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Apple iPhone costs $246-$281 to make, analyst claims

Very nice margin

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Apple's margins on the iPhone will be almost 50 per cent, market watcher iSuppli has forecast after being given a glance an an early list of components the Mac OS X-based smart phone will contain.

According to iSuppli's calculations, the 4GB iPhone will cost $229.85 to source and assemble. That's just the hardware - factor in the cost of the software and technology licensing fees and the cost rises to $245.83. That's still rather less than the $500 the phone will retail for when US carrier Cingular ships it later this year.

That price is in addition to the two-year contract iPhone buyers will need to take out with the carrier. That suggests Cingular may be subsidising the end-user cost of the phone, in which case Apple's margins may be higher still.

The $600 8GB iPhone costs $280.83 to produce, iSuppli calculates.

All of which provides Apple will plenty of room for maneouvre to reduce prices in due course, particularly if it appears the current pricing scheme is limiting take-up. As with the iPod, so with the iPhone: price it high early on to grab early adopters and the brand's key fanbase, then lower the price as demand expands - or to stimulate it. Apple's bill-of-materials cost will fall over time, thanks to greater degrees of miniaturisation and integration, pushing margins up.

Apple this week indicated it's expecting iPhone sales to hit 10m in 2008.

According to iSuppli's breakdown, the phone's Flash memory is the most expensive single component, closely followed by the 3.5in touchscreen - $35 and $33.50, respectively, in the 4GB model. ®

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