Where are you getting the $300 figure from? Also, elsewhere in this discussion you say "Yet the iPhone costs more than twice that" (ie >$400, [1]). iSuppli estimates the cost to be $180 including manufacturing and "other" parts[2]. This is very much in line with Apple's typical margins. Apple doesn't sell commodity products so it's no surprise that they could be netting 50% margins (see [3] for iPod cost information). I work in the electronic components industry. The component costs quoted by iSuppli are credible. Companies like Samsung and Apple are able to negotiate very low prices for components from their suppliers. The suppliers are willing to offer components at lower prices and hence sacrifice their profit margins for a couple of reasons: (a) Apple and Samsung buy in large volume (b) Apple and Samsung will always be around. Offering the best prices now is a foot in the door for future business with them

[1] http://news.ycombinator.com/item?id=996710

[2] http://gigaom.com/2009/12/09/who-is-getting-rich-off-the-iph...

[3] http://www.businessweek.com/technology/content/sep2005/tc200...