IPhone Under The Knife

Most gadget fans waiting in line for hours outside Apple and AT&T stores across America are doing so because they can't wait to purchase, use and cherish a $499 iPhone. But a few people in line for Apple's latest device have something a little more destructive in mind: They plan to take it apart.



Never mind that cracking open an iPhone voids its warranty--engineers and analysts want to see just what went into and who makes the iPhone's guts.

Research companies and "teardown" firms have sent employees to wait in line with the masses to retrieve a specimen to dissect. But if an Apple devotee standing in line next to one of these researchers found out about his neighbor's intentions, wouldn't he be horrified?



"People who don't understand what we do have trouble getting their minds wrapped around it," says Howard Curtis, vice president of global services for Portelligent, a teardown firm based in Austin, Texas.



Portelligent employees will be in line by Friday, says Curtis, who notes that it has been raining for nearly a week in Austin. How many iPhones would he like to see them return with? "We could get away with one," he says. "But it's nice to have a couple so you can tear one apart while doing functional testing on the other." Portelligent will perform two levels of analysis on the iPhone--a quick, 24-hour session, and a study worth four person-weeks.



Firms like Portelligent, and its largest competitor, iSuppli, sell reports detailing the processors, memory and materials used in each device to customers that include consumer electronics manufacturers and analysts. While most industry experts already have a confident hunch about which companies are working with Apple to make the iPhone, teardown reports serve as confirmation.



The reports also allow analysts to estimate the gross margins Apple is reaping on the iPhone. According to preliminary research in January from iSuppli, each iPhone sold will generate a 50% margin for Apple and partner AT&T .



But the reports also serve another function: as public relations assistants to the parts makers, who have sworn to Apple that they won't spill the beans. "They can't say 'Great news! We're in the iPhone,'" says Curtis. "This gets the word out there for them."



Some analysts say they're already certain what's under the hood. Barry Young, senior vice president for NPD's DisplaySearch, talked with various companies to learn which ones are providing parts for the iPhone's cutting-edge multi-touch screen. The glass display itself is manufactured by Toshiba Matsushita Display, while Sharp will contribute displays after a few months, says Young.



The touch screen itself, a film that gets bonded to the glass, is made by TPK (partially owned by German company Balda), Optrex and Optera, a subsidiary of Magna International . Indium tin oxide, a transparent conductor, is adhered to the film.



Apple filed patents on its multi-touch technology, which allows for 15 distinct things (fingers, pointers, pens) to control the iPhone at once. The touch-screen manufacturers will make lots of money on the iPhone through Apple, but they can't put Apple's innovative technology in any other company's devices, says Young. "That's why the display is so expensive. Apple always cuts special deals."