Apple profit margin 'likely shrunk' as A16 chip in iPhone 14 Pro costs over twice as much as A15

The new A16 Bionic chip that Apple used in the iPhone 14 Pro and iPhone 14 Pro Max costs $110 to produce, which makes it approximately 2.5 times more expensive than the A15 chip in iPhone 13 Pro models of the last year, Nikkei Asia report said.

The main reason for the A16 chip's higher cost is likely due to its TSMC's 4nm process compared to the last year's 5nm chip.

Chips in the iPhone models could continue to get more expensive as rumors say miniaturization will be continuing and the next A17 chip in iPhone 15 Pro models will use TSMC's 3nm process.

Moreover, DigiTimes reported this week that TSMC is expecting to begin volume production of 2nm chips in 2025.

Nikkei, working together with Formalhaut Techno Solutions, a Japanese research firm specialized in reverse engineering and bill-of-materials analysis, has found that the average production cost of the devices increased by around 20% compared to each phone's equivalent previous generation models.

The report also says that, taking into account the fact that Apple did not raise the prices for its latest iPhone devices in the US and certain other markets, the higher production costs suggest that the company's profit margins have "likely shrunk."

It is also worth noting that the prices actually did increase in key markets such as the UK, Japan, and Australia amid a strong US dollar compared to other currencies.