[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?