Teardown Reveals Nano Component Changes, Cost Reductions

[nagromme]

Reputation for high quality¿?

Yes--as evidenced by statistically low failure rates.

Apple HAS had hardware failures--like the ones you list--and yet they still have a better track record than every other PC maker. (See Consumer Reports for stats.)

And over the years, every time some Apple product experiences failures--however rare--people moan that Apple has gone cheap and lost their reputation

 

[Cloudane]

Fair enough!

I'm just worried, that's all. If the screen issue is a defect and they're willing to replace it (assuming I get a dodgy one) then all's well.

Have to admit, I had a Google for "apple quality" and people were whinging about "falling quality standards" back in the G3 days. Yet my G4 Powerbook has been more than reasonable, and I heard little other than good things around that era. Yes the metal paint is wearing off on the wrist rest area, the first HDD died (HDD's often die in about 2 years nowadays, that's why I like the Flash idea) and there is dust in between the LCD layers at the bottom of the screen. So what. I've been using the thing every day for almost 4 years, it's served me very well.

These screen problems are a huuuuge quality foul-up, just got to hope the *overall* quality is still good.

 

[aapl.jlo]

I don't blame them for making the iPods in China, after all, if we want a good rate on the iPod products, we can't make them in America for such a low price-I wish we could-but,we can't. There is nowhere in America that you can pay your workers a couple of bucks for a ten hour shift.
Do I feel guilty that I am buying products from Chinese labor factories...well, sort of, but that's how their government works, or doesn't (in the world of Communism)


Good job Steve-this is the best line-up yet of the iPods

​

 

[rhpenguin]

Yes--as evidenced by statistically low failure rates.

Apple HAS had hardware failures--like the ones you list--and yet they still have a better track record than every other PC maker. (See Consumer Reports for stats.)

And over the years, every time some Apple product experiences failures--however rare--people moan that Apple has gone cheap and lost their reputation

Mabye I'm a a little biased as every Apple product I've owned has failed miserably. With the exception of OS X, I run it happily..

 

[ChipperVW]

??

I don't think this is any real insight into the profits- but maybe if ALL of the information was available for production costs, etc. from previous model iPods it could be compared to this.

Either way, when Apple sells MILLIONS of these- whatever the profit is per iPod you can multiply that times __Million.

 

[CalBoy]

why wouldn't you be able?

Well, nothing really, I just know if I should expect a split. If there is a split coming, I'd like to buy before the split because splits have a way of making the price go up even more. Then again, we've been hearing rumors of a split for months.

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

Capitalism is great, but gouging is not. The iPod isn't a necessity, but that doesn't mean that it shouldn't be any less subjected to fairness and reasonable margins. Technically, you can live without cable, high speed internet, and even a computer. Nonetheless, you expect to get a fair market price on the product. Apple is able to have high margins and keep the price competitive because it is a large scale consumer of several critical parts, which other companies can't compete with. For example, Apple is the world's largest consumer of Flash. This gives Apple a better price than other companies. However, instead of passing even a small amount of these savings onto the consumer, Apple keeps the money for itself. Now, it is Apple's freedom to do this, and it is my freedom to not buy an iPod. Just like you are free to not buy gas and take the bus. We can complain about excessive margins without attacking capitalism. In fact, consumers being angry about prices is a critical component of capitalism. Without changes in demand, there will be no change in supply or price. I just think it works out better when consumers voice their concerns, and the company adjusts accordingly; I think this works better than a large group of people deciding to boycott the company.

By the way, ethics and business are two different discussions. It can be unethical for a business to charge too much, but it could be a great business strategy. Just look at Vista

Now, I'd like to emphasize that I don't think Apple gouges. However, if left unchecked, Apple could easily become a company which gouges its customers. It's a very fine line.

 

[MattInOz]

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.

"designed in California"
While I agree many companies of western countries sell there manual labour short by shipping production overseas. These sorts of teardowns don't tell the whole story when they talk about margins it's not like that margin is all profit as covered extensively already in the thread.

