New iPod Shuffle Contains $22 Worth of Parts

[MacRumors]

BusinessWeek reports on a teardown of the new iPod shuffle by research firm iSuppli, revealing that Apple's diminutive player contains approximately $22 worth of parts.

All told, the cost of the shuffle's components, the headphones, and the packaging it ships in comes to $21.77, according to iSuppli's estimates. That's about 28% of the device's retail price. The smaller the component cost as a percentage of price, the higher the potential profit. This suggests the per-unit profit margin on the shuffle is higher than on other iPod models. The component cost for the first iPod touch released in 2007, for instance, amounted to about $147, or about 49% of its $299 retail price. The component cost of the third-generation iPod nano, also released in 2007, amounted to about 40% of its retail price.

According to iSuppli's analysis, over half the cost comes from two Samsung components, the main controller chip and the 4GB of flash memory at approximately $6 each. The battery, capacitors, and resistors in the new iPod shuffle were also discovered to be remarkably small by industry standards.

The device contains a tiny lithium ion battery that costs $1.20, and that Rassweiler describes as "the smallest we've ever seen." And for a company that doesn't ignore the tiniest of details, the most mundane of components are the most advanced available. The device's so-called passive components - capacitors and resistors - are unusually small. Known by their numeric label 01005, which in electronics shorthand describes their dimensions in millionths of a meter, they're about the size of a grain of salt and cost fractions of a penny each. But they're half the size of what had previously been considered the smallest device of their type, those labeled 0201.

iSuppli's calculations consider only the actual parts of the device and do not include research and development, manufacturing, distribution, and patent royalty costs.

Article Link: New iPod Shuffle Contains $22 Worth of Parts

[PlaceofDis]

Originally Posted by MacRumors

.iSuppli's calculations consider only the actual parts of the device and do not include research and development, manufacturing, distribution, and patent royalty costs.

which, are probably some of the larger costs that are being recouped with its profit margin.

[stephengiem]

i hope this interesting research study and man-hours will lead to the price reduction of ipods in the future.

[YanniDepp]

Originally Posted by PlaceofDis

which, are probably some of the larger costs that are being recouped with its profit margin.

Exactly what I was going to say. There's a hell of a lot more money involved in making these than the raw material costs.

Don't forget the costs for heating and lighting the Apple Stores, and paying their employees.

[ThunderSkunk]

Way to stay in business, Apple!

[Small White Car]

Why are we still linking to these stupid things? First of all, they're obvious. (Who really thought the tiny parts in the Shuffle could cost much more than that?) Second, they're pointless. (They ignore all the other costs involved with creating products like this, including iTunes which costs money to make but is given out for free.)

And finally, so what? Apple makes a profit related to charging more than their production costs. Amazing! Everyone sells software (costing anywhere from dozens of dollars to thousands of dollars) on DVDs that cost only pennies to make. When is iSuppli going to amaze us all with that report?

[Pika]

I could build my own with old PC components for much more less:

[Cromulent]

Originally Posted by YanniDepp

Exactly what I was going to say. There's a hell of a lot more money involved in making these than the raw material costs.

Don't forget the costs for heating and lighting the Apple Stores, and paying their employees.

Even taking that into account one would assume that they are still making a 50%+ profit on each iPod. Which, truth be told, is not actually all that much.

In retail 100%+ profits are common.

[polaris20]

It costs $22 in raw parts, and it sells for $79. And? Apple's a company, not a charity. They need to make money for R&D, advertising, etc.

If you find $79 is unfair for a unit that costs them $22, then it's really quite simple. Don't buy it.

[nerdish]

So what if the parts cost $22, i could go out and buy these components myself, it doesnt mean i'd be able to make a Shuffle!

[That-Is-Bull]

Does that include the headphones that come with the Shuffle?

[Cromulent]

Originally Posted by That-Is-Bull

Does that include the headphones that come with the Shuffle?

Yes.

[WildCowboy]

Originally Posted by Small White Car

Why are we still linking to these stupid things?

I actually found the discussion of the parts more interesting than the numbers...there's cool stuff in there.

[Roessnakhan]

Consumer cost > Production costs? Surely you jest.

[mdntcallr]

$22 doesnt include distribution, marketing and R&D.

these things cost alot more to get to market than they are in just parts.

[Small White Car]

Originally Posted by WildCowboy

I actually found the discussion of the parts more interesting than the numbers...there's cool stuff in there.

I'd actually agree with that.

Perhaps I'm being unfair to iSuppli. I'm not mad at the info, I get upset with the stupid articles that spread around the 'net in its wake. But that's not really iSuppli's fault, I suppose.

My point for Macrumors (whose reporting on the subjust is top-notch, let me be sure to say) is that this seems like Page 2 information, no?

[BG-Mac]

No surprise here. I'd happily pay the $90 again for the new shuffle. Best gym iPod EVER!

[rockinrocker]

I don't think anyone's implying these numbers are surprising or unusual....

[That-Is-Bull]

Originally Posted by Cromulent

Yes.

Second sentence of the article. I feel stupid. Should've read more than just Engadget's post.

[flopticalcube]

I like this quote:

And for a company that doesn't ignore the tiniest of details, the most mundane of components are the most advanced available.

Go, Apple!

[iSlicer]

Be nice if the negative commenters would think about the cost of software development, hardware development, research, rent, salaries, etc... and how they effect the overall price of any product. Oh, and I am sure they are "allowed" to take some profit after they have factored in all of the costs. Far out, please don't try and run a business guys, or I may have to call and say your prices are too high.

[MrCrowbar]

Originally Posted by Pika

I could build my own with old PC components for much more less:

Kudos to you for not buying into the Hype.

[AAPLaday]

So apple charges more for these players than it costs to make, god-forbid any company out there follow this approach and actually turn in a profit!

[mogzieee]

Welcome to the business & retail world.

[ajones46]

What about all the time apple spent researching and developing the product without even making a penny? There's high risk involved and a lot of money spent that might not even pay off. Look at prescription drugs: it costs hundreds of millions of dollars to create a new drug that will make even more hundreds of millions of dollars, when the active ingredient for a single pill costs fractions of a penny.... it's threeconomics people.