iSuppli Says 3G iPhone Costs $173 to make

isuppli-says-apple-3g-iphone-costs-173-to-makeMarket researcher iSuppli, as with what they usually do with new Apple products, issued their teardown cost estimate of the 3G iPhone. iSuppli came up with a total of $173 for bill of materials and manufacturing costs. This is a virtual teardown estimate as iSuppli has yet to obtain an actual 3G iPhone. Apple 3G iPhone will be available on July 11th, 2008.

This low cost might explain why Apple is able to sell the new 3G iPhone for a low $199 price tag. The two main reasons according to iSuppli are: mobile phone service providers will subsidize the phone by paying Apple about US$300 per unit and the low cost of manufacturing materials for the 3G iphone.

In comparison, Apple sold the original iPhone for $499 initially, which costs $226 to make and does not include 3G and GPS components. Apple has managed to build the second-generation iPhone for 23% less than the first one. The most expensive component on the 3G iPhone is the $22.80 8G bytes of NAND flash memory, followed by the touchscreen at $20, iSuppli estimates.

This initial estimate does not include the cost of shipping, distribution, software development, packaging and accessories included with each iPhone. Taiwan’s Hon Hai (Foxconn), the world’s largest contract electronics manufacturer, is making the new iPhone at factories in China.