It's not all the profit made is on such as sale is even Apple's.
The retail markup on such a device maybe in the order of 30% and goes for the most part to local jobs in sales + some profit.
Apple of coarse out source more than manufacturing, Advertising for one using of coarse their favored firm in LA.
The Parts have R&D costs which put mores jobs in places like the U.S.

All these jobs putting bread on average peoples tables.
So the only two guys buying fancy planes out of produces like the nano are SteveJ and the guy who owns the Bakery.

 

[dukebound85]

to all that complain. buy the parts and build the product yourself.

 

[tveric]

However, if left unchecked, Apple could easily become a company which gouges its customers. It's a very fine line.

Oh yeah, because the cost of an building an ipod, to Apple, is just the sum of the cost of the parts. There's no R&D, manufacturing costs, shipping costs, and marketing costs. So if they're left unchecked, whatever that means in your bizarre logic, they might "gouge" you in the future when you want an ipod.

Maybe you need a refresher on the definition of price gouging.

Price gouging may be charged when a supplier of essential goods or services sharply raises the prices asked in anticipation of or during a civil emergency, or when it cancels or dishonors contracts in order to take advantage of an increase in prices related to such an emergency.

So if that hurricane hits and you HAVE to have an ipod to survive, and Apple is left unchecked, they will charge you QUADRUPLE what the sum of the parts cost them! The horror.

You're a friggin genius.

 

[CalBoy]

Oh yeah, because the cost of an building an ipod, to Apple, is just the sum of the cost of the parts. There's no R&D, manufacturing costs, shipping costs, and marketing costs. So if they're left unchecked, whatever that means in your bizarre logic, they might "gouge" you in the future when you want an ipod.

Had you read my first post, you'll find that I did take into account the all possible costs of production, including maintaining retail stores, marketing costs, manufacture, shipping, R&D, etc. Even with all this, Apple's margin on the Nano is probably above 20%, which is a very, very healthy number.

Maybe you need a refresher on the definition of price gouging.

Price gouging may be charged when a supplier of essential goods or services sharply raises the prices asked in anticipation of or during a civil emergency, or when it cancels or dishonors contracts in order to take advantage of an increase in prices related to such an emergency.

So if that hurricane hits and you HAVE to have an ipod to survive, and Apple is left unchecked, they will charge you QUADRUPLE what the sum of the parts cost them! The horror.

That definition of price gouging is the legal term. We're not talking about the legal perspective, we're talking about the average consumer perspective. And, had you bothered to read my entire post, you'll see that I didn't say that Apple was price gouging, but that the potential is there. If the iPod is able to smash all other MP3 players this Christmas, and the only choice is an Apple product, the stage is set for a possible gouge to occur, because, if you look closely at the meaning of price gouging, it clearly indicates that the supplier is increasing the price because no other alternative is present. Again, and read this this time, Apple is not doing this. However, if the margin on the iPod begins to cross over into the 40, 50, or 60th percentile, I think we can say that Apple is over charging for its product, and if there are no other *viable* competitors (of which there are only a handful at the moment, and even they aren't doing so well), then guess what? We have price gouging.

Anyways, the point is, the nano costs less to produce now than it did before, and Apple has provided an increase in capacity to its customers(for the same price), so we don't need to be arguing over a null point.

You're a friggin genius.

Check your attitude at the door. We are having a discussion; there's no need for sarcasm.

 

[tveric]

However, if the margin on the iPod begins to cross over into the 40, 50, or 60th percentile, I think we can say that Apple is over charging for its product, and if there are no other *viable* competitors (of which there are only a handful at the moment, and even they aren't doing so well), then guess what? We have price gouging.

Quit while you're behind, this point makes even less sense than everything you said previously.

First off, you have no idea, and will never have any idea, of what the margins on the ipod are, because you don't know what their R&D, manufacturing, shipping and marketing costs are, per ipod. Even if you did, and Apple was charging five times what it cost them to make it, guess what? You don't have to buy it, and there are competitors that you can buy from. The reason that they're "not doing so well", as you ambiguously put it, is because those products SUCK, compared to the ipod, not because Apple has some sort of imaginary partial monopoly over the mp3 player business.

