That's just the hardware, not including the software and other related R&D.
Zoom
The iPhone 4's pricing is no different than it's been in for the past two generations -- $199 for one, and $299 for double the storage. But what's different now is the cost.
According to teardown firm iSuppli, the 16GB iPhone 4 costs an estimated $187.51 on the bill of materials. That's just for the component parts only, not including the packaging and shipping. The software costs and R&D investment are also additional to Apple's costs. But in terms of just raw materials, those signing up for the iPhone 4 at $199 are getting almost exactly what they're paying for.