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Inside the Third Gen iPod Nano
ahess247 writes "When the leaked photos of the 3rd-gen iPod nano first hit the Web it quickly took the nickname 'little fatty,' but fat could be better used to describe Apple's profits on the project. BusinessWeek reports that a teardown analysis by iSuppli finds that it costs Apple only $58.85 to build the 4-gig iPod nano, and $82.85 for the 8GB version. The analysis also reveals some of Apple's suppliers, about which it is usually very tight-lipped. Synaptics is back as the supplier of the click-wheel technology, beating out Cypress Semiconductor which had it previously. Also of note: The same Samsung CPU chip that powers the video and audio in the nano is being used in the iPod Classic as well."
You mean an Apple product is overpriced?
When you have a better analysis of what it costs to develop the software, the amortized cost of engineering and other non-hardware costs (marketing, managing, distribution, etc) so that we can see a margin. Those numbers (58.84$) are totally irrelevant and only serve to misinform. Sure, you could buy the pieces that price, but for what it's worth...
Of Code And Men
Are not all that go into the final street price. You got R&D, Marketing, Logistics.. Steve's Salary...
---- Booth was a patriot ----
The price of a product only relates to the price of its components to the degree that the maker avoids taking a loss. I keep having to explain this to people. Adding a $50,000 extension to your house doesn't increase its value by $50,000; in some cases it could actually decrease the value. iPods are just jewelry (why else would there be a special U2 edition?), and the last time I checked the mark-ups on jewelry is way higher than any margnis that Apple would dream of.
Nothing for 6-digit uids?
Companies create and sell products in order to make money!
It is neat to see that the Nano has the same guts as the "classic" now, though.
Many of the numbers iSuppli comes up with are pretty much made up. Regardless, most news organizations assume that the entire difference between retail of the device and the iSuppli number is "pure profit," etc. - this is utter nonsense. Previous iSuppli numbers have been shot down by reason, I hope to see the same thing in this instance.
Yeah, the v3 Nano is cheaper to build. Its also cheaper to buy, with a 4 GB unit now $150 and $200 for the 8 GB, as opposed to 2 GB for $150, 4 GB for $200, and 8 GB for $250.
Test your net with Netalyzr
You mean an Apple product is overpriced?
That's one way to look at it, in the context of the whole marketplace. Another way to look at it is that they've priced it according to the amount people have told them they're willing to pay. So if it were cheaper, it would be underpriced for that particular offering from Apple.
The theory of relativity doesn't work right in Arkansas.
Price gouging? It's a luxury product. Does that concept even really apply?
From the referenced article:
"ISuppli's estimates don't account for nonhardware costs, including software development, intellectual property, packaging, final assembly, and distribution."
and
"When you look at all these other costs, which you can't see from a teardown, then you begin to see why Apple's gross margin tends to be in the 30%-to-35% range historically."
Just to save folks a trip and an excuse...
As is usual in such things, the cost of the hardware itself is not the majority of the cost of the device.
Everybody gets what the majority deserves.
The summary is not correct. The article is talking about the cost of the parts, not the cost of producing the iPod. There can be much more to the cost of development than just the cost of the parts. For example, what is the cost of developing software? Obviously it's much more than the cost of the physical medium.
When YOU can build one for $58.85, then this becomes relevant. I couldn't build one for $5885.00 without hiring somebody else to do it for me.
except for Apple ownership. Each person needs to decide if the retail price represents a good value to them personally. If it doesn't, don't buy it. It doesn't matter if it costs Apple 1 cent to manufacture the product. Thus is the nature of freedom. They can ask whatever they want, and you can pay it or not. FYI, the same thing applies to your salary.
R&D: $10 000 000
...
Marketing: $25 000 000
Logistics: $5 000 000
Steve's Salary: $1
Bringing a new iPod to market: $40 000 000+
Having your CEO cost less than your annual paperclip budget: priceless
Most things money can by; and if you have enough of it: you probably buy Apple.
**AA: a bunch of mindless jerks who'll be the first against the wall when the revolution comes
Of course it does. It is just like someone overcharging for plywood and batteries as the hurricane bears down. People need these iPods, and they need them now, and competitive products are not available. Apple execs should be put in jail for this immoral behavior.
Business Week:
After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 modelThere's also the retailer's cut. Retailers taking 60% of the final price is not unheard of.
