It’s going to be a couple more weeks before the 3G iPhone makes its way to the shelves of Apple stores, but thanks to analysts at iSuppli, we now have a decent idea of how much it costs Apple to make each new handset.
ISuppli’s “virtual teardown”* of the latest iPhone, which landed in my inbox today, puts the cost of an assembled 3G iPhone at $173. That’s 23 per cent lower than the best estimate of what it costs to make the existing 8GB iPhone.
For Apple, a 23 per cent drop in cost could lead to fatter margins, in spite of its decision to abandon the iPhone’s earlier unsubsidised $499 price tag in favour of a subsidised price of $199. As iSuppli writes:
“The size of the subsidy paid by the wireless carriers to Apple will be about $300 per iPhone, iSuppli estimates. That means that with subsidies from carriers, Apple will be selling the 8MB version of the second-generation iPhone to carriers at an effective price of about $499 per unit, the same as the original product.”
Some of Apple’s extra margin will be pared by loss of a share of operators’ subscription revenues, an early concession that Apple has agreed to drop with the 3G iPhone. Some estimates had put Apple’s share of subscription fees at 10 per cent for the first-generation version.
In choosing to revert to a traditional subsidy-based model for the new iPhone, operators seem to be willing to take a short term hit in hopes that service and data fees for the 3G iPhone will be higher than those for iPhone 1.0. If iSuppli’s analysis is right, Apple stands to make out well regardless.
*ISuppli analysts arrived at their $173 figure by getting on the phone with suppliers and supply chain analysts to develop an educated guess about what was likely to go into the new iPhone, and how much it was likely to cost. The final estimate did not include other costs, like the cost of software development, shipping, and packaging, iSuppli said.
