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iPhone 4 costs $188 in parts: How ISuppli comes up with estimates

June 28, 2010 |  1:30 pm

Iphone-4-parts Apple's new iPhone 4, with its sleek glass and metallic design, two cameras, high-quality display and faster processor, is composed of $187.51 in parts, according to preliminary estimates by the gadget analysts at ISuppli.

As it does for many high-profile technology product releases, the El Segundo research firm broke open the iPhone 4 -- not unlike IFixit's quick "teardowns" -- to see what makes it tick.

ISuppli then compares the parts to the company's internal price listings to come up with a final figure that doesn't include assembly, shipping, software development, patent licensing, advertising or any of the other expensive factors associated with a major product launch.

While a more thorough analysis is due from the company by the end of the week, its early estimates find the guts of the 16-gigabyte version may cost Apple slightly less than the upfront price of the phone. At retail, the 16-gig iPhone 4 costs $199 with a two-year AT&T contract, which subsidizes some of the hardware costs.

Apple announced that 1.7 million iPhone 4 units were purchased in the first three days since the Thursday launch in five countries. That's despite early complaints that holding the phone a certain way would hinder cellular reception.

The Times profiled another teardown expert, the San Luis Obispo IFixit, last week, which was, as usual, first out of the gate with a look at the new Apple product's insides. Co-founder Kyle Wiens explained that, unlike ISuppli, his crew doesn't estimate parts costs due to factors like Apple's A4 processor, which cannot be bought by outside manufacturers and therefore can't be quantified with a price tag, he said.

But everything has a price, and ISuppli has its educated guesses -- based on the work of 120 analysts around the world with connections inside the industry.

That A4 chip? $10.75 a pop, ISuppli says.

True, ISuppli doesn't know exactly how expensive the research and development Apple and chip maker Samsung Electronics put into it is. But the analysts, with the help of comparative prices of similar processors plucked from the firm's Component Price Tracker, can make a pretty good guess, according to ISuppli Director Andrew Rassweiler.

"A lot of the development cost is absorbed by Apple," Rassweiler said on the phone last week. In return for the initial hit, Apple gets a silicon organ that uniquely suits its mobile products' speed and power-consumption needs. (The A4 is also used in the iPad.)

"Our estimate is always based on what an Apple or another manufacturer would actually pay for the part," Rassweiler added. For that information, major players in the phone and computer industries, which ISuppli would not name, subscribe to its in-depth reports.

-- Mark Milian

Photo: iPhone 4 teardown. Credit: IFixit