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Keep in mind that iSuppli's reports have been described (by daringfireball, as well as others: http://daringfireball.net/2007/07/isuppli) as "bullshit". A lot of their price numbers (especially the ones for unusual parts, like the CPU and LCD in the iPhone 4) are pretty much pulled out of thin air.

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Does John Gruber have any experience in building hardware that would allow him to reasonably claim any such teardown report as bullshit? Or did he just do some simple math in his head and think to himself that Apple doesn't make that much money so it must be BS? Hardware costs are just one piece of the puzzle, manufacturing/IP/shipping/R&D/software/marketing are others.

The prices vendors quote are also, in a sense, pulled out of thin air. There is some floor to the price based on cost to produce and minimum acceptable margin, and volume also plays a role. But, there are many other factors that are subjective. For example, perhaps the part manufacturer is looking to get its first part into Apple, so they knock some more off the price.

While only Apply knows how much an Apple-proprietary processor costs, it is possible to estimate a cost for it based on process technology, die size, pin count, package, etc.

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