New iPhone 3G S Costs $179 to Make: iSuppli

iSupply iPhone 3G S teardown
iSuppli’s iPhone 3G S teardown.
Source: iSuppli. Click to enlarge.

It cost Apple $178.96 to make its newest iPhone, the 3G S, according to a teardown analysis by research firm iSuppli.

The 16GB iPhone retails in the U.S. for $199 with a two-year contract with AT&T, Apple’s (NASDAQ: AAPL) exclusive carrier.

The iSuppli analysis is based on its own physical deconstruction of the 16GB device and the firm’s estimates of component costs.

Like most manufacturers, Apple doesn’t release costs or detailed component information, which can sometimes make it hard to identify parts that aren’t always labeled or for which the cost isn’t readily available.

iSuppli said the 3G S uses many of the same components as the earlier 3G model — which the firm earlier estimated cost Apple $174.33 to build — and was able to take advantage of a drop in some component parts.

“From a component and design perspective, there’s also a great deal of similarity between the 3G and the 3G S,” Andrew Rassweiler, director and principal analyst of teardown services at iSuppli, said in a statement. “By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost.

“Nonetheless, there are a few key differences in component selection compared to the iPhone 3G introduced a year ago,” he added.

Among the changes noted by iSuppli is the use of a Broadcom (NASDAQ: BRCM) single-chip Bluetooth/FM/WLAN device that it said costs $5.95. iSuppli said Apple is capitalizing on a trend among chip suppliers toward higher levels of integration, in this case putting these multiple functions into one chip.

Previously, to implement these functions, the 3G employed two devices: a Marvell Technology Group WLAN chip and a Cambridge Silicon Radio (CSR) Bluetooth Integrated Circuit (IC).

The need for speed and real costs

At the iPhone 3G S’s debut earlier this month that kicked off Apple’s WWDC’s developer conference, Apple execs touted the new phone’s faster performance.

iSuppli said much of that speed improvement can be attributed to a faster 600 MHz version of the ARM RISC processor, replacing the 400 MHz version used in the 3G.

According to iSuppli, the ARM processor is supplied by Samsung.

While the inside dope on what it actually costs companies to make devices like the iPhone can be revealing, iSuppli readily admits that its estimates don’t include a number of other expenses incurred by Apple, including such things as marketing and development costs as well as support.

The retail $199 price for the 16 GB version of the 3G S is well below the actual total cost of bringing the device to market, analyst Jack Gold said.

[cob:Special_Report]”The bill of materials is not the primary factor of end-user cost, Gold, principal analyst with J. Gold Associates, told “There is Apple’s profit margin and how much they charge the carriers like AT&T in the U.S and also how much they think consumers are willing to pay.”

Gold said the $199 price is only so low because AT&T is able to subsidize that expense by requiring a two-year service commitment.

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