iSuppli: iPhone Will Deliver 50% Gross Margin


An early analysis of the iPhone by iSuppli suggests that Apple and Cingular could gross almost 50% on each of the cell phones sold, Evertiq reports.

iSuppli estimates that the 4GB iPhone will cost Apple a total of $245.83, giving Cupertino a 49.3% gross margin on each unit, which will retail for $499. The 8GB iPhone fares nearly as well, costing $280.83 to manufacture, resulting in a gross of 46.9% for the $599 phone.

iSuppli estimates as closely as possible the cost of materials used to manufacture device, and factors in other costs such as labor. However, it cannot account for the discounts that OEMs receive for large-volume orders. Shipping costs are also difficult to ascertain.

Jagdish Rebello, principal analyst with iSuppi, says that Apple has achieved similar margins of around 45% with iPod, and that Cupertino is setting itself up for 'steep' price reductions on iPhone in the future.

Analysis: That's the contemporary Cupertino strategy: Apple releases a new product and then ruthlessly undercuts itself on price with each new model, making life ever more difficult for the competition. Apple enters a crowded field, though, unlike the nascent MP3 player market when iPod appeared. But Apple has a modest market share target of 1%. But then just wait for the iPhone Nano...