iPhone Memory Margins

No 3G iPhone yet, but today Apple added new iPhones and iPod touches to its product lineup with double the amount of memory. The new 16-gigabyte iPhone costs $499, $100 more than the 8-gig model. The new 32-gigabyte iPod touch also costs $499, $100 more than the 16-gigabyte model. The new gadgets should give Apple a nice bump in average sales price -- we expect a lot of iPhone buyers to consider the model with more storage space for movies, music, etc. -- and will also improve the company's gross margins on those products. Last July, research firm iSuppli estimated that it costs Apple about $266 to build an 8-gig iPhone, including about $48 for the flash memory. Months later, last October, iSuppli estimated that the 8 gigs of flash memory in the iPod touch costs Apple about $40. We assume the price has dropped even more since then. But for the sake of argument, we'll assume that 8 gigs of flash memory costs $40, and 16 gigs costs $80. (So we'll subtract the original $48 memory cost from iSuppli's July estimate and add those newer memory cost estimates. Again, this is a very rough guess.) That means an 8-gig iPhone could cost about $258 to make -- not including packaging, marketing, distribution, etc. At a $399 retail price, Apple makes about $141 gross profit per phone, or a gross margin around 35%. Meanwhile, a 16-gig iPhone could cost about $298 to make. At a $499 retail price, Apple makes about $201 gross profit per phone, or a gross margin around 40%.