How is Apple ever going to have no competitors in the mp3 player business? Any tech company is free to create one and sell it, at any time. Applying the principle of price gouging to ipods, legal definition or consumer definition (and "consumer definition" sounds a lot like whining customers saying "hey I paid $600 for this iphone 2 months ago waaaah!"), is ridiculous. You don't like the price of the ipod, or how much money Apple is making on each ipod? No problem, DON'T BUY ONE. Oh, you NEED an mp3 player? (you don't, by the way) Fine, buy a cheaper one from a competitor.

And stop crying. Or move to a truly socialist state where prices get fixed by government and the economy eventually gets run into the ground. I'd prefer you did the second one, but I have a feeling you'll do neither.

 

[lofight]

Well, nothing really, I just know if I should expect a split. If there is a split coming, I'd like to buy before the split because splits have a way of making the price go up even more. Then again, we've been hearing rumors of a split for months.

Is apple maybe gonna split??

 

[koobcamuk]

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!?

err...
http://cgi.ebay.com/USB-2-0-Printer...ryZ51286QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

Why would you buy one for $29.99?

I don't blame them for making the iPods in China, after all, if we want a good rate on the iPod products, we can't make them in America for such a low price-I wish we could-but,we can't. There is nowhere in America that you can pay your workers a couple of bucks for a ten hour shift.
Do I feel guilty that I am buying products from Chinese labor factories...well, sort of, but that's how their government works, or doesn't (in the world of Communism)[/CENTER]

Why don't they make them in London? Then a shuffle might be something like $400 a piece...

 

[MagnusVonMagnum]

I don't blame them for making the iPods in China, after all, if we want a good rate on the iPod products, we can't make them in America for such a low price-I wish we could-but,we can't. There is nowhere in America that you can pay your workers a couple of bucks for a ten hour shift.
Do I feel guilty that I am buying products from Chinese labor factories...well, sort of, but that's how their government works, or doesn't (in the world of Communism)


Good job Steve-this is the best line-up yet of the iPods

​

Well, that's what I call typical short-sightedness. It's the same kind of thinking that lead to the U.S. handing the VCR to Japan. They couldn't see how to make a profit the next quarter on the thing so they gladly got rid of it and Japan ruled the market for the next two decades until DVD took off.

I usually wear New Balance shoes. I started buying them because they were the last U.S. maker of tennis shoes. They averaged $45 a pair while Nike were more like $100-200 a pair even though New Balance paid a decent wage in the USA while Nike paid slave rates in China. I always wondered how it was that New Balance managed to make shoes in the U.S. AND make a profit while paying U.S. workers while Nike gouged the market, paying a couple of million to celebrities to push sweat shop sneakers.

Now New Balance has moved to China in the past few years like everyone else. The shoes cost the same as they always have. You tell me where all those slave labor saving have gone. They sure as hell haven't been passed onto the consumer!!!! GREED GREED GREED GREED GREED.

It's a total load of bollocks that goods can't be manufactured in the U.S. at REASONABLE prices. It's NOT cheap to move factories over to China and it's definitely not cheap to ship them across the ocean. Your savings are eroded by those factors and most of the savings are not passed onto consumers. U.S. goods might cost 10-20% more than Chinese goods in the end (if that even given the way corporate greed keeps ALL the profit and doesn't pass savings on), but more importantly, keeping jobs in the U.S. means the country stays in good health. Look what has happened over the Bush years here. Good jobs leave and minimum wage (or close to it) job replace them. The country's debt has never been higher. The trade deficit has never been higher. How in the world can anyone say that's a good thing? Can you see past the DOW average or the next quarter what is going to happen in a few years to this country???? I guess not. We're selling the country's life blood off for to save a few cents on the dollar. What good are those savings if you lose your $50,000 a year job and have to take an $11,000 a year one because the $50,000 one was outsourced?