I usually stop reading when I see "iSuppli."
"It is our blasphemy which has made us great, and will sustain us, and which the gods secretly admire in us." - Zelazny
I purchased a 3rd gen Nano for my wife. She is very pleased with it. She even manages to watch some of her favorite TV shoes on it. It might be slightly wide - but it is very thin. Our only complaint is the dozens of bugs. However, these all appear to be software based so hopefully most of the annoying ones get fixed soon. How hard is it to code something like coverflow? Please forgive me if I'm wrong - but that feature is by far the most buggy. I also can't say too many nice things about iTunes. Is apple trying to make it suck on purpose? That's what it seems like to me.
Including it's shortcomings we are happy with it overall. Being able to personalize the player by engraving the back actually was a selling point. It takes a dumb electronic device and turns it in to a sentimental keepsake.
Like parent says, when you buy any electronic gizzmo you're not just paying for the parts. You're paying R&D costs, distribution costs, profit for share holders and the stores etc.
It is quite common for electronic products to sell for apperox 5x the cost of the raw components.
Engineering is the art of compromise.
You're not offering offer a fair analysis of an economic situation if you reason about it axiomatically, from an impoverished set of axioms that assume that the parties to every exchange are perfectly rational, that what they value doesn't change by the act of purchasing, and that they possess perfect information. All you're doing is demonstrating that you have an unempirical adherence to the axiom that trade only happens because both parties wanted the trade to happen, and that whenever you see some situation that contradicts it, you will reject the existence or straightforward description of the situation.
You can always preserve your belief in a given claim by refusing to believe the things that would contradict it.
Are you adequate?
It may not be the answer you'd like, but I'd say that if such an MP3 player does indeed exist, it would probably more or less have to be some kind of PC anyway (otherwise, there'd be no point in even making a "large" one, if one could suffice with a portable MP3 player constantly hooked up to the power jack). So if you're going to get one anyway, why not just resign yourself and use a retired PC? It's not as if it would be more expensive than buying any sort of dedicated, AC-hooked MP3 player anyway.
Just let the battery die. My iPod Shuffle's battery has died, but it still works fine on external power.
You got it wrong. You should have posted it into the "Emoticon turns 25" story. In that case, your post wouldn't have been offtopic. ;)
Microsoft has like a 70% profit margin on Windows, which on a technical level is a product that doesn't even work. How much better would Windows be if Microsoft had only taken a 25% profit on it? Why don't we ever hear complaints about that?
The cost-of-parts teardowns of Apple gear are tiresome. They don't take into account the cost of software development or product design, let alone warranty fulfillment and legal and localization, shipping, retail sales, demo units, so much else goes into a product like this other than just a bag of parts. Most of the work that brought us the new iPod nano happened inside heads at Apple. And being a publicly-traded company, you can plainly see what Apple's profits are, and they are always 25-30%. That includes really high-profit sales of software such as Final Cut Pro, and really low-profit sales such as personal computers. Yeah Dell wants that margin but they're not willing to work for it, they gave up all the high-profit software parts of their business to Microsoft. But when you combine Microsoft and Dell's profits on a PC purchased from Dell it matches up to Apple's profit on a Mac.
Why do the vast majority of all music players ever made suck so much if all you have to do to make an iPod is buy $85 in parts and hire someone to put it together? Why didn't the iPod nano with video come from Microsoft six months ago as Zune 2 while Apple was doing the iPhone? $85 is less than what Microsoft pay per unit to fix each Xbox.
And calling Apple a monopoly in music players conveniently ignores not only that there are hundreds of brands of music players but that every large manufacturer other than Apple is part of an anti-consumer cartel led by Microsoft, a convicted abusive monopolist. All the other music player manufacturers have tied one of their hands behind their backs and chained the other one to Microsoft. They are a failed monopoly that left one honest competitor with a exponentially better product.
The FUD that is going around today is just amazing. For the same US$149 as an iPod nano with video, you can buy a remaindered overstock Zune, one year old, sitting in a box with the battery aging, and from a two year old design, and requiring you to BUY another Microsoft product (Windows) just to make it work, and man that thing is HUGE.
I don't know why people keep listening to them. Time and time again, they report margins of >50%, and time and time again Apple reports their usual margins of 20-35%.