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Inside the Third Gen iPod Nano

Zonk posted more than 6 years ago | from the peek-under-the-hood dept.

Media (Apple) 230

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."

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230 comments

Big ol' mug (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20659871)

Of apple-flavoured piss, right in your face. YOU FUCKING APPLE BITCHES

Re:Big ol' mug (1)

b1gk1tty (670514) | more than 6 years ago | (#20660019)

Someone sounds jealous... heh... It's easier to tear down someone else's ideas than create new ones yourself.

Re:Big ol' mug (-1, Troll)

Anonymous Coward | more than 6 years ago | (#20660115)

It's also easier for you to suck my cock.

Actually, that would likely be harder for you if you have a gag reflex...you would need to be able to take something all the way into your stomach to handle me, beeatch.

JOKE TIME!!!!

Q: What do you call cheese that isn't yours?
A: NACHO CHEESE, BITCH

Re:Big ol' mug (-1, Troll)

Anonymous Coward | more than 6 years ago | (#20660383)

Someone sounds jealous... heh... It's easier to tear down someone else's ideas than create new ones yourself.
Perhaps in your Apple-centric world everything has to revolve around liking or hating Apple, but I suspect that the guy was just looking for an excuse to troll, and knew that Apple fanboys would make the best targets and give the most vocal response.

The fact that they have a reputation for being annoyingly partisan and self-justifying probably makes them a more satisfying target as well. In other words, he's not attacking Apple, he's trolling the Apple fanboys for no other reason than that he can. Your smug and self-assured assumption that this was an attack on Apple says more about you- or was it an attempt to deflect criticism that was ultimately aimed at you (the fanboys) and not Apple?

Re:Big ol' mug (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20660627)

Apple users fall into three categories:
  1. Out and out fags.
  2. Closet and "secret" fags.
  3. Catholic priests.
Apple is the gayest computer of them all.

Sincerely,

Fr. Randy O'Day, S.J.

Re:Big ol' mug (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20660805)

Mocking the Jebbies? You're going to hell, young man.
Besides, the Jesuits don't molest little boys - they're into the black bitches.

Re:Big ol' mug (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20660893)

AC writes:". . . Besides, the Jesuits don't molest little boys - they're into the black bitches."

And spanking. Don't forget the spanking. Lots of spanking and discipline.

8=========D ~~~ :-) (-1, Flamebait)

Anonymous Coward | more than 6 years ago | (#20659899)

MMMM. Your piss is so fucking delicous in my faggot apple fanboy mouth!

I want more!

8========D ~~~ :-)

Wait... (4, Funny)

hax0r_this (1073148) | more than 6 years ago | (#20659919)

You mean an Apple product is overpriced?

Re:Wait... (5, Insightful)

p0tat03 (985078) | more than 6 years ago | (#20659945)

You mean that the total cost of building a product is just the sum of its components, excluding research/development, manufacturing costs, shipping costs, and marketing costs? Shocking!

Shock! Horror! MS Office costs 10c! (5, Insightful)

EmbeddedJanitor (597831) | more than 6 years ago | (#20661247)

It only costs 10c to make a CD that MS sells for hundreds!

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.

maybe (5, Insightful)

User 956 (568564) | more than 6 years ago | (#20660049)

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.

Re:maybe (5, Insightful)

hmbcarol (937668) | more than 6 years ago | (#20660553)

Nothing which has been purchased can be overpriced, at least not in that transaction. The buyer weighs the money in one hand and the product in the other. They decided that they wanted the product more than the money. The seller has done the same calculus and arrived at the opposite conclusion. They would rather have the money more than the product.

Both parties believe they received the "better" bargain or they would not have traded. Of course a wise seller will offer a product at a price they feel will be the most profitable overall to sell at, balancing margin versus volume.

Nothing has an "intrinsic" value; only the value the seller and potential buyers would assign it. It will vary by person, time, and circumstance. Two people, one recently well fed at a nice restaurant and the other tired from working all day and skipping lunch would value a street venders hot-dog very differently.

Nonsense. (3, Insightful)

Estanislao Martnez (203477) | more than 6 years ago | (#20661273)

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.

Re:Nonsense. (1)

WhatAmIDoingHere (742870) | more than 6 years ago | (#20661347)

You sure managed to use a lot of words there, many of them are not in Joe Sixpack's vocabulary, so bonus points to you.

Now, I also noticed that you didn't provide any examples of a 'situation that contradicts it'.

Re:Nonsense. (4, Insightful)

radl33t (900691) | more than 6 years ago | (#20661745)

Now, I also noticed that you didn't provide any examples of a 'situation that contradicts it'.

Apparently GPs vocabulary was not the only thing that escaped you. GP gave two important reasons as to why the GGP's claim was nonsense. The economic transactions as you an I know them are not the same as those idealized in economic fantasy land (described by GGP). This is because the fantasy land assumption set is invalid in the real world. Namely 1) The actors are not rational 2) The actors do not possess complete and accurate information. If you extend this to rigid extremes then every 'situation' contradicts the axioms of fantasy land because you will never have perfect information. Ahh the blending of Heisenberg... As for GP's language. I do not think it was overly erudite.

