Outsize profits can only be achieved when there is something to constrain competition, in the long run. It may be natural, as in the case of oil where scarcity raises prices far above marginal cost of production, and even there, oil companies are pursuing increasingly costly, less profitable oil. It can also be the result of government regulation, eg patented products. http://en.wikipedia.org/wiki/Perfect_competition#Profit . 

This is why when a market has several entrants, analysts will talk about the market being “commoditized,” i.e. there are no profits to be made. This has already happened to an extent in the mobile phone market – Moto, Nokia, Sony Ericsson and LG make no profits. Apple has a quarter of the market and two thirds of the profit. http://www.asymco.com/?s=profit+htc+sony&submit=Go

Competition is the enemy of profits. That’s why investors like Warren Buffet seek to invest in companies with strong, anticompetitive advantages that help profits stay above market. http://37signals.com/svn/posts/333-warren-buffett-on-castles-and-moatsLike I said, the prices are higher than they would be, in a competitive, free market. That you get $1000 of value from a $600 smartphone, or that you pay five times as much on your phone service is irrelevant. 

There’s a “wrap” cost to develop and put it all together?  Even so, it’s likely to be a lot less, especially when spread over a ton of devices.  It’s a cost that actually drops the more an item sells.

Intel pours billions into R&D and except for their premium chips that they don’t make many of anyway, they still have a 50% margin on their chips even including R&D.  I don’t buy that the R&D and assembly costs are nearly as much as the cost of the parts themselves.

This may not be a really good example and you can tell me that everything is cheaper in China. But $35 couldn’t even get you onto a basic voice plan on VZW. Think about that.

And I’m not denying that cell phone manufacturers aren’t putting some decent markup on phones, but to prop up a $199 tablet that will be subsidized by content providers is the wrong way to prove it.

Just as you see in any other product and service there is mark up for finished products.

Yea I could pay $30 dollars for a Filet Mignon at a restaurant but I could also make that same filet for 10 at home. You are paying for Chef and the Waiters as well as the overhead of the restaurant when you buy that Filet, (Im sure I couldve came up with a better example but no one really cares anyway)

Point is if something cost 1 dollar to make and you charge 600 dollars, then drop it to 300 and say its a sale or a deal or wtf ever it is… this is still crap… there should be a law that says you can’t mark up a product but 10% of manufacturing cost…

At full retail, the carrier is losing money (assuming you buy a phone and then leave the company a month later).  The consumer loses very little (assuming they sell their month-old, pristine phone for close to full retail.)  So by this reasoning, you would think the wireless companies would be practically giving phones away, just to get the contract.  The contract is worth over $2,000 (someone in the comments did the math).  They should be subsidizing phones for very little.  Maybe the cost of an activation fee and tax.  No more than $100 for ANY phone.  You are “renting” the device for two-years (or a better description would be “pay-to-own”), and it’s definitely like those “Rent-A-Center” scams… you’re paying a 200% mark-up because you are making payments over two-years.  Your computer that is usually $600 at Best Buy will eventually cost you $2000 (at $20 a week or whatever….)  Both ideas pray on people who want what they want when they want it (and don’t have the means/dedication to save up).  This is how you have so many people with smartphones who can barely afford the data plan; they don’t have two pennies to rub together, but they got a subsidized phone for cheap.

Do you really think that there would ever be one unified cellular network? These companies have spent millions if not a few billions of dollars on their respective networks. A unified network would decrease competition.

If a phone costs $640 and the with contract price is $300, that means Verizon is subsidizing $340 of the price of the phone.

Just curious.  Cause I’ve never seen it itemized on my bill before.