just like we all expected, it's a total rip-off. just like all other apple products.

I am just curious how much it would have cost apple to add 3g and a gps chip to it?

Proof that competitors SHOULD be able to swoop in and produce devices just as good for less money, or better for the same money. But then, the end of the article notes similar margins for the iPod, and it still dominates the mp3 market, so what are other companies doing sitting on their hands??

That Apple is so greedy that they couldn't put GPS, 3G, Flash, or Java support in there phone for a few extra dollars. Worse yet in a little over a year Apple is going to soak you for another $150 when you have to replace the battery. I'm sure this doesn't factor in development costs but I doubt the development costs are more then $50 a phone. I guess that's what you get when you buy trendy products.

nets an extra $76 in profit? If they don't have to replace many of them they'll make some nice coin off all the first gen buyers.

By the time the second generation iPhone comes out with some of those elusive features, you can bet that there will be more than just a couple of comparable options at a much lower price on the market. Those phones won't have the multi touch, but I doubt they will be bound to a carrier and they will throw in features that Apple is missing.

The multi function cell market wasn't completely stagnant before the iPhone, but I do thank Apple for giving all the other device manufacturers a kick in the pants.

Christmas should be an interesting time if you're in the market for a new cell phone.

Not that I would pay that much for an Iphone myself, but ripping a product apart and estimating the cost of the parts to build it has nothing to do with the products value. There is much more cost to bring a product to market than material. In my business, labor and overhead runs double material cost. How do you measure a products true worth? Exactly what people will pay for it, and there are a whole lot of people that will buy these things at $600.

If you knew that you could sell something for twice it's cost to someone... wouldn't you? I'll bet they could have released it for $1000 and it would have still sold out. We can only blame this on ourselves... If we could stop "killing" for the latest and greatest and maybe prices will drop on some of the technology toys.

I think the other manufacturers have been caught off guard by this. There have have been smartphones before the iPhone but I think the problem is the software. Many manufacturers were happy to just make a decent phone and ship it with the latest Windows mobile OS and that's that , job well done. Others like Nokia decided to use Symbian and yet others decided to just use some custom OS. Only Motorola thought about using Linux as an OS but those models never really took off.
Apple somehow managed to create a cool factor around its products like the iPod but they've been successful mostly in the US. Their users are usually people who want something different. iPhone is different , and so is OS X , so was the iPod at its time.
They'll probably have a tough time when they want to get more and more market share because there's only so many people that want a telephone without a keyboard or an OS other than Windows.

Every few dollars they save on the cost means millions more in profits. Save $3 on cost and they just made an extra $13.5 million this year or $90 million by 2011. I think it's BS, but hey no one likes bean-counters anyways.

$600 is not a big deal to me but I like to pay what something is worth. I could be "different" and slide a Benjamin to the junkie to clean my windshield; but he's only worth a Lincoln (paper version) at best. Same goes for the iPhone yeah I could pay 6 Ben's for the phone but with Ben and a Jackson for the battery replacement in one year... it's really only worth a 2 Ben's.

Recently, there are so many blaming on different manufacturers and products such as Sony and their PS3. Now, it is the Apple and their iPhone.

If you don't like them or just feel their price is not reasonable, just pass them on.

We as a consupmer, just want some great roducts. In the technology gadgets, we need some really user friendly products. This is where Apple is great at. They may not be doing the right thing all the time but they do the right thing in most of the time. This when compared with other companies, which always do the wrong thing in most of the time, they excel.

Irregularly arranged buttons, text boxes, vertical and horizontal scroll bars around, waiting for more than 5 seconds opening a simple application. All these makes normal people feels uncomfortable.

Life should be cool instead of buried inside a set of windows!

Apple can charge you so much because most others are making the products with a wrong direction. Without this competition, the user interface will remain in the stone age for much longer.

Back when plasma TVs and LCD HD TVs came out, the profit margins were HUGE, all up till some time last year when the price war started.

