According to a preliminary bill-of-materials estimate by iSuppli, the $599 Apple iPhone could net Apple over a 50 percent gross margin, the analyst firm said on Jan. 18.
With the cost to manufacture an 8GB iPhone estimated to be about $280 in total expense, the remainder of the $599 total retail price is estimated to be pure profit1—which will flow back to Apple, as the company is forbidding carriers to subsidize or discount the phones.
Unlike other "teardown" services performed by iSuppli, the firm did not have an actual iPhone in hand to disassemble. The company said it was working off of its own component estimates, based on similar teardowns of competing phones, laptops and other devices.
Working models of the iPhone must also be submitted to the FCC for approval. However, a small number of working prototypes have already been distributed for hands-on previews, proving that the iPhone is nearing its final design.
High-profit products are no stranger at Apple, which has claimed margins of 45 percent on the iPod nano, said iSuppli analysts, who predicted that Apple will have to cut prices to keep up with the market. "With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, director and principal analyst with iSuppli, in a statement.
Specifically, the 4GB model will carry a gross margin of 50.7 percent, iSuppli estimated, while the 8GB iPhone will earn Apple a 53.1 percent margin, the firm said.