iSuppli: iPhone 3G costs about $173 to build

According to a virtual teardown by iSuppli, the iPhone 3G costs 23% less to build than the original 8GB iPhone.

iSuppli had calculated that the original version of the iPhone cost around $226 to build, but thanks to a drop in component prices, the build costs of the 8GB iPhone 3G is only $173.

That saving of $53 is good news for Apple, since under the new deal with AT&T Apple no longer receives a portion of the carrier's revenue from service subscriptions (iSuppli estimates that Apple gets some $300 per iPhone sold).

Electronics being what they are, the build costs of the iPhone 3G will drop over time (assuming that the hardware stays the same). By 2009 the build cost will be down to $149, while by 2012 it could cost as little as $126 per handset.

Now that carriers are subsidizing these handset the price that Apple wants for them doesn't really matter as far as end users go - in some countries the price for getting onto the iPhone bandwagon is the cost of a contract. I wonder how long it will be until the iPhone is free (excluding contract) in the US?