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New iPhone Costs $179 to BuildNew iPhone Costs $179 to Build

AT&T is still heavily subsidizing Apple's latest iPhone

Dan Jones

June 24, 2009

4 Min Read
New iPhone Costs $179 to Build

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


 Multi-Source Probability 

 Component Description 




Flash Memory NAND, 16GB, MLC



Display Module 3.5" Diagonal, 16M Color TFT, 320 x 480 Pixels



Touch Screen Assembly Capacitive, Glass




Application Processor ARM Core, Package-on-Package




Baseband HSDPA/WCDMA/EDGE, Dual ARM926 and ARM7Core



Camera Module 3 Megapixel Auto-Focus


Samsung (with Elpida die)


SDRAM - Mobile DDR 2Gb Package-on-Package (Mounted on Application Processor, Two Die)




Bluetooth/FM/WLAN Single Chip, WLAN IEEE802.11b/g, Bluetooth V2.1+EDR, with FM and RDS/RBDS Receiver




Memory MCP 128Mb NOR Flash and 512Mb Mobile DDR




RF Transceiver Quad-Band GSM/EDGE, Tri-Band WCDMA/HSDPA, 130nm RF CMOS




GPS Receiver Single Chip, 0.13um, with Integrated Front-End RF, PLL, PM, Correlator Engine and Host Control Interface




Power IC RF Function




FEM Quad-Band GSM, Tri-Band UMTS Antenna Switch and Quad-Band GSM RX RF SAW Filters




Power IC Application Processor Function


Cirrus Logic


Audio Codec Ultra Low Power, Stereo, with Headphone Amplifier


Rest of Bill-of-Materials*


Total Bill-of-Materials


Manufacturing Costs*


Grand Total


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

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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