Tuesday, April 14, 2009

Teardown of Apple's Tiny iPod Shuffle

BUSINESS WEEK -- There's not much on the inside of the iPod Shuffle, as a teardown analysis of the device by market research firm iSuppli has found. Privately held iSuppli takes consumer electronics apart in order to estimate how much they cost to build. And while a teardown doesn't account for the costs of design, software, manufacturing, or shipping, these cost estimates help fill in the blanks toward estimating the profit on each device sold.

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 $79 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.

Biggest supplier? Samsung

See previous CD post on the iPod teardown.


At 4/14/2009 8:50 AM, Blogger ExtremeHobo said...

I wonder how much cost you could build into each product based on the massive advertising expenditures from apple.

At 4/14/2009 10:50 AM, Blogger ExtremeHobo said...

You think the profit margin is higher on the $1.29 iTunes songs?

At 4/14/2009 12:57 PM, Anonymous Anonymous said...

This Business Week article is a bunch of Crapola. Just about any manufactured product will have a component cost of 20% of final retail price - maybe less. It means nothing.

Think about a shirt or shoes or a pen. It makes little difference.

This article was no doubt written by someone with zero knowledge nor experience with manufacturing.

At 4/14/2009 1:25 PM, Blogger ExtremeHobo said...

i dunno bout that. For example, Xbox 360s (and generally all gaming systems) were actually sold below cost for the first couple years because they plan to make the money back in software sales. Cars are built at a very small manufacturing profit (as highlighted on this site several times). One could also go into the component cost of gold jewelry which is almost 100% tied to the cost of gold (its only component).

Then there are products like cologne that cost nearly nothing to make, but have gigantic advertising overhead to give them perceived value.

At 4/14/2009 5:52 PM, Anonymous Dr. T said...

I always hate these analyses. They serve little purpose except to convince some people that they were ripped off. Apple has a massive R & D budget, a big design team, expensive ad campaigns, warranty repairs and replacements, and the need to make a decent profit for its shareholders. None of those factors were considered. For a small, commodity item such as the iPod Shuffle, those costs will greatly exceed direct manufacturing and distribution costs.

At 4/14/2009 10:35 PM, Blogger ExtremeHobo said...

lol, what R&D goes into shoving some flash memory into a small battery powered case with buttons? The shuffle has no features that a $30 Sansa doesnt have. If you bought one you were ripped off. That is unless you enjoy paying for giant advertising campaigns with terrible songs.

At 4/15/2009 8:35 AM, Anonymous Anonymous said...

Reminds me of a story from back in the early 1900's, about a company building a large generator that didn't work right. So an expert was called in who studied the problem for a few days, after which he marked the generator with chalk and told them to cut here and change this. Later he sent a bill for a large sum, too which the company asked why so much for just marking a spot with chalk. He told them he only billed $1 for the chalk, the rest was for knowing where to put the chalk.


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