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iPhone 3GS Manufacturing Cost at $179 Per Unit

Apple's 16GB iPhone 3GS costs the company US$178.96 per unit, according to a new teardown analysis conducted by iSuppli, Inc. This compares to a cost of $174.33 for the previous generation's entry-level 8GB iPhone 3G when that device was introduced in June of 2008. Apple retails the device for $599, with carrier subsidies bringing the cost down to qualifying customers down to $199.

The chart below offers a breakdown of costs for the major components in the iPhone 3GS, though iSuppli points out that these costs don't include the cost of software development, shipping and distribution, packaging, royalty fees and miscellaneous accessories included with each phone.

Wall Street analysts pay close attention to the cost of the iPhone due to its impact on Apple's gross margins and profits. This is especially so for a company like Apple, which guards this kind of information as closely as is possible.

iSuppli's teardown analysis is based on literally tearing a unit down, examining the components therein, and then using in-quantity costs analysis, along with associated labor costs estimates to provide a total estimated cost for each device.

iSuppli iPhone 3GS Price Breakdown
Chart provided by iSuppli, Inc.

3 comments from the community.

You can post your own below.

Lee Dronick said:

I would love to see them tear down the cost of R&D and include that with the price of components.


steveopti said:

Good analysis! Really good information. Does Apple mark only $20 above the cost?


daemon said:

I would love to see them tear down the cost of R&D and include that with the price of components

R&D cost of manufacturing per unit expotentially lowers the more units you sell, where as physical componets stay comparably stable regardless the amount of units that are sold.

Let’s play a game, let’s say Apple spent $1,000,000,000 to develop the iPhone and iPod Touch (Apple didn’t spend that much I know, Apple’s yearly R&D budget isn’t even that much).

Let’s say Apple onlu sold 200,000 iPhones and iPod touches, the unit cost for R&D would be $5,000. Now let’s say that Apple sells 1,000,000 iPhone and iPod touches, the unit cost would be $1,000. That’s a change of $4,000 per unit sold, the physical componets’ price most likely did not change, it’s still going to add up to $179, but the R&D price lowered radically.  Trying to put a unit cost to R&D is next to impossible withou knowing how many units will be sold and the total amount of money devoted to that single product’s R&D.

Apple places a value of $10 on their yearly major software updates for the iPhone and iPod touch. Assuming that this value is in place to recoup solely the costs of software development (part of R&D) then Apple spends about $200,000,000 a year on development for the device.


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