"It's a pricey piece of hardware. The $220 bill of materials is definitely at the high end of smart phones today," said David Carey, president of Portelligent, a teardown service focused on mobile phones and other consumer products.

While the iPhone's costs are high, its profits will apparently not be as great as those of some of its competitors. Portelligent estimates typical smart phones component costs range from $130-180 and some of the handsets sell at or even above the iPhone's $500-600 price tags.

The iPhone's touch-sensitive 480x320 display is one of its most pricey parts at about $60. Memory is also a big expense.

Many smart phones come with about 128 Mbytes of flash and a slot for users to add 2 Gbyte flash cards as needed. The iPhone comes in models with 4 or 8 Gbytes flash built in and no external memory slot.

About 700 Mbytes of the iPhone's flash is reserved for Apple's operating system and applications. The phone's applications processor has an additional 128 Mbytes of SDRAM memory dedicated to CPU working space.

The $220 cost does not include Apple's no doubt huge software development effort to port its operating system and develop applications and other code needed for the handset.

Opening up the simple-looking handset, Carey said he found "an extraordinary level of sophistication and complexity" in its mechanical design." He called the contrast an example of Apple's "outside in" philosophy of creating feature-rich products that look simple but involve significant internal complexity.

In its effort to pack the features of a phone, iPod and mobile Web browser into a small and sleek case, Apple drove an unusually high degree of mechanical complexity, forcing greater assembly costs. Carey estimated the iPhone has a density of about 1.91 grams per cubic centimeter, compared to rivals at about 1.14.

"There isn't much unused space in this design," Carey said.

For example, the device uses more than 20 screws to attach three separate circuit boards to the case, compared to about four screws in many handsets. To maintain a sleek look, some seams are glued shut.

Unlike competing handsets, the iPhone offers users no access to the battery or other internals. The access doors can eat up 0.5-1.0 mm of space, Carey said.

In addition, unneeded connectors were removed, saving more room. The battery for example, has wiring soldered into place.

"This wasn't designed to be easy to repair, and it's definitely more expensive to get assembled," Carey said.

The iPhone does not bear the AT&T name or logo despite the fact that the carrier typically co-brands handsets that run on its network. In this and other ways, Apple is "not following the rules of the rest of the cellphone industry," Carey concluded.