My 2 Cents: For all of you that are a little confused how apple is going to be providing their new 3G iPhone at such a low price here is a little more info to paint a clearer picture
According to a preliminary analysis by iSuppli Corp., the new Apple iPhone 3G materials and manufacturing cost is $173. The initial retail price of the phone announced by Steve Jobs will be $199. iSuppli has performed a breakdown of the costs using insights from its analysis staff to develop estimates of iPhone content, suppliers, and costs. “The new iPhone is significantly less expensive to produce than the first-generation product, despite major improvements in the product’s functionality and unique usability, due to the addition of 3G communications,” said Dr. Jagdish Rebello, director and principal analyst for iSuppli.
“The original 8Gbyte iPhone carried a cost of $226 after component price reductions, giving the new product a 23 percent hardware cost reduction due to component price declines.” Tina Teng, wireless communications analyst at iSuppli, added that if the 3G iPhone design is unchanged, the cost should drop down to $126 in 2012. Although the base iPhone 3G will sell for just $199 at retail, Apple will receive far more than that with AT&T footing the bill as it does with most phones. Wireless carriers subsidize much of the cost of devices and make up the difference with revenue from new and existing subscribers.