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Apple 3GS Cost $179 To Build, Sells For $199

Teardown analysis from iSuppli shows that Apple managed to boost performance over previous generations of the device, without significantly increasing cost to itself.

In building the iPhone 3G S, Apple managed to punch up the product line without spending much more on components, a teardown analysis showed.

Researcher iSuppli found that the cost of components and other other materials for Apple's latest smartphone was $172.46. Add the manufacturing expense of $6.50, and the total is $178.96, or a mere $4.63 more than the older generation iPhone 3G.

ISuppli's cost estimate does not include other costs associated with a product, such as marketing, distribution and the accessories bundled with the device. Nevertheless, the teardown indicates that Apple was able to boost the iPhone's performance without dramatically increasing expenses.

The new, low-end iPhone offers double the memory of last year's low-end model, without costing Apple much more to make. ISuppli conducted its teardown on the entry-level 16 GB version of the iPhone 3G S, comparing it to the low-end 8 GB iPhone 3G based on pricing in July 2008. AT&T, the exclusive iPhone carrier in the United States, is offering the latest iPhone for as low as $199 with a two-year data contract, the same deal as with the older product when it first launched. AT&T today is offering the older phone with a contract for $99.

Without a service contract, the iPhone 3G S costs $599, which was also the original price for the iPhone 3G. But despite the price similarities, there are differences in the technology.

Features unique to the iPhone 3G S include video capture, an autofocus 3 megapixel camera, versus a 2 megapixel camera in the older iPhone, and a built-in digital compass. Aside from these extras, the hardware is not much different, iSuppli said.

"From a component and design perspective, there's also a great deal of similarity between the 3G and the 3G S," iSuppli teardown analyst Andrew Rassweiler said in a statement released Wednesday. "By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost."

One of the most noteworthy hardware changes is the use of a Broadcomm single-chip Bluetooth/FM/WLAN device. This component represents the industry trend of integrating more functionality into one chip. The iPhone 3G used two chips to implement the same functions.

Making its debut in the iPhone is Dialog Semiconductor's power management integrated circuit. To implement the digital compass, Apple added AKM Semiconductor's electronic compass and STMicroelectronics' accelerometer.

Toshiba scored the biggest single design win in the iPhone 3G S with its 16 GB multi-level cell NAND flash memory device, which at $24 is the third most expensive component, after the display module and the touch-screen assembly, iSuppli said. However, Apple is likely to shop around and get the same memory part from other suppliers, most notably Samsung Electronics.

Samsung maintained its position as the supplier of the iPhone's applications processor, the fourth most expensive component. The processor plays a key role in the iPhone 3G S's faster performance over its predecessor. Where the 3G used an ARM RISC microprocessor with 400 MHz clock speed, the 3G S uses a 600 MHz version.

InformationWeek has published an in-depth report on smartphone security. Download the report here (registration required).

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