I have very close family members in the consumer electronics business (mainly digital cameras), so I'm well aware of the other costs. The rest of those things matter far less than the actual cost to manufacture the device. And, the more items you produce (and import), the less those other costs figure as a percentage of each item.
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Teardown Reveals Nano Component Changes, Cost Reductions
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I have very close family members in the consumer electronics business (mainly digital cameras), so I'm well aware of the other costs. The rest of those things matter far less than the actual cost to manufacture the device. And, the more items you produce (and import), the less those other costs figure as a percentage of each item.
Wait for Leopard.
Just wait until isuppli.com does this "teardown" on Leopard after it is released. Retail price will be $129 and the cost of the part, less packaging is just one blank DVD, about a five cents, I think. So Apple makes $128.95 per copy? Margins on the iPod are nothing compared to this.
But then what about those 1,000 engineers who had to be paid for two years and their office space and the people who answer the phone for Applecare and the guy in the Apple store who hands yo the box and takes your money and the person who cleans the carpet at night and so on and so on.....
Just wait until isuppli.com does this "teardown" on Leopard after it is released. Retail price will be $129 and the cost of the part, less packaging is just one blank DVD, about a five cents, I think. So Apple makes $128.95 per copy? Margins on the iPod are nothing compared to this.
But then what about those 1,000 engineers who had to be paid for two years and their office space and the people who answer the phone for Applecare and the guy in the Apple store who hands yo the box and takes your money and the person who cleans the carpet at night and so on and so on.....
The question is how much money. From a consumer stand point, I think a healthy 10-15% profit margin after ALL costs are factored in is very reasonable. I expect the company to walk away with at least 10% after they pay for everything to get the product to me (employees, stores, shipping, production, design, the whole shabang). If a company starts to develop a higher profit margin, like the one Apple is currently enjoying, then no doubt shareholders are happy, but what about the rest of us? At times, Apple's margins on Macs can go as high as 30%. Don't you think that's a big out of line? I don't mind if Apple makes money off of me, heck, they should if I want to buy another Apple product in the future, but it can go too far.
As for these Nanos, I don't think Apple is making too much money off of them. For the 8GB model, the report indicated a materials cost of $82.85. Factor in the cost of designing, producing, shipping, packing, advertising, keeping Apple Stores with enough inventory, setting aside a few for Lemon problems, and the cost of updating iTunes (and keeping it working smoothly), we can probably guess that the cost of the Nano is probably quite a lot more than $83. My guess is that Apple probably makes a good $45 off of each 8GB model, which is healthy, but also perfectly fine. Even though the margin is above 20%, there are few MP3 players that offer a better storage/price ratio, which means that the customer still wins because they get better design, more options, and a very nice piece of software to go with it.
Of course everyone knows that companies make a profit on items they sell (with some exceptions, ie PS3 and Xbox 360). The question is "how much" profit are they making on each item. Since Apple doesn't release those figures (most companies don't), iSuppli is providing a rough estimate of hardware costs so you can infer the profit margin. For investors, that is VERY important information! Selling a hundred million iPods with a ten cent profit margin is far worse than selling two million with a $50-75 margin. One of the reasons Apple has had so many great quarters lately is because supply costs keep going down, while the price of Macs stays roughly the same, so Apple earns a fat margin on each machine.
EDIT: Calboy beat me to it!
Yeah, but your explanation was better. Meanwhile, I wonder if I'll be able to buy AAPL before Christmas.
These kind of studies are really interesting, but as noted, it's ridiculous to infer a profit margin from this.
There are so many drivers behind RD&E, SG&A, and non-BMC costs, everything from transport, to engineering, to warranty. Generally, those costs could be just as much if not more than the cost of the electronics.
Not really saying ANYTHING about Apple's margins.
There are so many drivers behind RD&E, SG&A, and non-BMC costs, everything from transport, to engineering, to warranty. Generally, those costs could be just as much if not more than the cost of the electronics.
Not really saying ANYTHING about Apple's margins.
Go the main MacRumors page and the Positive/Negative links are right below the article's text.
I thought they were on the article's page as well but it turns out that they aren't. Digg is though...
Several comments in this thread, including this one, seem to imply that there is potentially unfairness/lack of ethics in Apple's profit margin. But no one has to buy iPods. There are many alternatives. "What the market will bear" is the saying in economics. This is capitalism people.
Mule
Ethics don't come into it (unless people get so disgusted they stop buying). Apple is a business, not a charity! As such they will do what they can to please the shareholders, and as long as customers are willing to keep buying then to heck with what they think. It's not evil, it's just how capitalism works.
