Apple $599 iPhone less than $300 in parts

The sum of Apple's iPhone is more than its parts.

Apple will likely have some wiggle room to cut prices on the iPhone, if a report from iSuppli proves correct.

The consulting firm just released an analysis of what the components will likely cost for the . The $499 phone, which comes with 4GB of memory, will likely have a component budget of $229.85. Assembly costs will raise the total manufacturing price to $245.83.

Some guy with an iPhone Declan McCullagh/CNET Networks

Meanwhile, the $599 iPhone, sporting 8GB of memory, will have a component budget of $264.85 hardware cost and a manufacturing cost of $280.83. The large margins make price cuts inevitable. "They will cut prices later on," said Jagdish Rebello, director and principal analyst with iSuppli. "It is hard to imagine anyone else getting 50 percent margins for long."

You're probably thinking that the iPhone has got to cost a lot more to make than that. Look at the picture. It's at least 20 feet high. That's actually just a projected image. The phone fits in a person's hand.

Apple has only released a few specifications on the device. It's still not known, for instance, what processor will be inside the phone, though there are some indications that it will be . So how can iSuppli predict the component budget? Like other companies, Apple builds its equipment out of components and some software bought and sold in the gigantic, worldwide parts markets.

About the author

    Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.

     

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