Apple iPhone Could Enjoy Profit Margins Over 50%

Apple and Cingular will enjoy a combined profit margin of over 50% on the forthcoming iPhone device, according to estimates by iSuppli, which recently put together a Bill of Materials (BoM) estimate for the device.

“iSuppli estimates that the 4-Gigabyte 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% margin on each unit sold at the $499 retail price,” explained Andrew Rassweiler, a senior analyst with iSuppli.

“Meanwhile, the 8-Gigabyte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1% margin at the $599 retail price,” Rassweiler said.

This exceeds even the impressive margins associated with Apple’s iPod Nano device, and will allow for significant price reductions in the future, potentially giving the iPhone a competitive advantage against the LG PRADA and other rivals.

“With a 50 percent gross margin, Apple is setting itself up for aggressive price declines going forward,” commented iSuppli’s director and principal analyst, Jagdish Rebello, PhD.