[jluxenberg]

Seriously? Parts can't be more than $200 for this. I mean, they sell the iPod Touch for $200 which costs $155 to make ( http://iphonetouch.blorge.com/2007/12/19/ipod-touch-bests-ip... ). Is a GSM radio IC expensive? Hell no. They're in bed with the carriers, and they're even worse than Apple because they're trying to say that they aren't.

[eli]

Sure, and this bottle of Coke costs only $0.12 to make. What's your point?

Google's not a charity. The rumors that they were going to sell the phone at a huge loss to gain market share was, frankly, silly.

[jonknee]

To be fair you're missing a lot of parts and the ones that they share are a lot more high end on the N1. Twice the CPU, 4x the RAM, over 2x as large a screen, GSM/EDGE/UMTS/HSDPA radios, GPS, compass, still/video camera with flash and autofocus, etc etc.

And on top of all that iSuppli's figure is just an estimate. Considering every phone in the same league as the N1 is in a similar price, there aren't obscene profits being made. If they really cost $150 to make someone somewhere would start selling them for cheaper--we're talking CE here which is defined by brutal price wars. Don't think that HTC would settle for being an OEM when they could own the market by selling devices at 1/3 the price directly.

[gaius]

Because the software is free right? (Clue: the people who wrote it were full-time Google employees).

[bvttf]

Clue: the software for the iPod touch wasn't found in the street either.

[gaius]

Which, umm, is why it also retails for more than its parts cost.

[jimbokun]

I suppose the question is, why is the iPhone over $500 more than the iPod touch? Is there really that much hardware/software differentiation between the two to justify the increased price?

I suppose the ability to make calls and access data almost anywhere makes it that much more valuable to people, or they would not be able to price it as such.

[warfangle]

A lot of it probably deals with a plethora of byzantine patents needed to manufacture a mobile phone.

[GHFigs]

It's amazing what happens when you price things according to how much people are willing to pay as opposed to how much it cost you to make.

[numbchuckskills]

Seriously? I despise this worn out arguement.

Sure, the parts might cost $155; but you can't do much without knowing how to connect the parts together, and without spending millions on finding the right combination of parts.

And then there's the software on top of that which others have noted.

[mrkurt]

The parts are the variable cost, software and know how are largely fixed. In a normal market, prices would trend towards the variable cost. The US cell phone market, however, is an oligopoly of large carriers that push the "retails" prices on phones high so they can lock people into contracts by selling the "subsidized" phones. Thus, prices won't trend towards the marginal cost. They'll stay high.

That's a long winded way of saying: if carriers (and handset makers) didn't have a massive chubby for long term contracts, prices on handsets would be much, much lower. The iPod Touch is a good example of that. It's obviously worth Apple selling it for a ~30% margin, assuming the $155 parts cost is correct. What do you suppose the margins on the actual iPhone are?