Breakdown of Costs in an Intel iMac

[MacRumors]

Businessweek reports on a breakdown on the costs of components in the new Intel iMac.

They cite a company called iSuppli which took apart the Intel iMac and calculated the total cost of materials it takes to assemble.

According to the company, the 17" Intel iMac which retails for $1299 costs Apple $898 before adding software and boxing it. They estimate that the most expensive component is the new Intel Core Duo chip which is estimated to cost Apple $265 a piece.

The exact cost of the PowerPC that was in the G5 iMac is unknown, but the company estimates that it was significantly cheaper - closer to $100. That cost is a bit deceptive by itself, however, as Apple also had to develop their own custom chips to integrate the G5 into the rest of the motherboard. With the Core Duo, Apple simply uses Intel-provided chips at much lower cost.

 

[Lacero]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost. Seems to be heading that way, with the inclusion of the ATI Radeon X1600... they are gunning for the home livingroom.

 

[jacobj]

That seems like a fair margin to me!

 

[robbieduncan]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost.

Well said! OS and software upgrades should be free for life too

 

[caveman_uk]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost.

And go bust...

Well said! OS and software upgrades should be free for life too

And throw in the electricity to run them.

 

[Lacero]

And go bust...

They can coast on iPod sales...

Here's to the Crazy Ones ​

 

[Josh396]

Anyone know how much they made of the G5 iMacs? If the chips are costing them that much I wonder how the Intel Mac minis will fare? How much cheaper would a new single core Intel chip cost?

 

[RichP]

And go bust...

Yeah, how would they make money then? The amount of software sold for a mac is much less than games for an xbox. Theoretically, the imac comes with enough stuff where you would NEVER have to buy software, if you were happy with the featureset if the current iLife. An xbox without games doesnt do much of anything.

Im actually suprised the margin is that low on the machine.

 

[FoxyKaye]

Darnit. This is like the third or fourth "take apart" I've seen for the new iMacs. Who are these folks that have that kind of money (since taking it apart would apparently render AppleCare null and void forever)? Just so everyone knows and it's on the record, if you'd like to take apart your shiny new Intel iMac I would gladly take it off your hands to re-assemble on my own time. Just email me - I'll even pay for shipping.

Does anyone know the profit margins on PCs? I do think Apple would benefit from dropping prices another $100-$200 on all of its current stuff, but without a basis for comparison this is an arbitrary number.

 

[skunkworks]

If apple wanted tremendous marketshare they would have priced these machines at competition levels against dell/hp/gateway/lenovo. I don't think apple is aiming for that, rather, is looking to aim more at the home and enthusiast. In other words they will still remain a niche player.

 

[gekko513]

They can coast on iPod sales...

Here's to the Crazy Ones ​

Sounds like a healthy business plan.

I believe part of the reason why Apple's still here is that their business strategy, at least since Job's 2nd era, is to never sell anything with a loss.

 

[Spock]

I wish Apple just sold a intel Mac compatible logic-board so You can build Your own Mac, that way Apple still makes money on home built Macs.

 

[Josh396]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost. Seems to be heading that way, with the inclusion of the ATI Radeon X1600... they are gunning for the home livingroom.

I really don't think Macs are terribly overpriced. Power Macs are a tad on the pricey side, and I do think the new Powerbooks (I will never call them a Macbook) are overpriced but both iMacs, the Intel Duo and G5 I think are priced very well. Of course I could just be saying that to convince myself that I didn't get ripped off when I bought both of them.

 

[mister880]

It takes margins to inovate!

Apple has rolled off some amazing software (iLIFE) and other bundles that no other PC manufacture has even come close too.

It takes healthy margins to do R and D!

A pill that cost only 20 cents to make cost 5.00 because the proffit in the pill is what funds research to make new pills that will cure other illness!

Dell or HP haven't come out with anything truly inovative since the Pentium II!

3% faster each quarter... same old same old!

I got no problem with Apple making $400.00 off an iMac!

Kevin

 

[Ja Di ksw]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost.

Yes, because MS has made money with the Xbox.

Oh wait. . . . . . . .

 

[GFLPraxis]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost. Seems to be heading that way, with the inclusion of the ATI Radeon X1600... they are gunning for the home livingroom.

Oh please; that's one of Microsoft's monopoly tactics. They did that on the XBox and lost $4 billion dollars. That would SERIOUSLY hurt Apple, even if it gave them a 16% marketshare like the XBox, it may not be worth it.

 

[QCassidy352]

it's a $400 profit per imac... but that's just profit over the cost of the components.

They also have to pay for R+D, advertising, tech support, factory workers, the electricity in their building, and Steve Job's private jet.

So a $400 profit per box really doesn't seem like that much to me.

