RSSApple Maintains Margin with iPod Nano
By Ed Oswald | Published September 23, 2005, 3:55 PM
Contrary to initial reports that Apple may have had to settle with significantly lower profit margins in order to release the flash-based iPod Nano, electronics research firm iSuppli says that the cost to the Cupertino company to produce the player is likely the same as previous models.
iSuppli dissected a 2GB iPod Nano and found $90.18 USD worth of parts. Combined with the $8-10 it costs to produce each model, the Nano ran about $100 USD to produce, said iSuppli. The player retails for $199 USD, meaning a profit margin of just under 50 percent.
Senior analyst for consumer electronics at iSuppli, Chris Crotty, told BetaNews that similar profit margins exist for the 4GB model as well. "The price differential is almost the same as what you'd expect from the increased cost of memory," he said.
Crotty also noted it would be possible that Apple could negotiate better deals for the bigger memory chips used in the 4GB Nano, thus increasing margins. Early reports indicate that the larger model is apparently selling better than the 2GB version.
The profit margins fall in line with other teardowns by iSuppli, including the 512MB iPod Shuffle, with a total cost of $45 USD compared to a $99 USD retail price or a 55 percent profit margin. The Mac Mini, which had $284 USD of production costs yields a 43 percent profit margin on the retail price of $499 USD.
Details of the margins of other models were not known, although Crotty said from his understanding they all hover near the 50 percent mark.
iSuppli assumed a 35 to 40 percent discount on the price of flash memory from Samsung based on research done by the firm. Crotty added that in the teardowns of the Nano that the firm is aware of, Samsung flash memory was used in all but one.
This would seem to confirm reports that Apple purchased a large stock of Samsung memory specifically for the new player. "This makes a lot of sense for Samsung," Crotty said, referring to the company working with Apple.
However, Crotty says that reports of fellow Korean companies accusing Samsung and Apple of collusion are likely untrue. "I certainly don't think Apple and Samsung are engaging in illegal behavior," he said.
Crotty explained that in many Asian companies, different business divisions have a great deal of autonomy. That means the division that deals with flash memory production probably worked on its own to secure the Apple deal without the help of the division that produces digital music players.
Don't forget about the margin that goes to the retailers. This is not insubstantial. Apple is not getting the entire 50 points of profit margin, as 20 points are probably going to the retailers.
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It's certainly a sexy player, but i have never trusted Apples intentions to bring the best technology to the market at the cheapest possible prices.
Sounds like a fantasy, but some companies come closer to that goal then most.
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Some other costs...
advertising, support, retail, rent, labor, insurance, telecommunications, electricity, other utilities, taxes, business licenses (national and international,) R&D, refurbish.
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Like there was ever any doubt it owuld be any other way? Trendy, overpriced status symbols are their MO and they're sticking to it.
Talk about moot hype...
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Over-priced? Apple are the reason we have such cheap flash-based mp3 players available today. If it weren't for their Shuffle, and now their Nano, we'd still be forking out $500 for 512MB flash players (like I did, some years ago).
50% margin is hardly over-priced anyway. Find out how much profit your local clothing store has on new items... it's more like 400%, not 50%.
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$500 for 512? i doubt that. i bought a 256 flash player a few years ago and it's still the same price now give or take 20 dollars
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Of course, this totally ignores the costs of research and design ... which I guess is a one-time thing per product (as opposed to the supplies which obviously must be paid for with each player), but still.
Same with the story about the "actual" costs of Intel chips that was floating around last week (don't remmeber if that was here or not, though).
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with people like my friend who already own the mini, and went out to get the nano 2 weeks ago. apple will do very well with people like my friends.
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It's like a status symbol; some people think that having the latest cool gizmo from Apple or some other popular company makes them special or something. I don't know; I still have an old Sony cassette walkman myself. I hardly ever use it since I'm not addicted to music and don't need to carry it around with me like a life support system, but when I do it works just fine. :)
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http://slashdot.org/arti...&tid=118&tid=99
That's why they can blow millions and millions on commercials that come on every 35 minutes. :P
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Here here! Couldn't agree with you more :)
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Well, some people do like to have music on the road. I'm not saying this Nano is the solution, but there are tons of products out there tailored to multiple needs. I own a SanDisk MP3 player now and I'm really happy with it. Small, light, comfortable. A good purchase for me at least. I bought it some months ago as a replacement of a big discman with a high power consumption and I found myself hearing more music now because it's easier to carry and use than the discman.
And I don't think they are mostly status symbols. Not MP3 players at least. Maybe PDAs of Celular Phones. Nano has some nice features and so that nearly pales the "status" quality of it.
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