What does the iPhone Cost Apple?

Last week, I had the chance to oooh and ahhh over the new iPhones that a number of my friends purchased. The device is cool indeed, even if the Outlook calendar and contacts synch is not quite there yet with Exchange. But how much does it cost to make this new device which features a UI that makes Windows CE look and function like a green screen relic? According to an article in Business Week, Apple is making some decent margins on its new category killer.

The above-linked story notes that "an analysis from teardown firm Portelligent estimates that the new smartphone costs Apple a mere $220 to make ... Portelligent estimates that the cost of the materials used in the iPhone add up to about $200 for the 4-gigabyte version, which sells for $499 and about $220 for the 8-gigabyte version, which sells for $599. Their estimate doesn't include costs of final assembly, but it does give some insight into the gross margin on the device."

What part(s) drive the cost for the device? It's not the flash memory or the battery (which has received significant criticism for being embedded in the device and not replaceable by users). Nor is it camera. Rather, the major cost driver is the touch screen, which Business Week provides a cost estimate of $60 per unit. That's right, sixty bucks for a single touch screen. And it's most likely made in Germany -- the article suggests -- and shipped to Asia for final assembly. If you've tried out an iPhone, you'll see why Apple spent the money on it. The screen does not scratch, and its visual quality is splendid. And I've not even mentioned the intuitive touch screen that mysteriously understands your little pokes down to the millimeter without a stylus.

Jason Busch

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