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However, UK handset could cost £300 to buy on contract

iPhone costs ?130 to make

Market research firm, iSupply has estimated the cost to produce Apple’s iPod at $265 (£130).

The firm took the iPod apart, as it did with other consumer electronics before it including the Xbox 360 and PS3, and estimated a bill of materials (BoM) and manufacturing costs.

iSupply conceded that the BoM estimate does not include royalties and logistics.

The news comes as suggestions that UK-operator O2 has secured the right to distribute the iPhone on its network emerge. Although no release date has been mentioned, it has been suggested that the phone will be £300 on contract.

It will be interesting to see how the iPhone performs in the European market with customers used to getting new contract handsets for free, or at least at a heavily subsidised rate.

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