Dumb question but if an iPod touch is $250...why is an iPhone $650?

[rui no onna]

Allot has to do with the current subscription model of the carriers. Subsided phones.
Once more people go to as NEXT type plan our whatever Verizon offers maybe the price will go down.

Cellular and gps are a149$ option to an iPad.
Is that the big difference between a iPhone and iPod?

Actually, cellular and GPS is a $130 upgrade for the iPad. Not bad for something that costs Apple, what, $10-15?

And yes, I agree. The reason Apple can afford to sell it that high is because carriers front the money and most people are duped into thinking that the iPhone only costs $0/99/199/299/399/499.

Next/Edge plans are a bit of a double-edged sword for phone manufacturers. On one hand, it can encourage yearly upgrades and makes for easier upsell of higher end models (oh, the 64-128GB is just $5-10 more per month). On the other hand, it increases consumer awareness of actual device cost which might lead to less frequent upgrades or switch to less expensive smartphone models. Since this is just early days for Next/Edge with plan discounts, it's hard to say what the overall effect on smartphone purchasing and upgrade habits this will have.

 

[AlanShutko]

Well, a few companies have tried to figure out Bill of Materials costs for the devices.

Teardown.com estimates that an iPhone 6 costs about $227 to build. I can't find a recent estimate for the iPod Touch, but an estimate I found on StackExchange suggests it cost $149 to build an iPod Touch in 2007. It's likely gone down since then.

Manufacturing costs are usually higher when a device is new than after it has been out for a while, since they continue to find ways to do things more efficiently. Therefore, older components will be cheaper as well than they were when they were used in a brand-new product.