Apple (NASDAQ:AAPL) spends $207 to manufacture each unit of a 16GB iPhone 5, according to estimates from a virtual teardown of the device by IHS iSuppli, higher than the $188 manufacturing cost of the iPhone 4S. While the phone’s bill of materials is $199, the extra $8 is the labor costs involved in putting the final piece together.

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Most of the extra cost came from the new iPhone’s display technology and 4G LTE wireless components. In fact, the most expensive part in the phone is the new four-inch in-cell display, which costs Apple $44 and is being supplied by multiple companies, including LG Display (NYSE:LPL), Japan Display, and Sharp.

“The iPhone 5 makes a big evolutionary step in technology that we have not seen elsewhere with the use of in-cell touch sensing,” IHS researcher Andrew Rassweiler said. “Most other smartphones LCDs use a completely distinct capacitive touchscreen assembly that is physically separate and placed on top of the display. The iPhone 5 partially integrates the touch layers into the display glass, making the product thinner and reducing the number of parts required to build display that senses touch without the need for a separate capacitive touch layer.”

The device also uses an LTE wireless system from Qualcomm (NASDAQ:QCOM) that costs $34, while the new A6 processor carries a $17.50 price tag, up from the $15 cost of the A5 processor in use in the iPhone 4S. One area where cost has gone down from last year is the NAND flash memory, with prices nearly halving.

“NAND flash continues to come down in price as manufacturing processes for these memory chips become more advanced,” Rassweiler said. “And because [Apple] is the world’s largest buyer of NAND flash, Apple gets preferential pricing.”

A similar breakdown was done last Friday by UBM TechInsights, which estimated the phone cost $168 to build. A more reliable figure is expected once research firms get their hands on an actual iPhone 5 unit this Friday in order to tear it down to its components.

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