Apple enjoyed over 45% margins in its other successful products including the iMac and iPod nano, according to iSuppli. However, because Apple is facing extensive competition in the music-phone market, the company may need to cut into its margins to reduce pricing in the future.

“iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a $229.85 hardware BoM and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price,” said Andrew Rassweiler , teardown services manager and senior analyst for iSuppli. “Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price.”

Music phone shipments to hit 1 billion by 2010

In the high growth and competitive  music phones market, some 835 new models are expected to be introduced by various competitors in 2007. In terms of features and form factors, the closest competitor to the Apple iPhone is LG’s KE850, which will ship later this year, says iSuppli.  

Shipments of music-enabled mobile phones will rise 39.9% to 618.1 million units in 2007, up from 441.7 million units in 2006, iSuppli predicts. 

By 2010, shipments of such phones will increase to 1 billion units. Apple’s goal is to capture 1% of these unit sales, which seems attainable, according to iSuppli.