Teardown Reveals Nano Component Changes, Cost Reductions

Discussion in 'MacRumors.com News Discussion' started by MacRumors, Sep 19, 2007.

  1. MacRumors macrumors bot


    Apr 12, 2001

    Research firm iSuppli has torn down the latest iteration of the iPod nano to find hefty component changes.

    Specifically, iSuppli estimates the bill of materials (BOM) at $58.85 for the 4 GB nano and $82.85 for the 8 GB version. Apple sells the 4 GB model at $149 and the 8 GB model at $199.

    As usual, the estimate is limited to the BOM and does not include costs for manufacturing, software, intellectual property, research and development, accessories and packaging. Still, the estimates can provide some insight into Apple's profit margin on a given product.

    Article Link
  2. Eidorian macrumors Penryn


    Mar 23, 2005
  3. tschull macrumors newbie

    Jun 23, 2003
    It does?

    So the message here is that manufacturing, software, intellectual property, R&D, accessories, and packaging are either minor costs or can be directly inferred from the cost of the components?

    All I can tell from this data is that Apple's profits will be somewhere between zero and the retail price less the cost of the components. In other words, still a guess.
  4. DTphonehome macrumors 68000

    Apr 4, 2003
    As a shareholder, this is great news. I love to see huge margins.

    If I were an Apple competitor, however, this would be incredibly frustrating...I'm sure no one can build these for anything near Apple's price.

    You can't tell net profit margin from this info, but you can tell that Apple is building these way cheap, and selling them for a healthy price on the market, so it's safe to say that a good chunk of that ~$100 markup is profit.
  5. QuarterSwede macrumors G3


    Oct 1, 2005
    Colorado Springs, CO
    $100 just for parts is great. All other costs will be easily taken care of when these sell like hot cakes.
  6. Marx55 macrumors 65816

    Jan 1, 2005
    My question is: is that cost for a single component? Because otherwise, SINCE Apple purchases millions of components AT ONCE, will get 50% price cuts or even more!!! So, WHAT ARE THE REAL TRUE MATHS???
  7. k2k koos macrumors 6502a

    k2k koos

    Jan 21, 2003
    Somewhere between yesterday and tomorrow
    Not so sure about a good part of $100,- of profit, but a healthy one yes. It also indicates that Apple's products are indeed competitively priced, and can't really go much lower than they are, given that loads of people will have to be paid their wages, transportation costs, etc within the profit margin. good on :apple:
  8. lofight macrumors 68000


    Jun 16, 2007
    saw this houres ago but no prob... yes it seems like apple is going to have big margins at the end of this year!!
  9. Gherkin macrumors 6502

    Apr 9, 2004
    I wonder where they get that price for the NAND. Anyone have any data on how much the 8 GB of NAND cost in the black nano when it was released a year ago? It would be interesting to see how much it has come down in price.
  10. DTphonehome macrumors 68000

    Apr 4, 2003
    I'm sure they take Apple's discount on flash, and their unrivaled economies of scale, into account.
  11. gkarris macrumors 604


    Dec 31, 2004
    "No escape from Reality..."
    I hear the markup on ALL MP3 players is 100%, so the 4Gig wholesale is $75 and the 8Gig is $100...
  12. nagromme macrumors G5


    May 2, 2002
    "...does not include costs for":

    intellectual property
    research and development

    NOR for:

    customer service/support
    insurance costs
    legal costs
    regulatory approvals


    I'm not sure how much "insight" this gives us (reminds me of the iTunes Music Store profit estimates that ignore R&D, support, servers, power, bandwidth, staff, rent, credit card charges, etc.) but you can compare this one segment to past product estimates I suppose.

    I'm sure iSuppli is TRYING to estimate some kind of bulk discount, but we can't know the true math. We can't know what deals Apple has worked out. Maybe better than iSuppli's guesses, maybe worse.

    What we CAN be sure of is that iSuppli is good at getting attention for itself :)
  13. gnasher729 macrumors P6


    Nov 25, 2005
    This is just bizarre. For some reason iSuppli tries to take any Apple product apart. So where are the numbers for the Zune? How much do the parts in a Dell computer cost? Or the parts in a 40 inch LCD TV? Has anyone ever read a report from iSupplie where any product had parts cost of more than 50% of retail price?

