More specifically, iSuppli claims the parts in the 16GB iPhone cost $172.46, with a further $6.50 required for manufacturing, leading to a total cost of $178.96. Given the significant costs for shipping, packing, distribution, research, additional accessories supplied (cables etc), staffing and the rest, it's probable that Apple is reliant on the heavy subsidies from AT&T to stay in the black. iSuppli adds that adding features like video and more memory didn't greatly affect the iPhone's costs:
By leveraging this commonality to optimize materials costs, and taking advantage of price erosion in the electronic component marketplace, Apple can provide a higher-performing product with more memory and features at only a slightly higher materials and manufacturing cost.
The strategy is working, as Apple continues to grab market share: 1 million of the new phones were sold during the first 3 days after the 3G S launch.