Apple's profit may be higher for new iPhone
NEW YORK (Reuters) - Apple Inc's latest iPhone will be more profitable than any other product in its popular iPod line of music players, despite a price tag that is half of the previous iPhone, according to a study.
Helped by lower component costs, margins for the new iPhone are expected to exceed the 50 percent level achieved by Apple's most popular media players, according to a preliminary study by research firm iSuppli Corp, released late on Tuesday.
"Apple's iPod and iPhone products typically are priced about 50 percent more than their (materials and manufacturing) costs," iSuppli said. "With the new iPhone sold at a price of $199 and the estimated subsidy of $300, Apple will achieve an even higher ... margin.
Wireless phone carriers are expected pay a subsidy of about $300 to Apple for each of the new iPhones, iSupply said.
ISupply estimates manufacturing costs for Apple's new high-speed iPhone totaled $173, compared with $265 for the original iPhone, released one year ago for about $500 with no subsidy. After what it called "component price reductions," the initial iPhone carried a cost of $226.
"At ... $173, the new iPhone is significantly less expensive to produce than the first-generation product, despite major improvements in the product's functionality and unique usability, due to the addition of 3G communications," said Dr. Jagdish Rebello, principal analyst for iSuppli.
The figures don't include other costs, including software development, shipping and distribution, and packaging, iSuppli said.
ISuppli performed what it called a "virtual teardown", using insights from its staff to develop estimates of iPhone content, suppliers and costs.
Once the 3G iPhone becomes available, iSuppli plans to perform an actual, detailed teardown of the new iPhone's components and cost structure.
(Reporting by Franklin Paul; Editing by Derek Caney)
