iSuppli: Apple’s 8GB iPhone 3G manufacturing and component costs are $173 per unit

“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,” Arik Hesseldahl reports for BusinessWeek. “Comparable expenses for the earlier iteration of the iPhone were about $226, iSuppli says.”

“Falling component prices let Apple add new features, including navigation tools and faster Internet download speeds, while maintaining healthy margins, say iSuppli analysts, whose estimates are preliminary,” Hesseldahl reports.

“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,” Hesseldahl reports.

MacDailyNews Note: Analyst estimates we’ve seen regarding AT&T subsidies range from $325 to $500 per unit.

Hesseldahl continues, “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.”

Much more, including which companies make some of the components that go into Apple’s iPhone 3G, here.


  1. I was waiting for iSuppli’s numbers. Their past numbers have been proven quite accurate. Some estimates have recently put component cost at $100, which struck most observers as too low.

    The only thing that’s not quite clear to me is the net profit as calculated by the author of this article. If the cost of the device is $173, and it retails for $200, that means that Apple will be receiving about $27 from the consumer, on top of the projected subsidy of $500 (or, as MDN take says, $325 to $500). Even the lowest end of that spectrum gives us $350. Is it possible that the royalties and other cost could be $70 (or much more, if subsidy is closer to $500)?

    Well, even if he is right and the net profit is $281, that would mean about $12.5 billion in net profits through the end of 2009.

    As I have said before, this is one major cash cow.

  2. Is it true that the 199 and 299 pricing for the iPhone is only for new AT&T;customers only? because if thats true then i can see a lot of people having to pay the full price for the iphone, does anyone know what the full retail price is?

  3. “Well, even if he is right and the net profit is $281, that would mean about $12.5 billion in net profits through the end of 2009.”

    and yet nokia and moto and RIM, who make far lesser phones and sell the top end for similar prices, seem unable to hire R&D;people….. or at least unable to use them.

  4. Just wait until prices drop on Flash RAM even more…especially when every laptop on the planet has a flash drive…Apple will make even more and we will get higher capacity and an iSight camera can replace and be added to the top face and eventually, true iChat videoconferencing. You will see iChat for Windows first.
    Don’t count out the iPod touch yet, as VOIP with iChat will be full blown about the time the contract with AT&T;expires. As always, bandwidth and battery are the issues.

  5. Apple are probably not charging full cost for the iPhones since the mobile companies will be buying in bulk. I would imagine they would pay 399 for the 8GB iPhone. $200 profit per unit is still over the average selling price for an iPod. Plus when mobileMe comes nline Apple will add another revenue generating business that was not there for the iPhone before.

  6. Anyone who believes that the iPhone will be subsidized by $500 is really drunk. Most mobile carriers subsidize handsets to the tune of approximately 4 months of service assuming a 24 month contract.

    This would indicate that ATT would subsidize about $250, but since this is the Jesus phone, perhaps they’ll increase that subsidy up to the previously mentioned $300.

    I don’t care about the subsidy, I want to know what the sale price to ATT will be and I guess it will be around $500 for the 8GB. If Apple can reasonably sell 30 million 3G iPhones in 2009, this adds $15B of new revenue. Considering this is a company that will produce about $30B in 2008, this obviously is a HUGE new revenue source.

    If you break it down further and assume of that $500, less about $200 for raw costs, and another $100 for other costs (selling, general, administrative), you still get to a $200 per iPhone profit or an incremental $6B of profit. The street underestimates the potential for this product by a long shot.

  7. You will need to sign a new contract, but if you are currently an ATT customer under a current contract, you will just need to sign a new contract to get the new phone.

    I wonder if you be about to sign a new contract for a crack berry, then turn around sell it on ebay and then resign to buy the iphone.

  8. That fancy iPhone box probably cost as much as 80 cents to produce. It’s a freaking beautiful box. Can anybody give a better estimate from China? If it was a regular cardboard box, it would cost around 12 cents + couple of cents for the plastic interior parts.

  9. …”you still get to a $200 per iPhone profit or an incremental $6B of profit.”

    To put it in perspective, in fiscal year 2007 (last full year of financial data), Apple’s net profit was $3.5 billion. In about four months, they will be reporting FY 2008 earnings (late October). This could be above $5B. If iPhone alone can bring $6billion in a year, can anyone imagine where the stock price will go once they report all these profits?

  10. One, iSuppli is GUESSING at the components inside the 3G iPhone. It does not have one to teardown, as of yet.

    @Predrag, Two, I think MDN’s $500 subsidy, refers to Germany where it was reported that you could buy a 3G iPhone for 1 Euro, with a very high monthly contract. If you put two and two together, you’ll see that a $200 price with $325 subsidy adds up to $525. If you look at Germany’s 1 Euro price with $500 subsidy, you get just over $500. Roughly the same. The difference is due to all the estimating and foreign exchange differences.

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