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16 GB iPhone 3GS Teardown Reveals $178.96 Parts and Manufacturing Cost

Research firm iSuppli today announced the results of its teardown of the new 16 GB iPhone 3GS, estimating the device's parts cost at $172.46, with an additional $6.50 in manufacturing costs bringing the total cost to $178.96. The data compares to a total cost of $174.33 for the 8 GB iPhone 3G at its launch in July 2008.

BusinessWeek provides a full analysis of the iSuppli report, noting that Apple's flash memory costs have been adversely impacted by pricing increases precipitated by production cutbacks in response to economic conditions. While Apple previously relied on the ability to be able to double flash memory capacities at the same price point over models from the previous year, the recent fluctuations have resulted in Apple having to pay more in order to bump the iPhone 3GS's capacity to 16 and 32 GB.

iSuppli's teardown also reveals that Apple is using the same BCM4325 combination Wi-Fi/Bluetooth chip from Broadcom used in the second-generation iPod touch, resulting in a cost savings over the iPhone 3G, which had used two separate chips, a Wi-Fi chip from Marvell and a Bluetooth chip from CSR.

As always, iSuppli's cost estimates do not include software, research and development, distribution, and patent royalty costs. Consequently, Apple's true costs are considerably higher than the figures cited in these studies, leading Apple to sell the iPhone at price points hundreds of dollars above the manufacturing costs. Wireless carriers in turn offer subsidies to customers in exchange for signing multi-year contracts, bringing the final handset cost to the consumer back down to lower price points, such as the $199 price for the 16 GB iPhone 3GS in the U.S. on AT&T.

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