Low Manufacturing Costs And Wireless Carrier Subsidies Mark Down 3G iPhone Price

With a $199 price tag, the new 3G Apple iPhone is very affordable – a fact attributed primarily to low production costs. Reports had it that a total of only $173 is spent producing one of these smartphones, a figure that is inclusive of both hardware bill of materials (BOM) and manufacturing costs.

Furthermore, Apple will be offering the 3G iPhone to wireless service carriers for $499, of which $300 is subsidized by said carriers – a common business model for the mobile handset market. This is in contrast to last year’s 2G iPhone that went for the same price without any subsidies. This time, Apple will no longer take a portion of the wireless carriers’ service subscriptions revenue, which is why it is important that they take a profit through the subsidies.

In the future, the BOM/manufacturing costs will decrease as the component prices decline, which will allow for an even higher BOM/manufacturing margin.