Unfortunately, once a company goes from niche to mainstream, there is less emphasis on Quality. Quality is what's needed to get the company up there to that level of popularity, but once it's so popular there's no longer a need to concentrate quite as heavily on it. This is the point I'm worried that Apple has reached.
Unfortunately, once a company goes from niche to mainstream, there is less emphasis on Quality. Quality is what's needed to get the company up there to that level of popularity, but once it's so popular there's no longer a need to concentrate quite as heavily on it. This is the point I'm worried that Apple has reached.
I'd be curious to see the price breakdown on the MacPro. I wonder if Apple consumers might be a little upset to find out they could have their mid-priced tower if Apple just lowered their insanely high profit margins a bit.
No, I don't own stock in the company. I'm just a consumer that doesn't like being shafted. Watching stock owners get gleeful because they know consumers are getting soaked, which means more returns for them reminds me why I hate Capitalism in general and especially the Republican Party in the U.S., whose mandate is essentially, Let them eat cake. 25% profit is essentially the 'fair' cap of profits, IMO. Beyond that you're being ripped off, IMO.
Look at Nike. Less than $8 to make a pair of $200 shoes using essentially slave labor in China. They then ship it back to the U.S., without an protection tariffs for American labor forces who literally CANNOT compete with slave labor and then reap the massive profits. The worst part is U.S. consumers DON'T CARE. They should demand products be made in the U.S., even if at slightly higher costs (and lower profit margins) because it keeps the overall TRUE economy going (not the Dow Industrial which represents the top 10% or less). And yes that should include demanding Apple bring their Mac production lines back to the U.S. where it belongs.
This country (and the world in general save countries like China) is heading for a massive economic collapse and new great depression. The writing is on the wall. The housing market is a good indicator of how people are NOT smart (what DiTech REALLY thinks, not what they advertise). Some might say stupid people get what they deserve (and we are stupid to not demand FAIR trade, controlled government spending and better foreign policies), but that also means no compassion for one's fellow man and ultimately, countries are only as strong as their lowest common denominator. The U.S. is WEAK compared to decades ago and yet the rich call the economy an improvement because the upper 5% are getting richer while everyone else is struggling to hold on.
No, I don't blame that all on Apple or iPods or Nanos, but it just REMINDS me that Capitalism is ultimately the representation of GREED on Earth and the U.S. is the simultaneously the worst offender and the hardest hit by the lower end effects of it. Competition is one thing. Companies like M$ seeking to DESTROY competition by any means possible or ones like Apple seeking to control every aspect of their computers, phones and other products means it's not about friendly competition but economic warfare. WalMart, for example is about destroying competition, not offering a cheaper alternative. Everything they do is to try and drive other companies and small businesses OUT of business. Foreign companies regularly dump steel and other raw materials below market cost on this country to destroy internal US competition and our laws often just let it happen. Those aren't competitive tactics! They're designed to destroy infrastructure here so they can have a monopoly on said items in the future.
So when I say FAIR trade, I mean tit for tat, not maximizing the shareholders profit or have a 1:10 ratio of outgoing versus incoming. Why does the U.S. even trade with Communist China while holding embargos on Cuba? Is Cuba more of a threat in any aspect than China with its nuclear weapons? Of course not. We deal with China because they represent almost unlimited slave labor and cheaper manufacturing so the top 5% can get rich while the working man loses his job because minimum wage can't compete with pennies on the dollar. And then the rich say that's too bad. Those people should find new jobs. We sell out our industry; we sell out our entire country so a select few can drive a Lamborghini and fly in private Lear jets while we the middle or lower class struggle to make ends meet as prices rise faster than inflation and wages.
So yes, it really bothers me to see gleeful greed over Corporate profits. But then I KNOW it doesn't bother said people one bit. Screw everyone else. Let them eat cake. Watch where it leads us in the end. People who learn nothing from history are doomed to repeat it.
No, I don't own stock in the company. I'm just a consumer that doesn't like being shafted. Watching stock owners get gleeful because they know consumers are getting soaked, which means more returns for them reminds me why I hate Capitalism in general and especially the Republican Party in the U.S., whose mandate is essentially, Let them eat cake. 25% profit is essentially the 'fair' cap of profits, IMO. Beyond that you're being ripped off, IMO.
Look at Nike. Less than $8 to make a pair of $200 shoes using essentially slave labor in China. They then ship it back to the U.S., without an protection tariffs for American labor forces who literally CANNOT compete with slave labor and then reap the massive profits. The worst part is U.S. consumers DON'T CARE. They should demand products be made in the U.S., even if at slightly higher costs (and lower profit margins) because it keeps the overall TRUE economy going (not the Dow Industrial which represents the top 10% or less). And yes that should include demanding Apple bring their Mac production lines back to the U.S. where it belongs.
