By Trefis.comApple ( AAPL), which competes with Research in Motion ( RIMM), Nokia ( NOK) and Motorola ( MOT) in the mobile phone market, released the latest version of its popular iPhone recently. Apple moved 1.7 million units of the new iPhone 4 in the first three days of its launch, an all-time record for any new Apple device. Market research firm iSuppli recently estimated the material costs of each iPhone 4 at around $188. The iSuppli estimate implies gross margins of around 63% for iPhone 4. This healthy margin could mean an upside of 5% to Apple's stock. How do we figure that? Read on... iPhone Gross Margins Expected to Decline We estimate that iPhone sales account for more than 50% of the $296 Trefis price estimate for Apple's stock. In the past, Apple has been able to maintain gross margins of around 61% for the iPhone. However, we expect that declining iPhone prices will drive gross margins down to around 40% by the end of the Trefis forecast period. In another article, Trefis explained why iPhone prices are likely to decline. iPhone 4 Pricing for Apple Could be Around $650 Over the past two years, the total price of an iPhone has averaged around $590. This price includes the subsidy that AT&T ( T) pays Apple, which we estimate to be around $400. The retail prices for iPhone 4 are $199 for the 16GB model and $299 for the 32GB model. We estimate the total price at around $600 for the 16 GB iPhone and $700 for the 32 GB model. If Apple sells equal quantities of the 16 GB and 32 GB versions, Apple's average pricing for the iPhone 4 could be around $650.