Apple is about a year ahead of everyone in terms of what they have created. It isnt 3g, doesnt have GPS, but its the first to do a LOT of different things, IE full internet web browsing, newly designed touch screen, little things like their advanced voice mail.

No one can deny that it would be great to have 3g, Jobs even said that, that is why it also has WiFi, and that is the preferred way to connect to the internet.

Consumers are paying 50% margin on these products because they want to, and Apple's innovation is why its worth it to so many people.

The real question is: If it only costs about 280 dollars to make an iPhone, why haven't any other manufacturers jumped on the ball and made a fully internet ready phone thats easy to use, cool looking, and innovative? I mean, cant they see there is a market for that?

Thats who we should blame, because in the end, Apple is still the only company meeting the needs of consumers who want a device like this, and they are willingly paying for it.

At least Apple isnt making an artificial shortage of these phones making the ebayers really have the upper hand. They are at least keeping up with demand.

I won't knock some of the other features of the iPhone but with no Javascript, Flash support, and dumbed down video streaming (of which the site must support for it to work) the title of "full internet web browsing" needs to be dropped ASAP! I'm sorry but your not fully experiencing the internet without flash and Java! Both of witch have been out since the 90s!

Opera on the Wii doesn't ever deserve the title "full internet web browsing" and it supports a hell of a lot more then the iPhone's safari does!

How about this, "Full sized internet web browsing?"

Seems like I've been getting fooled about 'full internet web browsing' since my Motorola Mpx220 back in 2005... The webpages, including my Webguide media-center streaming webpage at my house, come up fine on my motorola Q... guess I've been fooled. Excuse me while I stream live tv over my EVDO connection...

Route my voicemail through my office's asterisk box, and I've got voicemail through email, to which I can listen to through attachments without using minutes. Speaking of email, did I mention that my Q is always in sync with my exchange mailbox...

I'll have to schedule some time to look at more of the iPhone's new 'innovative' features. Please wait about a minute while I do the ridiculously long edit process on my calendar entry on the iPhone...


It's attractive, and it does 'feel' solid, but it's not ready, nor innovative.

Do you people understand demand? The iPhone is not over priced. If it was over priced it would not be selling. You clearly do not understand this simple part of business. There is also no law to how much you can markup a product.

Individuals and corporations alike are just jealous of Apple. Some individuals are dying to lay their hands on this puppy but couldn't - either because of affordability or lack of energy to queue up at the store for one. Many rival corporations are so envious to the point of throwing up just because they couldn't match up with Apple in innovation or business wherewithall.

Even humans - created by God or whoever (depending on your believes) - have imperfections. People should congratulate Steve Jobs and the entire Apple team for re-inventing the phone. No matter how loudly you guys yell or complain, iPhone will always seel out. When are we going to start looking at a cup as half full versus half empty?

I love the iPhone and I'd borrow money to purchase one even if sold at a higher price.

Would I prefer the phone to have an SDK or support Java? Absolutely. I think it's absurd to judge a product by its component parts instead of the functionality. Forget it, if you're expecting the iPhone to cook your dinner or do your laundry.

disc $.08
packaging $1.20

Cost $$$$$$

Hardware and shipping cost is never the whole picture, unless you are stuck in 19th century.

Echoing "The Truth", Google "Supply and Demand" to get the basics of marketing a product. Remember too... this is just a component list, and does not include all the engineering and development costs that went into designing the iPhone... millions of $$$ I am sure. It is typical to get the early adopters to pay for the development costs at product launch. You also want to make as much money as you can while you have a competitive advantage, ie THE must have device at the moment. I agree that these phones are priced fairly... as they are selling well.

I myself look forward to paying $300 for one in a few months when excitement dies down.

FYI: I have a Motorola Q... the last cool piece of smartphone technology that had lots of appeal... and I gotta say it is worthless to me because of its lame software and cumbersome interface.

