The Biz of Coding

How Much Does an iPhone 3G Cost Apple to Manufacture?

by Ujwal Tickoo on June 25th, 2008

iSuppli estimates the cost for iPhone 3G (8GB) for Apple to be $179. At this cost and with a clever business Model, Apple will not only make solid profits but it will give a lot of pain to competition - NOKIA, HTC.

With the iPhone 3G Apple (AAPL) is changing its business Model from revenue sharing to a hardware subsidy. With a retail price of $199 Operators will provide a subsidy of $ 300 and the iPhone 3G will be much more profitable for Apple than previous versions. PC World estimates that competition will find it hard to beat Apple on Price "Similar products from rivals cost much more. Taiwan's…HTC…has priced the Touch Diamond at NT$23,900 (US$785) for its home market, while Nokia estimates its new N96 smartphone will retail for €550 (US$855).":

With subsidies from carriers, Apple will be selling the 8Mbyte version of the second-generation iPhone to carriers at an effective price of about $499 per unit, the same as the original product.

For the first version of the iPhone, Apple was given a portion of the wireless carriers’ revenue from service subscriptions. With the second-generation version, Apple is not garnering any service revenue, making it more imperative that the company cut a profit on the actual hardware through the carrier subsidies.

…iSuppli has observed that Apple’s iPod and iPhone products typically are priced about 50 percent more than their BOM and manufacturing costs. With the new iPhone sold at a price of $199 and the estimated subsidy of $300, Apple will achieve an even higher BOM/manufacturing margin

In a earlier popular post "How Much Does an iPod Cost Apple to Manufacture" I had supplied iSuppli's figures for previous generation iPhone's and iPods as:

• iPhone 4 GB Retail Price $499 Cost of Components $ 230
• iPhone 8 GB Retail Price $599 Cost of Components $ 265
• Video iPod 30 GB Retail Price $299 Cost of Components $ 151
• 2nd Gen iPod 4 GB Retail Price $199 Cost of Components $ 72.24

Apple has not only managed to reduce costs, but according to iSuppli future iPhone's would get progressively cheaper:

The BOM/manufacturing cost of the second-generation iPhone will decrease to $148 in 2009, down 37 percent from $173 in 2008, according to data from iSuppli’s Mobile Handset Cost Model (MHCM). “If the 3G iPhone design is unchanged, the cost will decline to $126 in 2012”

Here is the BOM estimate of iSuppli for iPhone 3G 8 GB

POSTED IN: Apple