Apple's iPhone Brings Margin Magic

SAN FRANCISCO - Apple's(AAPL Quote - Cramer on AAPL - Stock Picks) upcoming 3G iPhone may cost about $173 to make, giving the company a great shot at a high-margin hit.

Industry research firm iSuppli, which performed a virtual teardown of the 3G iPhone, said a bill of components used in the device will likely mean Apple's profit efficiency will outdo the earlier version of the iPhone as well as its iPod music player line.

Apple's iPod and iPhone products are typically priced about 50% more than their bill of materials, said iSuppli.

"At a hardware bill of materials and manufacturing cost of $173, the new iPhone is significantly less expensive to produce than the first-generation product," said Jagdish Rebello, director and principal analyst for iSuppli in statement.

The original 8-gigabyte iPhone carried a cost of $226 after component price reductions, 23% more than the original iPhone, said iSuppli.

Apple has priced the 8-GB version of the new 3G iPhone, along with its telecom service provider partner AT&T(T Quote - Cramer on T - Stock Picks), at $199. Most analysts are estimating that AT&T is offering a $200 subsidy on the 3G iPhone -- but iSuppli suggests it could be even higher at $300.

iSuppli's analysis does not include costs such as software development, shipping and distribution, packaging and miscellaneous accessories included with each phone.

iSuppli said it plans to offer a more accurate analysis of the iPhone's cost after a physical teardown of the product following its release, the company said.

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