Apple announced this month that it will launch the new 3G iPhone this month with $199 tag. But how can it afford such a killing price?There are two reasons why Apple can charge so less for the new iphone:

1. The handset service providers will subsidize the handsets by paying $300 per unit to Apple.
2. The second reason is the low cost of the materials going into handset.
   The most expensive component in the 3G iphone is the 8GB flash memory storage costing $22.8 . The nest one is the touch screen for 20$. The chips and other components add upto 164$. Apple is paying 9$ for the assembly of the device.
   This brings down the total cost to 173$.

But these initial estimates does not include the cost of software, shipping, distribution, packaging and the cost of accessories.