    After paying for the parts, you pay for the people putting the parts together. You pay for testing. You pay for the players that fail the test. You pay for shipping. You pay for advertising and marketing. You pay to put the players into the shops. The shop wants some profit. Some shops have problems paying and you have trouble getting your money. Some people return the player for no good reason and it is resold as refurbished. Some people return it because it doesn't work. And before all of that, development cost, paying license fees and so on.

    The numbers from iSuppli are one little piece of a very complicated equation. If you don't know all the other pieces, you can't draw any legitimate conclusions from this at all.
  14. PhatBoyG macrumors regular


    Jun 8, 2007
    Tulsa, OK
    Well, my guess would be that MS pays around $280 for the hardware for each Zune, which they turn around and sell for $199 at a loss to "get into the market."

  15. Rocketman macrumors 603


    One thing we do know is the net margin has been on an increase lately for Apple overall. This seems to try to continue the trend of incremental system wide sales margin increases thus profit margin increases.

    I would be curious to see an expert analyze the packaging and distribution costs.

    The "other" costs are "sunk costs" and simply are amortized over the first X number of units until breakeven is achieved, after which the gross margins approximate the iSupply figure net net.

  16. hayesk macrumors 65816

    May 20, 2003
    I disagree. Marketing, packaging, shipping, channel costs, etc. can often be more than the cost of the product itself.
  17. slffl macrumors 65816


    Mar 5, 2003
    Seattle, WA
    If it doesn't account for manufacturing, software, intellectual property, research and development, accessories and packaging, then it provides absolutely NO INSIGHT as to what their profit margins are.
  18. jellomizer macrumors 6502


    Sep 12, 2006
    Upstate NY
    Building Costs.

    I would assume moving from injection molded plastic to all metal designs has a huge change in costs too. Injected Plastic with a bit of glue make the manufacturing plastic easy. Cutting Bending metal to such a high tolerance has its price too. I would love to see how these iPod are manufactured. Just the cases alone would be interesting. i've seen people make Freezers and the metal bending process is often a very manual job. And most of the parts required low tolerances The the fact every time they change the project they need to redo the manufacturing process. No wonder why Thinkpads look almost identical to the way they did 12 years ago.
  19. MegaSignal macrumors 6502

    Oct 20, 2003
    No doubt the first Nano (in this new generation) cost millions to produce; eventually, however, this product will be extremely profitable. It's only a matter of time...
  20. Cloudane macrumors 65816


    Aug 6, 2007
    Sweet Apple Acres
    I hope this doesn't mean they're now using cheap crappy components. Though with the Touch's screen problems one has to wonder. Please don't ruin your reputation for high quality, Apple!
  21. lofight macrumors 68000


    Jun 16, 2007
    well, the latest time apple has been having problems with screen issues and more...
  22. shadowfax macrumors 603


    Sep 6, 2002
    Houston, TX
    Yeah, I am worried about that too, after the iPod Touch screen, as well as my Polka-Dot iPhone screen, and the bits about the lower-quality audio chip in the new iPods.
  23. Mgkwho macrumors 6502a

    Mar 2, 2005
    It seems as if all of the recent model's screens of Apple products are all screwy. There's the iMac, the iPod touch, the iPod nano tilted screens....

  24. Yateball macrumors regular


    Jul 25, 2007
    Realistically, doesn't everyone already know that companies make profit off stuff they sell?

    Sure that's a big profit margin, but like it says it counts no extras such as manufacturing costs, etc.

    USB Printer cables retail for $29.99 at futureshop and cost on them is $1.96.... I'd say the profit from that is significantly more. It's just no surprise to me that apple is profiting from their products.... apple wants to make money? NO WAY!?
  25. shadowfax macrumors 603


    Sep 6, 2002
    Houston, TX
    Hah, I forgot to mention this 2.3 Ghz MBP that I have: the right side of the backlight is screwed up and the screen is already dimmer than it was 4 months ago when it was purchased. Of course, I will be taking it into the Genius Bar next week. I hope the screen replacement is good--other than the backlight problem, the screen is flawless--not one single dead/white pixel. I wish they could just replace the backlight...

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