The US $173 iPhone 3G cost estimate from iSuppli - that's cheap!

Alex Zaharov-Reutt
Wednesday, 25 June 2008 12:57

Your IT - Mobility

Apple’s volume discounts are interesting, because companies like Nokia sell more phones every week than Apple has sold iPhones so far. It must have enormous volume discounts, too.

Yet its high-end phones cost a lot more, although that really depends where you are in the world. Nokia isn’t strong in the US like it is in the rest of the world. In Europe and Australia, it’s easy to find the Nokia N95 available at a $0 upfront cost.

The reality is that the HTC Touch Diamond and Nokia N96 will also be available at $0 upfront pricing, too. It will take some time for prices to fall – they’re always expensive to begin with. When the Nokia N95 first came out, it was valued at AUD $1300!

Even the Motorola RAZR, which is available at $0 upfront from many telcos, also started life at AUD $1300.

So it would seem that Apple is purposefully starting with a low price to get as many sales as possible, knowing that it won’t have to suddenly make massive price drops, and knowing that its interface and ease of use are still miles ahead of everyone else.

Apple also has a content business running through iTunes for music, movies, TV shows and more, while the upcoming App Store looks set to be the most successful online software store in history, all of which make the Apple cash register ring with profits.

Apple also started with a high price – US $599 – and still saw great demand.

Demand went up ever more when the iPhone was dropped to $399, and when European telcos started really slashing the price of the original iPhone to the 99 euro mark, sales took off even further.

Apple’s bill of materials cost is likely very similar to that Nokia, HTC and others pay for each phone, at least in today’s world where rising commodity prices still haven’t forced massive price hikes in consumer electronics as we’ve seen in fuel and food.

I’m not confident that consumer electronics can stay this cheap forever.

But for now they are, and consumers are still reaping the benefit, while telcos are making profits on top of that through the charges they levy each month for voice and data, and sharing some of it back with the phone manufacturers - Apple, HTC, Nokia, Samsung, LG, Sony Ericsson and others.