Apple packed a lot of features into the latest version of the iPhone but managed to keep a tight lid on the cost of components that go into it. Manufacturing and components for the 8-gigabyte iPhone 3G set Apple back about $173 per unit, according to an estimate by Silicon Valley-based research firm iSuppli, due to be released June 24. Comparable expenses for the earlier iteration of the iPhone were about $226, iSuppli says. Analysts scour component-price estimates to gauge profit margins on Apple's best-selling products, while keeping a close eye on which supply manufacturers have won the potentially lucrative contracts from Apple. Falling component prices let Apple (AAPL) add new features, including navigation tools and faster Internet download speeds, while maintaining healthy margins, say iSuppli analysts, whose estimates are preliminary. The iPhone 3G is due to be released July 11. "They have done a good job in using what worked well with the first one and making improvements where it mattered," iSuppli analyst Jagdish Rebello says.
Consumers who purchase the iPhone in Apple and AT&T (T) stores will pay $199 for the 8GB version, but AT&T will subsidize a big chunk of the price of each phone—an estimated $499 for each device. AT&T hopes to make up for the expense through monthly service packages but will take a bottom-line hit of 10¢ to 12¢ a share through the end of 2009. After royalties, Apple's per-unit profit on an 8GB iPhone works out to about $281, or about 56%, in keeping with the percentage on other Apple products, iSuppli says. The figure doesn't include other costs, including software development, shipping and distribution, packaging, and miscellaneous accessories included with each phone. Apple also pays fees to its Chinese manufacturing partner, Hon Hai Precision Industry.
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