The Economics of the iPhone

What Are the Economics of the iPhone?

It’s estimated that 1.38 billion people around the world own an iPhone in 2025. About 155 million of them are in the U.S. That’s a market share of about 23% globally, and 59% in the U.S.

The iPhone lineup from Apple Inc. (AAPL) currently includes the iPhone 16, iPhone 16 Pro, iPhone 15, iPhone 14, and iPhone SE, at prices ranging from $599 to $999.

Apple’s greatest product may also be its greatest curse. The iPhone has been the company’s biggest money-maker, accounting for nearly two-thirds of its sales of products and services in its fiscal 2024 year. Much of the company’s efforts have been focused on creating ancillary services and products that complement the iPhone.

With all of the products and services intertwined, it’s challenging for investors to determine just how much money Apple earns from iPhone sales.

Key Takeaways

• iPhone sales made up about two-thirds of Apple’s total 2024 sales.
• Apple shipped 151.3 million iPhones in the first nine months of 2024, identical to the number delivered in the previous period.
• iPhone’s global market share is about 23%.

Understanding How the iPhone Makes Money

Investors and analysts cannot readily calculate how much profit Apple earns on each product as its reports include only revenue by product. The table below displays the company’s products and services revenues for the past three years. The data was pulled from the company’s 10K report filed in September 2024.

• Apple reported $301 billion in net sales of products and services for its fiscal year 2024. That’s down from $383 billion in 2023 and $394 billion in 2022. Note that Apple sales move in tandem with new product launches. The iPhone 16e and the iPad Air5 were released in 2022.
• The iPhone generated $201.1 billion in sales and services in 2024, meaning the iPhone represented about two-thirds of the company’s total sales for the year.
• That iPhone sales number is virtually flat from the previous year but down from about $205.5 billion in 2022.

Apple is one of the most valuable companies to date, yet most of its revenue depends on a single product line.

Services and Wearables

Apple has been actively expanding its services business in recent years, which includes its App Store, Apple Music, and Apple T.V. The company has also grown its wearables business such as the AirPods.

It’s important to consider that the company’s services and wearables business is an extension of its iPhone and other hardware products. Its businesses for services and wearables are an offshoot of its hardware business.

The company’s sales of wearables and accessories totaled $37.0 billion in 2024, down 7% from the previous years. Services revenue $96.1 billion, up 13% from 2023.

The ancillary businesses would not be possible without the company’s hardware products, including the iPhone. That makes it harder to pinpoint the overall profitability of the iPhone.

What Does it Cost to Build an iPhone?

Apple’s sourcing model is one of the reasons it generates attractive profit margins. The company makes very little of its products. Components and materials are purchased from sources around the globe and sometimes even from direct competitors such as Samsung.

This process significantly lowers capital expenses for Apple, saves the consumer a bit of money, and lets shareholders benefit from the difference.

The iPhone lineup in 2025 has retail prices ranging from $599 to $999.

It’s estimated that the components of an iPhone cost from $400 to $700 per unit depending on the model. That figure does not include the costs of marketing, distribution, or software development. It also does not take into account corporate and retail sales costs.  

How the iPhone Helps the Economy

Apple claims that the company has created more than two million jobs across all 50 states.

That includes 80,000 company employees, 450,000 jobs at suppliers, and 1.5 million jobs “attributable to the App Store ecosystem.” The growth has been exponential since introduction of the iPhone in 2007.

What New Products Is Apple Releasing in 2025?

There are facts and there are rumors. Let’s stick to the facts:

• The iPhone 16e is available for pre-order, priced from $599.
• An Apple smart home display, which looks like a 6-inch iPad to hang on your wall, is expected to be released in the second half of 2025.
• An iPhone 17 Pro is in the pipeline and may be released in the second half of 2025.

Is Apple the World’s Biggest Company?

Apple is the world’s biggest company by market capitalization. It has been since Aug. 2, 2018, when it became the first company to pass the $1 trillion in market value. As of Feb. 23, 2025, Apple’s market cap is $3.69 trillion.

Are There Risks to Investing in Apple Now?

As for any investment, there are potential risks and rewards to buying Apple stock.

Since early 2007 when the first iPhone was released, the stock has climbed from $3 or $4 a share to about $227 in late 2024.

Is the market for the iPhone limitless? Will Apple come up with a new product that rivals the iPhone in popularity? These are among the issues to consider.

The Bottom Line

Global demand for the iPhone lineup and its many related products have made Apple the world’s biggest company by market capitalization. Its dependance on the iPhone as a driver for sales worries some analysts. They don’t know how long Apple can sustain this level of demand for its leading product, or whether it can pull off another product introduction that has its seismic effect on the market.