Apple to reap 50% margin on iPhone

Betting its fortunes on the power of its brand and the loyalty of its enthusiasts, Apple stands to gross a 50% margin on each iPhone it sells, according to research company iSuppli.

"iSuppli estimates the 4GB version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli, in a written statement. "Meanwhile, the 8GB Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price."

Following is iSuppli's estimated cost breakdown of the iPhone. (Click the image to enlarge):


It's not unusual for Apple to tack on a hefty margin to its wares. "The company having achieved margins of 45 percent and more in products including the iMac and iPod nano, according to iSuppli."

If people are willing to pay it, why not, right? And sure, there obviously are other expenses associated with the iPhone, including research and development, marketing -- plus Apple does need to pay for its ever-busy iLawyers.

But Dr. Jagdish Rebello, director and principal analyst with iSuppli, notes that the pricing puts Apple in a position to reduce the cost on the iPhone and still make a profit, something it may need to do given the number of music phones that will hit the market in 2007: 835 models are expected -- including some that rival the stylishness of the iPhone -- such as LG's KE850 Prada phone -- or that can be tweaked with new themes and icons to resemble it (try as Apple might to stop that from happening).

For more information about iSuppli's estimates, go here.