Why is it selling? Simple, the media told the people this is the coolest thing ever®, they listened and bought it in droves.

LOL ! Apple's product is always garbage and overpriced, all they do is just put a nice and shinny shell and all these Apple Fanboys/girls will save their lunch money up to buy them.

Now the iPhone, with totally outdated technology still selling for 600 ? get the *beep* out of here.

Theres nothing wrong with markup, Apple is a business I know, but I think they rip people off way more than anybody else.

The real test will come in about 6 months. If they are still flying off the shelves, then I will be very surprised. This is still a $600 phone/music player that you have to pay another grand a year to use. It's gotta be a "cool" thing to keep using.

Component price has nothing to do with R&D along with setting up a full technical site for support.
All you people who are talking are end users not business people.
DO you drink Starbucks coffee at $$$ for a name,do you buy bottled water....
Apple is trying to keep the edge,,,,and doing it... No one is forcing you to buy it... but do try it before you rip it apart verbally...What is the last thing that you invented that made it to market and will make even thousands of dollars...
There are things Apple has coming down the pipe that will surprise most of you with the flexibility the iPhone will have...but no one can talk about them for months,,,,
Oh ye of little faith..
If you spent as much time inventing as you do bellyaching you would become wealthy...

You know its amazing... there are two ways to succeed in upward modality in this world...
One is to work hard and excel
The other is to stay where you are a push others down....

LOL

What is the point of this article, it is what any business does, try to make something that people will buy and keep cost down as much as possible in such an item, thereby retaining a higher profit margin ( no brainer ) its the hype that people fall for that makes me laugh, some silly competitive notion one has to have the latest and greatest of something or out do your neighbor, bad enough somewhere along the line people have become addicted to this strange need to be in contact with others 24/7, in the check out line, on the commode its just a telephone with bells and whistles if it had a projection system to view video on a wall 6 feet wide I would be impressed, but its still a 21st century version of a Dick Tracy wrist watch. personally I have higher priorities than to have not only a phone but a complete entertainment system in the palm of my hand. As far as phones go I would still be happy with one of the old Ma Bell 14 lb black bakelite jobs sitting on a table somewhere. Can't reach me! Oh well!

Simple economics. There is no competitor making a product this appealing. Not even for the iPod, which has been around how many years? Therefore, Apple has a natural monopoly, and they will price where they guess marginal revenue meets demand. The fact that people lined up around the block and the item sold out suggests it was UNDER-priced. Of course, Apple would definitely want to sell out quickly on the first pass, so it makes sense they'd underprice a little.

If you don't like the price, don't buy it. If everybody else agrees with you, the price will come down.

How stupid to say the only cost in innovating to this standard is the component cost of the end product, what about what it took to get there. Its thinking like that makes such analysts a waste of bandwidth and destined to adhere to their "Vista" of the world

8 and 16 Gb memory, 3G and probably GPS ( the last not sure the 2 other is sure )

Yes, how about labor cost? And - will anyone tel me, where iPhone is made? China? Malaysia? Singapore? And don't forget, how much Apple spent on R&D. So, at the end it isn't so rosy...I think.

That' always the same with new electronics, what about the Playstation 3, Xbox360, new Intel CPU's etc. etc.

If you want to be first in the line you'll have to pay for it. Normal people wait a while and spend less money for the same.

So the iPhone has component costs of $280 and sells for $600. So what? Trying to make a profit is what most companies do (and what CEOs and stockholders demand). Realize, of course, that from that 50% profit you must subtract the hundreds of millions of dollars for research and development (R&D), about $40 million in paid advertising, manufacturing costs, shipping, warehousing, and on and on. So it might be that Apple only makes about $100 in profit on a $600 iPhone. Feel better now? Hmmmm. [People used the same argument for iTunes. 'Apple is ripping the people off charging $.99 for a song!' The reality is that Apple gets only $.34 for each song that sells on iTunes (the other $.65 goes to the record companies). From that $.34, take bandwidth costs for the web sites, development costs, microbanking transfer costs, advertising, personnel, yada yada yada, and Apple's profit is about $.05 on every $.99 song they sell.]

