News & Analysis
Lower costs, higher profits for Apple with 3G iPhone
John Walko
6/26/2008 5:31 AM EDT
The second generation iPhone will hit the streets on July 11. The market research group says it would follow up this preliminary estimate with an actual teardown.
"At a hardware BOM and manufacturing cost of $173, the new iPhone is significantly less expensive to produce than the first-generation product, despite major improvements in the product's functionality and unique usability, due to the addition of 3G communications," , said Jagdish Rebello, director and principal analyst for iSuppli, in a statement.
"The original 8Gbyte iPhone carried a cost of $226 after component price reductions; giving the new product a 23 percent hardware cost reduction due to component price declines."
Carriers are expected to pay a subsidy of about $300 for each iPhone, depending on the territory.
Rebello notes that Apple is making a significant departure in its pricing strategy with the 3G version of the handset. "The original 2G phone was sold at an unsubsidized price of $499. However, at a retail price of $199 for the low-end 8Gbyte version of the new 3G model, wireless communications service carriers will be selling the product at a subsidized rate, using a common business model for the mobile-handset market."
In terms of margin, based on its teardown analyses, iSuppli suggests Apple' s iPod and iPhone products are typically priced about 50 percent above that of their BOM and manufacturing costs.
Typical BOM cost estimates include $22.80 for the 8Gbyte NAND flash memory, $20 for both the touch screen and display, $13.50 for the application processor, $15 for the HSDPA baseband chipset, and $3.50 for the GPS capability.
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