The Apple 3G iPhone is shown in this publicity photo released to Reuters June 9, 2008. Apple Inc on Monday unveiled a next-generation iPhone with faster Internet access that will run on advanced wireless networks and sell for as low as $199 -- half the current entry-level price.
(Apple/Handout/Reuters)By PETER SVENSSON, AP Technology Writer Tue Jun 24, 4:15 PM ET
NEW YORK - The cheapest model of Apple Inc.'s new iPhone, which is about to go on sale for $199 in the U.S., costs about $173 to make, according to an estimate by research firm iSuppli Corp.
The phone, which updates last year's model with faster Internet speeds and an improved navigation feature, goes on sale on July 11.
Apple's profit is much more than the $26 difference between the cost and retail price. The retail price is subsidized by the exclusive carrier, AT&T Inc. In effect, the carrier will be buying the phones from Apple at a higher price, then selling them at a loss that it earns back through monthly service fees.
ISuppli estimates that AT&T will subsidize each phone by $300. Other analysts have put it at $350. In either case, the subsidy creates a substantial margin for Apple.
ISuppli said the margin appears to be higher than for other Apple products, which are generally priced 50 percent higher than their cost of materials and manufacturing.
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