The market research firm iSuppli Corp reported on Tuesday that the new second-generation iPhone will have have a higher profit margin than the original iPhone. A new iPhone 2 will cost $199 plus a service plan from AT&T. AT&T in turn pays Apple an estimated $300 subsidy for delivering them a new custom. From this Reuters article:
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.
With Apple now profiting even more per iPhone sold, it’s obvious why they chose to market their phone through only a select few exclusive service providers around the world. By sinking their teeth into a telecommunications giant like AT&T, Apple can make windfall profits, while still not alienating their buyers by making the outward price of the device much higher.