I'll say it again. People are STUPID to let this stuff happen.

That's just the way it is in China? Developed countries should not interact with undeveloped ones on the same level (even Star Trek had its Prime Directive for a REASON) because they are NOT on the same level. It undercuts the developed country as a whole (job losses) and the undeveloped countries propagate out of control, sucking up all the world's resources.

When gas prices in the U.S. top $6 a gallon people might start to ask themselves why it keeps skyrocketing. CHINA (and their insatiable need for ever more oil to keep up with their modernizing industrial base) is why it keeps skyrocketing and we're making it happen many times faster than it ever should have happened.

Like I said, people need to look past the next quarter! Saving a few bucks in the short term leads to massive losses in the future. The rich don't care because ALL those changes MOSTLY benefits them, not YOU. They brain wash you into thinking it can't be made here for reasonable prices and that just isn't true.

There's a big difference beween FREE trade agreements and FAIR trade agreements. Until people understand the differences, we'll keep selling this country out by the dollar (and the same applies to other countries as well).

 

[CalBoy]

First off, you have no idea, and will never have any idea, of what the margins on the ipod are, because you don't know what their R&D, manufacturing, shipping and marketing costs are, per ipod. Even if you did, and Apple was charging five times what it cost them to make it, guess what? You don't have to buy it, and there are competitors that you can buy from. The reason that they're "not doing so well", as you ambiguously put it, is because those products SUCK, compared to the ipod, not because Apple has some sort of imaginary partial monopoly over the mp3 player business.

Well, this gives me some idea: Apple's 3rd Quarter profits.
Granted, I don't have the specific values for each product, but a gross margin of 36% sounds pretty good to me. If that's the average, I think we can safely assume that the new nano, which costs less to produce than the older one, has around a 20% margin AT THE LEAST.

How is Apple ever going to have no competitors in the mp3 player business? Any tech company is free to create one and sell it, at any time. Applying the principle of price gouging to ipods, legal definition or consumer definition (and "consumer definition" sounds a lot like whining customers saying "hey I paid $600 for this iphone 2 months ago waaaah!"), is ridiculous. You don't like the price of the ipod, or how much money Apple is making on each ipod? No problem, DON'T BUY ONE. Oh, you NEED an mp3 player? (you don't, by the way) Fine, buy a cheaper one from a competitor.

Ok, this is my last word about price gouging. If you had been paying attention, you would have seen that I stated, three times, that Apple isn't price gouging. What I said was, the potential for price gouging is present, though I doubt it will materialize.

pricing above the market price when no alternative retailer is available

This means, that if the iPod were to become the only MP3 player in the future, and Apple decided that this meant they could charge $800 for one, that Apple would be guilty of price gouging. Do I think this is going to happen? No. There is enough competition where this isn't likely to happen. But, people have thought that about other industries in the past; oil (how do you think Rockefeller made his money?), phones (remember when all there was was ATT?), and dozens of other industries of the past have been able to get away with similar actions.

And stop crying. Or move to a truly socialist state where prices get fixed by government and the economy eventually gets run into the ground. I'd prefer you did the second one, but I have a feeling you'll do neither.

Your laissez-faire attitude is fine, in fact, I like it when government stays out of business, but I don't want to be a stoic spectator; if something begins to go wrong, I would like to be able to help correct it. Now, that means, that as a consumer, I have a duty to challenge anything which I percieve to be a threat to my position in the market economy; just like Walmart challenges unions or healthcare reform. If that isn't playing the game of economics to you, then you need a refresher course. It's our duty as consumers to look after our interests, not corporate interests. You may think I'm whining, or "crying" but this is part of the process which keeps certain prices low in our economy, and certain industries in check.
And, if you think that complaining about economics (which I never did by the way) is unpatriotic, then go and read that tiny little thing called the First Amendment. You'll find all kinds of interesting stuff in there. Seems the framers thought it was just mildly important.