The least expensive new iPhone 3G S costs $179 to build and $199 to buy with a two-year contract from AT&T Inc. (NYSE: T), which means that the carrier is continuing to subsidize this year's model in anticipation of increased data revenues over the long term.

The bill-of-materials (BOM) cost estimate comes from the analysts at iSuppli. "The entry-level, 16Gbyte version of Apple’s new iPhone 3G S carries a BOM cost of $172.46 and a manufacturing expense of $6.50, for a total of $178.96," according to Andrew Rassweiler, director and principal analyst for teardown services at iSuppli. (See Apple's 3G S Draws Decent Crowds.)

This is actually slightly higher than the $174.33 that the analysts estimate it cost Apple to build the original 8GB 3G iPhone in July 2008. The introductory price for both the old and new 3G phones is $199. iSuppli estimated that AT&T bought each original 3G model from Apple for $499 and thus was heavily subsidizing and continues to heavily subsidize the iconic smartphone. (See Apple Peels Away iPhone Costs and AT&T’s iPhone Pain.)

Table 1: Apple iPhone 3G S Major Components and Cost Drivers

Manufacturer	Multi-Source Probability	Component Description	Cost
Toshiba	High	Flash Memory NAND, 16GB, MLC	$24.00
	High	Display Module 3.5" Diagonal, 16M Color TFT, 320 x 480 Pixels	$19.25
	Medium	Touch Screen Assembly Capacitive, Glass	$16.00
Samsung	Low	Application Processor ARM Core, Package-on-Package	$14.46
Infineon	Low	Baseband HSDPA/WCDMA/EDGE, Dual ARM926 and ARM7Core	$13.00
	Medium	Camera Module 3 Megapixel Auto-Focus	$9.55
Samsung (with Elpida die)	High	SDRAM - Mobile DDR 2Gb Package-on-Package (Mounted on Application Processor, Two Die)	$8.50
Broadcom	Low	Bluetooth/FM/WLAN Single Chip, WLAN IEEE802.11b/g, Bluetooth V2.1+EDR, with FM and RDS/RBDS Receiver	$5.95
Numonyx	High	Memory MCP 128Mb NOR Flash and 512Mb Mobile DDR	$3.65
Infineon	Low	RF Transceiver Quad-Band GSM/EDGE, Tri-Band WCDMA/HSDPA, 130nm RF CMOS	$2.80
Infineon	Low	GPS Receiver Single Chip, 0.13um, with Integrated Front-End RF, PLL, PM, Correlator Engine and Host Control Interface	$2.25
Infineon	Low	Power IC RF Function	$1.25
Murata	Low	FEM Quad-Band GSM, Tri-Band UMTS Antenna Switch and Quad-Band GSM RX RF SAW Filters	$1.35
Dialog	Low	Power IC Application Processor Function	$1.30
Cirrus Logic	Low	Audio Codec Ultra Low Power, Stereo, with Headphone Amplifier	$1.15
Rest of Bill-of-Materials*			$48.00
Total Bill-of-Materials			$172.46
Manufacturing Costs*			$6.50
Grand Total			$178.96
Source: iSuppli. *Dollar totals are currently estimated.

The reason that AT&T would spend so much on the iPhone and new faster 3G networks that will speed up download times for the 3G S is because it anticipates greater data revenues in the future from this upfront spending. (See AT&T Boosts 3G Networks.)

AT&T saw wireless data revenues grow by 38.6 percent, to $3.2 billion, in the first quarter of this year even as its overall revenue declined slightly. Data made up 27.2 percent of AT&T's wireless revenue for the quarter. It's no secret that iPhone users have helped to drive that jump in data revenues for the carrier. (See AT&T: Another Bumper iPhone Quarter.)

— Dan Jones, Site Editor, Unstrung