How much does it take to make an iPhone? About $173, according to iSuppli. The analysis released by iSuppli Corp. found a 23 percent hardware cost reduction in the 3G iPhone, compared to the original iPhone.

The estimations don’t include other costs, such as software development, shipping and distribution, packaging, and miscellaneous accessories that come with each phone.

Compared to the original 8GB iPhone version , which had a $266 cost after component price reduction, the second generation of iPhone comes cheaper in terms of material and manufacturing costs.

Apple’s 3G smartphone, whose official release date is July 11, 2008, when it will reach 22 different countries, will have a retail price of $199.

But if you think all Apple is going to get from this deal is $26-a-phone, you’re nowhere near the real figures.

According to the iSuppli estimations, wireless carriers will pay Apple a subsidy rate of approximately $300 per unit, which means Apple will in fact sell its 8GB version of the iPhone to carriers for $499 per unit.

Apple means business like never before. The estimations have shown that Apple usually prices its products, such as the iPhone and iPod, approximately 50 percent over the hardware Bill of Materials (BOM) and manufacturing costs.

This time however, after taking into consideration the $199 retail price and the $300 estimated subsidy, the BOM/manufacturing margins increased even more than before.

The second generation of iPhones is mainly focused on hardware revenue, Dr. Jagdish Rebello, director and principal analyst for iSuppli, explained.

Unlike the first generation of iPhones, when Apple received a share of the wireless carriers’ winnings from service subscriptions, the second generation will bring the company a profit from the actual hardware through the carrier subsidies.

The 3G iPhone’s BOM/manufacturing costs are expected to decrease in time, and according to data from iSuppli’s Mobile Handset Cost Model (MHCM), the second generation of iPhone will cost $148 to make in 2009.

Tina Teng, wireless communications analyst at iSuppli, said that if the iPhone design will remain unchanged, the cost will continue to decline and reach $126 by 2012.