Analysis firm IHS iSuppli estimates that the new iPhone 5 costs Apple just over $200 to make. 

The materials in the basic model, 16GB iPhone, cost Apple $199 while manufacturing added another $8 to the phone. The 32 GB version costs Apple $209 to make, while the 64 GB is estimated to cost $230. With mobile carrier subsidies, the iPhone 5 retails at $199, $299 and $399 respectively. Without the contract, carriers charge the iPhone 5, from the basic model up, at $649.99, $749.99 and $849.99.  According to Andrew Rassweiler, IHS’s senior principal analyst for teardown services, the lowest-end iPhone 4S had a bill of materials of $188, which is lower than the iPhone 5.

Not surprisingly, the phone’s costliest component, is its screen. The screen, a big part of any phone, is almost always the most expensive part of a phone, and the iPhone 5’s display is a half-inch larger than the screen of the 4S.  The new iPhone also has a sophisticated panel that integrates the touch sensor and the display panel. According to IHS, the screen costs Apple around $44 per phone.

Another part of the new iPhone that makes it more expensive for Apple to produce is the inclusion of LTE chips, which the firm said added $10 to the cost of the phone’s cellular components.  Ressweiler said that the iPhone 5’s LTE chips are meant to run on as many of the world’s LTE networks as possible. The addition of high-speed 4G LTE technology is estimated to have driven up the cost of the wireless section of the iPhone 5, at $34.00, compared to about $24.00 for the iPhone 4S.

Apple’s A6 processor also costs a bit more to make than its A5 processor, but the company was able to decrease the price for NAND flash memory due to the price of the components dropping and the company's ability to buy the memory chips in bulk.

If the iPhone costs Apple overly $200 to make, then why are we able to buy them for less?  We can thank subsidies from carriers, in which they cover the rest of the cost.  That means, of the roughly $650 carriers are paying Apple for a basic iPhone, about $200 is being picked up by the customer directly. That leaves about $450 to be made up by the carrier over the length of a contract. That’s a mighty handsome profit for Apple and that’s why the release of the iPhone 5 is such a big deal to them as well as for us, though obviously for different reasons.