"Apple only pays £3.99 to manufacture a £600 iPhone", claims report.

Report is unclear that this refers only to the labor cost, and what's involved in that labor.

Is that $3.99 for someone clipping half a dozen parts together/watching robots, or is it $3.99 for 18 hours of soldering?

The parts cost around $188, according to iSuppli (http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries...)

it's the software+service+phone that make up the value (and final cost) of the phone. Not the individual physical parts.