The Iphone 4 costs just $187.51 to make

Nick Farrell
29 June 2010

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THE LATEST SHINY GADGET, Apple's Iphone 4 smartphone, for which it's charging at least $500 at retail, is built of parts that cost $187.51, according to market research firm Isuppli.

According to the tear-down the most expensive part of the Iphone 4 is the 3.5-inch LCD screen which costs $28.50. Isuppli thinks that the Iphone 4 screen must be identical to one made by LG.

It seems that Apple has managed to keep its parts cost at about $170 to $180 per unit. Isuppli's cost estimate doesn't include labour, shipping, advertising, software development or patent licensing.

The cost is based on a 16GB version of the Iphone 4 but the low costs of each componant are fairly staggering.

The Apple A4 processor reportedly is made by Samsung Electronics for $10.75 per chip.

Isuppli thinks that Geneva-based STMicroelectronics supplied the gyroscope chip at an estimated cost of $2.60, as well as an accelerometer chip used in previous Iphone versions, which has an estimated cost of 65 cents.

Other component suppliers named by Isuppli include Skyworks, a wireless chipmaker and TriQuint Semiconductor.

In 2009, Isuppli estimated that the components and materials used in the iPhone 3GS cost about $179. Since then Isuppli thinks that the materials costs for that model have fallen to $134. Thus the Iphone 4 costs a bit more to make than the earlier model.

Of course this means that Apple's gross margin on the hardware in Iphones is extremely high.

The actual price margin gets obscured by the fact that AT&T heavily subsidises the phone in the US for about what it costs to manufacture. AT&T makes its money back with lucrative data contracts, so it is happy.

However the real winner is Apple, which does not have to pay for the cost of manufacture and still takes home about three times Iphone 4 production costs, on average. Then Apple makes other profits from users living in Steve Jobs' walled garden of delights. µ