by Saleem Khan, CBC News Online

Apple Inc. may need to make a lot of money on its iPhone to pay for legal fees and lawsuit settlements — and if estimates of the device's cost are right, they probably will.

Apple will make a 50.7 to 53.1 per cent gross profit on the iPhone according to market research firm iSuppli Corp. of El Segundo, Calif.

The cost of materials and manufacturing for the $499 US 4GB iPhone will likely be about $229.85 US, with a total cost of $245.83, while the $599 8GB model's hardware will cost $264.85 and the unit's total expense will be $280.83, according to iSuppli analyst Andrew Rassweiler.

That margin is a lot wider than I had expected when I last blogged about the iPhone but another iSuppli analyst suggests the iPhone will face deep discounts to remain competitive in an increasingly crowded music-phone market.

I wouldn't be surprised if Apple and wireless carriers follow the same approach the network companies took with Motorola's Razr, selling it in large volumes at steeply discounted rates to take advantage of economies of scale.