The true cost of building an iPhone

The cheapest model of Apple's new iPhone, which is about to go on sale for $US199 in the US, costs about $US173 to make, according to an estimate by research firm iSuppli Corp.

The phone, which updates last year's model with faster Internet speeds and an improved navigation feature, goes on sale on July 11.

Apple's profit is much more than the $US26 difference between the cost and retail price. The retail price is subsidised by the exclusive carrier, AT&T. In effect, the carrier will be buying the phones from Apple at a higher price, then selling them at a loss that it earns back through monthly service fees.

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