This country (and the world in general save countries like China) is heading for a massive economic collapse and new great depression. The writing is on the wall. The housing market is a good indicator of how people are NOT smart (what DiTech REALLY thinks, not what they advertise). Some might say stupid people get what they deserve (and we are stupid to not demand FAIR trade, controlled government spending and better foreign policies), but that also means no compassion for one's fellow man and ultimately, countries are only as strong as their lowest common denominator. The U.S. is WEAK compared to decades ago and yet the rich call the economy an improvement because the upper 5% are getting richer while everyone else is struggling to hold on.
No, I don't blame that all on Apple or iPods or Nanos, but it just REMINDS me that Capitalism is ultimately the representation of GREED on Earth and the U.S. is the simultaneously the worst offender and the hardest hit by the lower end effects of it. Competition is one thing. Companies like M$ seeking to DESTROY competition by any means possible or ones like Apple seeking to control every aspect of their computers, phones and other products means it's not about friendly competition but economic warfare. WalMart, for example is about destroying competition, not offering a cheaper alternative. Everything they do is to try and drive other companies and small businesses OUT of business. Foreign companies regularly dump steel and other raw materials below market cost on this country to destroy internal US competition and our laws often just let it happen. Those aren't competitive tactics! They're designed to destroy infrastructure here so they can have a monopoly on said items in the future.
So when I say FAIR trade, I mean tit for tat, not maximizing the shareholders profit or have a 1:10 ratio of outgoing versus incoming. Why does the U.S. even trade with Communist China while holding embargos on Cuba? Is Cuba more of a threat in any aspect than China with its nuclear weapons? Of course not. We deal with China because they represent almost unlimited slave labor and cheaper manufacturing so the top 5% can get rich while the working man loses his job because minimum wage can't compete with pennies on the dollar. And then the rich say that's too bad. Those people should find new jobs. We sell out our industry; we sell out our entire country so a select few can drive a Lamborghini and fly in private Lear jets while we the middle or lower class struggle to make ends meet as prices rise faster than inflation and wages.
So yes, it really bothers me to see gleeful greed over Corporate profits. But then I KNOW it doesn't bother said people one bit. Screw everyone else. Let them eat cake. Watch where it leads us in the end. People who learn nothing from history are doomed to repeat it.
Go the main MacRumors page and the Positive/Negative links are right below the article's text.
I thought they were on the article's page as well but it turns out that they aren't. Digg is though...
Thanks. I have been going to the direct pages right from the RSS feed and I thought I was going crazy.
If "those other things" include the R&D to actually create the product, then that will vary but it's a BIG expense.
And to remind people: the cost to manufacture the device (even without those other things) is NOT just the cost of the parts. The parts also have to be shipped to the factory, with machines and employees and power, where the parts are transformed into a product. In other words, even if iSuppli's guesses were correct, we still wouldn't know the cost to manufacture.
i expect the nanos are making a healthy profit the company i work for bought the old 2gb ipod nanos in for £55 each and sold them on for the rrp of £99 apple must have still been making a fair profit on the nanos at £55 just think what they made on the nanos they sold through their own stores at £99
the new ipods i expect will have very similare product margins taking into account drop in prices of flash memory but the increased memory size in each unit.
the new ipods i expect will have very similare product margins taking into account drop in prices of flash memory but the increased memory size in each unit.
The Mac Pro is a competitively priced for a workstation class system... compare one to a workstation from HP or Dell. Don't forget it is a Xeon system (higher priced processor, chipset, and memory then your typical desktop system).
You likely are looking at margins in the low 30s (30%) for the top end MacPro (given the long run of the current Mac Pro model margins have of course risen so they could be higher then that now).
iSuppli does the Apple teardowns to get free publicity. Their main business I would guess is teardowns of competitor products that only the paying company sees. The previous company I worked for considered using iSuppli to get BOM (Bill of Materials) costs for a competitor's box.
Greg
Reputation for high quality¿? My first Apple II caught fire on my desk. Lets go back over even just ten years of Apple blunders.
Rev A B&W PowerMac ATA controller fiasco
G3/G4 iBook Logicboard/GPU issues (this problem was ongoing from 2000 till the last G4 iBook rolled off the line.)
Short battery life on 3G iPods (and the lawsuit that ensued...)
Powerbook batteries that blow up.
Apple Cinema (alu) displays with yellowing at original release
The C2D notebooks that would heat up till they shut down due to crappy build quality.
I can keep going, but I think you get the point.
