iPhone 3GS costs Apple $179 to make, says iSuppli

Even though it has twice the storage space of last year's model, Apple's new 16GB iPhone 3GS costs the company less than 3% more to make than 2008's lowest-priced iPhone 3G, according to a tear-down analysis published today by iSuppli.

The full bill-of-materials (BOM) for the low-end iPhone 3GS is $178.96, said iSuppli in an abridged version of the for-pay analysis it sells to vendors. That total reflects an estimated $172.46 in the cost of goods and another $6.50 in manufacturing costs.

Last summer, iSuppli pegged the iPhone 3G's BOM at a slightly smaller figure: $174.33. That number was nearly one-quarter less than the $226 the research firm said Apple spent manufacturing each first-generation iPhone in 2007.

Apple and its U.S. carrier partner, AT&T, sell the 16MB iPhone 3GS for $199; that, however, is the subsidized price. Analysts have estimated that AT&T and other carriers pay Apple as much as $600 for each iPhone.

"From a component and design perspective, there's a great deal of similarity between the 3G and the 3GS," said Andrew Rassweiler, who oversees iSuppli's tear-down services. "By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost."

Apple doubled the amount of flash RAM story space in the new iPhone 3GS smartphones, upping the low end from 8GB to 16GB, and the high end from 16GB to 32GB, and added several new components, including a better camera capable of capturing both stills and video. It also added hardware necessary to implement a new digital compass.

"Besides these extras, the 3GS hardware feature set is not much different from that of the 3G," said Rassweiler.

The most-expensive item in iSuppli's parts list was the 16GB of Toshiba-made flash memory, which the research firm priced at $24. Second and third on its list were the $19.25 for the display module and $16 for the touch-screen assembly.

An instant tear-down by Aaron Vronko, the CEO of Michigan-based Rapid Repair, on the day that Apple launched the iPhone 3GS revealed a faster CPU (central processor unit) and a faster GPU (graphics processor unit) than those in 2008's model, and supported Apple's claims that the new smartphone is two to three times faster.

On Monday, Apple said it had sold one million iPhone 3GS phones in the first three days through its own retail and online stores, other retail outlets such as Best Buy and Wal-Mart and its carrier partners, including AT&T.

This story, "iPhone 3GS costs Apple $179 to make, says iSuppli" was originally published by Computerworld.

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