An analysis posted by IHS pegs the total component cost for the 4-inch iPhone SE at around $160. The handset’s retail price in the United States is $399 for the 16GB version, with the $499 64GB variant component cost pegged at $170.

The firm’s analyst also said that Apple has intentionally priced the 16GB iPhone SE at $399 to encourage more consumers to go for the 64GB variant, which has a higher profit margin because for only a $10 increase in component price, Apple is being able to charge its customers an additional $100.

The firm says that the A9 chip inside the iPhone SE costs Apple $22 to bill, while the modem from Qualcomm costs the company $15. The 4-inch display on the iPhone SE, which is manufactured by LG Display, costs Apple a mere $20 — less than half of what it costed the company on the iPhone 5s back in 2013.

Now, keep in mind that bill of materials is not the only thing that dictates the final price of a smartphone. Most smartphones nowadays cost around $200 to $270 to build, but are usually priced around $700. This is because a lot of money goes into research and development, support, and other miscellaneous expenses related to that product. Obviously, with Apple using most of the components from the iPhone 6s on the iPhone SE, such expenses should have been pretty low for the company.

Nonetheless, the iPhone SE is more of an experimental product from Apple that is targeted to fill the niche segment of people who still want a small 4-inch iPhone. While the handset is also targeted at emerging markets like China and India, the high price of the handsets in these markets is likely going to be a deterrent for consumers.