Apple 2.0

Covering the business that Steve Jobs built

Early teardown: iPhone 3G could cost Apple as little as $100

June 14, 2008: 1:59 PM ET

The new iPhone costs Apple considerably less than the original to make, according to a somewhat speculative analysis by Portelligent, an Austin, Texas-based teardown specialist.

David Carey, Portelligent's president, told EETimes that based on what his firm knows about the components Apple (AAPL) is using, the bill of materials for the new phone could be as low as $100. The first iPhone, by contrast, came with a BOM of $170.

"Apple's really taking the gloves off on this one," Carey told EETimes.

Although the 3G and GPS chipsets in the new model add to its cost, Apple is saving on other components, says Carey. The display that Apple paid an estimated $60 for last year, he says, may cost it half as much this year, thanks to a learning curve and engineering changes. The $100 Apple is charging for the extra memory in the $299 16GB model probably costs the company $20.

Portelligent's conclusions are only guesses, of course, because the company didn't actually have an iPhone 3G in hand to tear down.

Still the profit margin on the iPhone 3G is probably quite handsome, even by Apple's rich standards.

AT&T (T) and the other carriers could be subsidizing the $199 sale price by $200, according to Piper Jaffray's Gene Munster, which means Apple may be charging its partners as much as $399 per phone.

"If these numbers are true," writes the Yankee Group's Carl Howe, "the iPhone 3G could end up being the most profitable product Apple makes." (link)

Join the Conversation
About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

Email | @philiped | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.