'Build a better mousetrap and people will beat a path to your door'. For all its many strengths, maybe that's what Apple does best. They take an existing product and make it better. And in the case of the iPhone, a lot better. According to the published reports, somewhere between 525,000 - 700,000 people agree with that point. [And over 100 million iPod users concur]

For those of you who know the cost of everything and the value of nothing, the iPhone (and most Apple products) are not for you.

I certainly can't blame them for an over 50% profit on components alone, but there is still R&D costs as well, so it's not a true percentage of profit. What I still can't understand is this love affair with ATT. Seems like this exclusive relationship would limit the reach to potential customers who refuse to use the Cingular/ATT network. The device looks wonderful but time will tell on the reliability.

Commodity pricing typically constitutes a fraction of the actual selling price of something considering the manufacturer typically sells a product to the retailer for 50% of the selling price so the retailer can make a profit. Factor in marketing, sales, general costs, manufacturing labour, overheads of a plant/utilities/insurance (or in their case, a manufacturing contract most likely), R&D (which yes, you have to pay for - people forget about this), bank charges/interest/equity costs of financing projects, administration, logistics a profit margin for both Apple and AT&T and the figures you quote are not an issue.

I would suggest iSuppli learn how to cost out business models of other manufacturers before going on about 50% margins. IMHO, 50% for commodities alone is huge and the only way Apple and AT&T can turn a profit is if Apple sells them direct. One thing they don't mention is if the prices they quote are based on volume discounts (which I doubt considering how shitty the estimates are). If they were turning these products to retailers alone, they'd be $799 and $899 respectively so others can make money too. I'm sure the costs to produce will come down in time and then the margins Apple makes will be more in line with what they should manufacturing something. Just my 2c (1c American)

The majority of the price comes from years of creating the technology that makes this work.

Let not for get Apple needs to do this to catch up with Microsoft. Xbox sold for like half the production cost, Vista, how many years did it take them to produce and all the saleries they had to pay. Apple just needs to catch up and have everyone love them by doing the oppisite.

It is time for a little marketing lesson everyone. When a company introduces a brand new product the price of the product is always high because the company has to recover its initial investment into the development of the product (research and development), plus all of the marketing costs - in which Apple had little because the media frenzy took care of that for Apple.

I agree that the material cost is ignoring MANY factors. It will take Apple a fair bit of time to recoup R&D costs, not to mention material cost does not account for labor and production costs.

BUT - Apple and their iPhone are still totally lame.

have you considered millions of dollar in R&D? What about labour? Management? Distribution? Marketing? Brand Image Devolopment?

It's called market skimming.... i can buy a Motorola V3i at 1/4th the price i would 1-2 year ago

Without including the costs for software and development, this doesn't really tell us much.

The margin Apple makes on kit has always been higher than the industry standard. That may make consumers of their products grumpy. It makes Wall Street folk dance the jig, however, which explains the juicing shares got on Tuesday.

"That' always the same with new electronics, what about the Playstation 3, Xbox360, new Intel CPU's etc. etc. "

And all of you who said similar are full of it. In fact, both MS and Sony LOSE money on every single hardware unit sold, until years down the road.

Software is how video game consoles bring in the money for MS/Sony, not their hardware. Please get a clue before responding with tripe.

Nothing whatsoever against Apple, but come on, lrn2thnk.

They only loose money in the first year or two, then every year after than returns HUGH profits on the sales of the hardware. But, the first year looses are easily made up by software sales, which turn the largest profit. Now, who's clueless?

The hardware in any iWhatever is trivial and actually quite poor in quality. The iCraze is based on commercialization alone. Without the cool dancer commercials, where'd the iPod be today? Nowhere. Kinda sad ain't it?