Another year, another teardown estimating the bill of materials (BOM) for the newest Apple (NASDAQ:AAPL) iPhone. Last year's iPhone X was estimated at roughly $370 to build for a base 64 GB model. Investors often use these types of third-party BOM estimates as a way to gauge how profitable the new gadgets are, which has implications for the company's gross margin. With the iPhone XS Max priced at $1,100 to $1,450, it has the potential to be incredibly profitable. However, the device does have the largest display that Apple has ever put into an iPhone, and it also uses expensive OLED technology.

Here's how much the iPhone XS Max costs to make.

Woman using iPhone XS Max in the rain

iPhone XS Max. Image source: Apple.

Tech teardown

TechInsights has released its initial BOM estimates for a 256 GB model, which has a retail price of $1,250. The overall internal design is similar to the iPhone X, but has higher costs compared to the iPhone X. Here's a breakdown and comparison of the iPhone XS Max and iPhone Max. (Note that TechInsights' estimate for the iPhone X differs slightly from IHS Markit's estimate mentioned above.)

Component

iPhone XS Max

iPhone X

Applications processor and modems

$72

$66.22

Battery

$9

$6.46

Connectivity and sensors

$18

$17.11

Cameras

$44

$42.80

Display

$80.50

$77.27

Memory

$64.50

$45.35

Mixed signal and RF

$23

$23.31

Power management and audio

$14.50

$14.16

Other electronics

$35

$32.51

Mechanicals and housings

$58

$45.71

Test, assembly, and supporting materials

$24.50

$24.55

Total

$443

$395.44

Data source: TechInsights.

The biggest drivers of cost increases are the baseband (Apple adopted gigabit LTE this year), a larger OLED display, bigger battery, more memory, and a "significant increase in the cost of non-electronic components," according to the report. The estimates are preliminary in nature, include some assumptions, and may change slightly, TechInsights warns.

As always, these BOM estimates primarily relate to hardware components and assembly costs, and do not include other variables that ultimately affect reported gross margin, such as marketing costs, warranty and return accruals, software development costs, and amortization of manufacturing infrastructure, among others. That said, the estimates suggest that the iPhone XS Max model in question carries an approximate hardware margin of 65%.

It's worth noting that IHS Markit separately released its own estimates this morning as well. IHS Markit estimates that a 64 GB iPhone XS Max has a BOM of $390. The researcher notes that the OLED display cost is comparable to last year's iPhone X, much like TechInsights' estimates above. But that's a comparable cost for a much larger 6.5-inch OLED display instead of a 5.8-inch OLED display. That "indicates that there has been some non-trivial price erosion of the OLED displays between last year's 5.8-inch OLED display and this year's 5.8-inch version, which Apple apparently did not pass on to consumers," according to IHS Markit.