iSuppli Estimates new iPhone costs $173 to Manufacture

Research firm iSuppli Corp. estimates that the 8 gigabyte version of the upcoming iPhone costs Apple around $173 to manufacture. The handset goes on sale in twenty-two worldwide markets on July 11, with the cheapest model selling for $199 in the United States. But Apple will make more money than the $26 difference between the sale price and manufacturing costs.

The retail price of the iPhone is subsidized by the carriers, who buy the devices from Apple at a higher price and then sell them at a loss hoping to earn the money back through monthly service fees. In many markets, the carriers have the exclusive right to sell calling plans for the iPhone.

Researchers at iSuppli estimate that AT&T, the U.S. iPhone carrier, subsidizes each phone by $300. Other analysts have estimated the amount to be closer to $350. Either amount is a large profit from a $173 manufacturing basis.

The profit margin for the upcoming iPhone is estimated to be higher than that of the original iPhone which came out last year. The old model was estimated to cost Apple $226 to manufacture, moderately higher than the $173 for the new version. Cheaper component prices account for the difference.