New York - The 8GB Apple (NASD: AAPL) iPhone 3G, which will go on sale next month in the U.S. for $199, costs the company an estimated $173 to manufacture, according to a report by market research firm iSuppli.

The firm also estimated that AT&T is paying Apple $300 for each iPhone to subsidize the cost of the devices for its customers, in return for the chance to make up its initial outlay through its service contracts with iPhone owners.

The 16GB version's extra memory adds another estimated $22.89 to production costs on each device, while the new GPS chip will cost an estimated $3.60 per device.

While noting that Apple's profit margins for this new iPhone are higher than for the first edition, due to lower component costs, iSuppli said its estimates do not factor in software development, packaging, shipping or included accessories.

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