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Battling Apple's iPhone Isn't Cheap

Going head to head against Apple and its 3G iPhone isn't cheap.

In its quest to knock the high-flying iPhone off its perch, Research in Motion (NASDAQ: RIMM) spruced up components and design which led to higher costs for its latest release, the BlackBerry Storm 9530.

An iSuppli report released this week, estimates the Storm costs $202.89 in>materials and manufacturing.

That's $28.56 more than iSuppli says Apple's (NASDAQ: AAPL) $174.33 iPhone direct bill of materials (BOM) cost, and about $32 more than it estimates itcost RIM to make its BlackBerry Bold.

The news comes as consumers pull back on spending in today's recession. Yet wireless carriers are reaping big financial rewards thanks to data services revenues tied to snazzy full-featured smartphone offerings.

The Storm and iPhone both retail for $199 with two-year data services plans while the Bold carries a $299 price tag for data plan subscribers.

Verizon Wireless is the exclusive carrier for the Storm. AT&T is the exclusive carrier for the iPhone and Bold in the U.S.

RIM told InternetNews.com that carrier partners set BlackBerry prices and declined comment on the new iSuppli report.

AT&T has previously stated it pays Apple $300 for every iPhone 3G it sells. Calls to AT&T on what it pays RIM per Bold handset were not returned by press time. Verizon Wireless declined comment on what it pays RIM for Storm handsets.

Apple reportedly sold 13.7 million iPhones in 2008. Verizon Wireless told InternetNews.com today it has sold 1 million Storm handsets so far.

The Storm, in addition to being a bit more expensive to build than the iPhone, is also more complex in component count, noted the iSuppli report.

Much of that is tied to the fact that Storm brought a slew of 'firsts' to the BlackBerry lineup when it debuted in late November.

It's the first BlackBerry to feature a touchscreen. The handset also boasts 3G capability, the second RIM device to offer 3G, and lots of memory along with the familiar secure messaging platform.

The Storm uses a Qualcomm MSM7600 baseband processor, a first for a RIM product, according to iSuppli, as the vendor has used Marvell chips in the past.

The Qualcomm part provides support for the EvDO air standard, making it a more of a worldwide phone, according to iSuppli. It also eliminates the need for multiple basebands and radio frequency chains, which saves RIM some cost.

In the breakdown, the MSM7600 accounted for 17.2 percent of the total component price tag. The touchscreen cost was $15.50, and the 8GB MicroSD memory card cost $11.50.

The new features provided by the components, however, didn't seem to impress reviewers or buyers.

In fact complaints prompted exclusive carrier Verizon Wireless to push out a software upgrade shortly after launch that improved touchscreen accuracy and navigation.

iSuppli’s teardown analysis covers all parts and manufacturing costs, but excludes other expenses, including Intellectual Property (IP), royalties and licensing fees, software, shipping, logistics, marketing and other channel costs.

In its iPhone breakdown report last year, iSuppli said the original 8GB iPhone, which debuted in June, 2007, cost Apple about $226 to make.

Apple has since benefited from component price declines for a 23 percent reduction in its 3G iPhone hardware costs, said iSuppli. The 3G device arrived last summer.

The 3G iPhone's top five most expensive components are the 8GB NAND flash memory ($22), an improved touchscreen display ($20), application processor ($13.50) and digital baseband chip with High-Speed Download Packet Access, known as HSDPA. ($15).

iSuppli's Bold report revealed a direct BOM cost of $158.16 and manufacturing cost of $11.25 for a total of $169.41.

The Bold's component costs included a processor (the highest-priced device part at $34.34), keypad assembly (the cheapest piece at $1.85), camera ($9.90) and display ($16).