 

[chazmox]

I've worked in Engineering for 15 plus years and I own my own business... so let me say that is a very low margin. Think about it - each iMac has to operate as it's own little business. So each computer has to contribute some profit to pay for marketing and advertising, some profit to pay for the sales channel, some to pay for all that magnificent packaging, some profit to pay for software development, product R&D, etc.

That $400 will disappear very quickly. I would dare say that after all is said and done that Apple makes nothing on that computer. That's their loss leader and the profit is in the 2GHz version.

 

[LethalWolfe]

Apple has rolled off some amazing software (iLIFE) and other bundles that no other PC manufacture has even come close too.

It takes healthy margins to do R and D!

A pill that cost only 20 cents to make cost 5.00 because the proffit in the pill is what funds research to make new pills that will cure other illness!

Dell or HP haven't come out with anything truly inovative since the Pentium II!

3% faster each quarter... same old same old!

I got no problem with Apple making $400.00 off an iMac!

Kevin

What new newbie said. R&D money doesn't grow on trees and Apple has to have higher margins on its hardware 'cause its software is so inexpensive.


Lethal

 

[min_t]

I wish Apple just sold a intel Mac compatible logic-board so You can build Your own Mac, that way Apple still makes money on home built Macs.

You're asking for a lot of tech support calls from users used to installing Windoze. I'd rather just call 1 vendor for issues with my Mactel.

 

[nagromme]

I really don't think Macs are terribly overpriced.

They're in the same range as other brands--and sometimes cheaper--UNLESS you compare to one of the following:

1. Building a PC yourself (a fun project, but you're your own tech support).

2. A budget-brand PC (eMachines are cheap for a reason: cheap components with higher failure rates).

or 3. A name-brand PC (like Dell, HP, Sony) IF you pick a model that does NOT truly have comparable specs. (Dell offers some lower-end machines than Apple does--Apple has no offering in the bottom-of-the barrel market.) People like to pick one or two specs, call a machine equal or better, and conveniently ignore other specs. Often ignored: the Mac's GPU and VRAM, DVI out and spanning, the software bundle, powered Firewire, internal WiFi antennas, power consumption, noise levels, size and weight, microphone and camera, DVD burner, HD RPM, scroll ball mouse, lighted keyboard, sudden motion sensor, slot-load drive... just some examples, but Ghz and GB aren't the entire value you get from a computer.

Oh please; that's one of Microsoft's monopoly tactics. They did that on the XBox and lost $4 billion dollars. That would SERIOUSLY hurt Apple, even if it gave them a 16% marketshare like the XBox, it may not be worth it.

The XBox isn't even making money today, is it? They still take a loss on each one to make it up in licensing fees for games, don't they? (And does that even offset the loss yet? Last I heard, Microsoft was ONLY profitable with Windows and Office. What's the latest?)

 

[tmornini]

This estimate is CRAP!

They estimate that the most expensive component is the new Intel Core Duo
chip which is estimated to cost Apple $265 a piece.

Please. There's absolutely no way Apple would pay 2.6x for these processors,
and there's no need to believe they are.

1) Do you think Intel may have "sweetened the pot" to entice Apple to switch,
merely for the prestige?

2) $265 (and no doubt the other prices quoted) is the 1,000 piece pricing.
http://www.heise.de/english/newsticker/news/67961

How much do you think they cost when you're ordering 500,000 per
quarter?

 

[kiwi-in-uk]

Anyone know how much they made of the G5 iMacs? If the chips are costing them that much I wonder how the Intel Mac minis will fare? How much cheaper would a new single core Intel chip cost?

This might provide a clue to Apple's turnaround - their initial statement was that they would switch the low end consumer models first, and the performance models later. If the Mac Mini ended up costing too much then the only sensible roll out strategy is as we have seen - where there is at least some margin in each unit. So, as others have speculated in other threads, perhaps the Mac Mini will need to wait for the lower cost single processor before it can become profitable and therefore viable as an Intel based machine.

 

[jdechko]

R&D money doesn't grow on trees...

But Apples do. (sorry, had to be said)

I agree. $400 margin over parts isn't much when you think of all the R&D, software, and manufacturing costs. And think about that much of the included software is in R&D as well.

 

[stealthboy]

it's a $400 profit per imac... but that's just profit over the cost of the components.

They also have to pay for R+D, advertising, tech support, factory workers, the electricity in their building, and Steve Job's private jet.

So a $400 profit per box really doesn't seem like that much to me.

It's not $400 profit, people! Development costs eat into that, as you say. I *hate* these stupid take-apart fiascos for this very reason. They think it took zero hours to actually design and prototype this thing. The development costs alone probably mean they just about break even on each machine.

Fine, let me go buy the $800-whatever in parts and watch YOU put it all together for free.

The only thing that happens when these "articles" comes out is everyone gets in a tizzy about how Apple should lower prices. Anyone who actually believes that the only thing Apple has to pay for is the parts is a moron, plain and simple.