shipping, advertising, software and patents costs.

Let us compare the two:

 Cost of making the iPhone 4  

According to iSuppli, which conducted a teardown analysis to determine the component price of iPhone 4, the device costs Apple only $187.51 to make.

A teardown has revealed that the iPhone 4's much-talked-about retina display or the super-high resolution LCD screen is the single most expensive component, costing $28.50 and accounting for 15.2 percent of the product's total BOM.

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Though the manufacturer's name was not labeled on the display, iSuppli feels the most likely supplier is LG Display or Toshiba Mobile Display.

The second most expensive component in the iPhone 4 is the NAND-type flash memory. In the device torn down by iSuppli, a 16GB Samsung-made NAND was found. It costs $27 and accounts for 14.4 percent of the total BOM, iSuppli said.

Samsung also made the third and fifth most costly component of the iPhone 4 - the 4Gbits of mobile Double Data Rate (DDR) SDRAM, priced at $13.80, and the A4 applications processor (by using Apple's Intellectual Property), which, iSuppli estimates, costs Apple $10.75.

Infineon Technologies AG is the supplier of the fourth most expensive component - the baseband Integrated Circuit - which costs $11.72.

Prices of other components range from $10 (the capacitive touchscreen) to $0.70 (the e-compass).

 Cost of making the BlackBerry Torch 9800  

According to iSuppli, RIM spent only $171.05 to make Torch 9800. Here's how they arrived at the figure:

As in the case of the iPhone 4, the single most expensive component that went into making the Torch 9800 is the 3.2-inch diagonal TFT LCD and touchscreen display (480x360 pixel resolution) which costs $34.85 or 20.4 percent of the device's BOM. iSuppli could not identify the manufacturer but said it could be either Samsung Mobile Display, Toshiba Mobile Display or Sharp who RIM has engaged in the past.

The second most expensive component, according to iSuppli is the memory subsystem of the Torch 9800. It costs $34.25 or 20 percent of the BOM.

In the torn down Torch 9800, iSuppli found that Samsung supplied the a 4Gbyte eMMC NAND flash memory device, plus an 8Gbit NAND flash and 4Gbit Mobile Double Data Rate (DDR) SDRAM while SanDisk Corp. supplied a 4Gbyte removable Micro SD memory card.

The mechanical/electromechanical portions of the Torch 9800, including the printed circuit boards and the enclosure plastics and metals, came in third at an estimated cost of $23.35, iSuppli said.

The fourth and fifth most expensive components in the Torch 9800 are the applications processor/baseband section at $15 and the RF transceiver and power amplifier section, at $13.90.

Marvell Technology Group, Infineon Technologies AG and Renesas Electronics Corp. are the manufacturers of the components.

Other components of the Torch 9800 are priced between $12.40 (the user interface electronics subsection) and $4.90 (the power management system).

The teardown suggests that though the Torch 9800 and the iPhone 4 are being sold for the same price, it costs RIM less to make the Torch. In other words, RIM could be making more profit by selling the Torch 9800 than Apple could be making by selling iPhone 4 (16GB model).

However, let us not forget that the BOM comparison is based on the 16GB iPhone 4 and not the more popular 32GB iPhone 4. Even if the higher capacity NAND flash memory adds $50 (which is doubtful) to Apple's BOM, the company still stands to make a neat profit - probably even more than RIM - by selling the 32GB iPhone 4 as it retails for at least $100 more.

Also there's a strong demand for the iPhone 4. Apple sold over 1.7 million iPhone 4s within the first three days of its debut in June, smashing iPhone's previous sale records, and the device is still selling well, Antennagate notwithstanding.

On the other hand, there's a healthy demand for the Torch 9800 but can it break or even rival iPhone 4's sales record? Very unlikely.

No wonder, Apple is content with a higher BOM than RIM though both Torch 9800 and iPhone 4 are retailing at the same price.