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.
Jeremy Schoenherr of MLB.com demonstrates a new platform to view Major League Baseball scores and highlight videos on the Apple iPhone during the Apple Worldwide Developers Conference in San Francisco, Monday, June 9, 2008.
(AP Photo/Eric Risberg)
Apple Inc. CEO Steve Jobs announces a number of new languages that the updated Apple iPhone will work with during his keynote speech at the Apple Worldwide Developers Conference in San Francisco, Monday, June 9, 2008. Jobs announced innovations to the Mac OS X Leopard operating system and a long-awaited update to the iPhone.
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(AP Photo/Eric Risberg) SAN FRANCISCO - The iPhone will soon be $200 cheaper and support satellite navigation and faster Internet access, but higher monthly service charges are likely to erase most of the savings.
Apple Inc. revealed Monday that it has scrapped its pricing plan for the iPhone as it unveiled a model that works over faster wireless networks, addressing key criticisms about the device that have hurt the company’s foray into the cell phone industry.
An 8-gigabyte version with the new features will go for $199 when it goes on sale July 11, and a 16 gigabyte model will cost $299, the Cupertino-based company said.