Re:maybe (1)

Ajehals (947354) | more than 6 years ago | (#20661971)

Apart from medical care presumably as you don't have any real choice whether to buy it or not. Or car insurance (if it is mandatory) for the same reason. Apple can charge whatever they want for their product, it is only over priced if they have no buyers, that's because portable music players, like mobile phones, laptops, game consoles etc.. are luxuries. That theory however breaks down when applied to necessities, especially necessities that are supplied by a monopoly or near monopoly.

Not disagreeing with you really but pointing out that some things have real value (albeit hard to put in currency terms, after all what is a life worth, how much does freedom cost? etc..).

Re:maybe (4, Interesting)

TheRaven64 (641858) | more than 6 years ago | (#20660679)

I was really surprised when they didn't bump the capacity of the iPod Nano. Some of their competitors are already making 16GB devices in a similar form factor to the Nano. If I'd been in their position, I'd have jumped to 24GB, making it an ideal replacement for a 3G iPod (same features, smaller form factor, no moving parts). Adding video support seems a bit misguided; the Nano seems to be aimed more at the market segment that don't care about video (smallest screen of any iPod, not enough storage space to be useful as video player plugged into a dock). These number just confuse me more. It seems like they could have added two more 8GB RAM chips and still been making a decent profit, so I wonder why they didn't.

Tor like oatmeals! (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20659921)

Tor like oatmeals!

Call me back... (5, Insightful)

Poltras (680608) | more than 6 years ago | (#20659931)

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...

Re:Call me back... (0, Redundant)

tomstdenis (446163) | more than 6 years ago | (#20659983)

I'm sure they've re-couped the initial R&D costs and then some. It's not like the Nano has completely different firmware from the classic or other versions.

At this point it's basically covering retail margins, returns, and a big fat percentage of profit.

Re:Call me back... (2, Informative)

ttldkns (737309) | more than 6 years ago | (#20660637)

Actually the new nano and classic dont run on portal player chips anymore hence they needed a complete OS re-write.

Re:Call me back... (1)

tomstdenis (446163) | more than 6 years ago | (#20661475)

complete re-write? That seems unreasonable. Just because the codec chip has changed doesn't mean your itunes code is broken, or the UI for that matter, etc.. That's if Apple was smart and didn't code all of the Ipod in a single 100,000 line long main() function.

Re:Call me back... (1)

catbutt (469582) | more than 6 years ago | (#20660043)

Although....mixing in fixed costs with marginal costs isn't necessarily a good way to analyze something like this. If the $58.54 is indeed a good estimation of the marginal cost (the theoretical amount it costs them to make one additional unit), it isn't irrelevant at all. It's just not a direct indicator of profit -- which you are never going to get anyway without knowing how many they are going to sell through its lifetime.

Re:Call me back... (2, Insightful)

Poltras (680608) | more than 6 years ago | (#20660133)

Worse, sometimes they might be spending more engineering some other products that they plan to amortize with this one. So basically, you can only look at the profit a company made from all its product line, which is already public from Apple, instead of just one, which is unknown.

Re:Call me back... (4, Insightful)

Jeff DeMaagd (2015) | more than 6 years ago | (#20660169)

The firmware is significantly different from previous generations. It looks to me that they more than doubled the complexity of the firmware relative to the previous nano.

I don't think that this $59 is the marginal cost even, because the iSuppli numbers don't even include packaging, shipping, average warranty expense, retail mark-up and so on. In the past, they didn't even include the cost of the ear buds.

Re:Call me back... (4, Interesting)

ivan256 (17499) | more than 6 years ago | (#20660123)

iSuppli is actually generally pretty bad at figuring out what the pieces cost too if any of the parts are even the least bit exotic. It also doesn't include packaging costs (We're probably talking whole percentage points in the costs for packaging), and assembly, which isn't trivially cheap on tiny devices as it may be for larger electronics. Their numbers are even less relevant than you'd think.

Re:Call me back... (4, Insightful)

catbutt (469582) | more than 6 years ago | (#20660523)

Their numbers are even less relevant than you'd think.
They are only irrelevant if you don't know how to read them.

Companies hire iSupply to help them calculate how much a competitor's products cost, and if iSupply didn't know what they were doing, they'd be out of business by now.

It's not their fault that dumb readers make naive conclusions.

Don't Forget (3, Insightful)

Anonymous Coward | more than 6 years ago | (#20660897)

There'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."

Re:Don't Forget (1)

zerocool^ (112121) | more than 6 years ago | (#20661367)


There'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."


While I'm not disagreeing with you that iSuppli's numbers seem to be lacking in several sunk costs, often in the case of the AppleTM iPod, the distributer is apple.

~Wx

Re:Call me back... (1)

dagamer34 (1012833) | more than 6 years ago | (#20661141)

You shouldn't compare iSuppli's costs to the money in your wallet but to other comparisons it's made. In any case, based on the numbers iSuppli spewed out last year for the 2nd gen nano's, iPods are getting cheaper to make year-over-year, even after modest improvements this year.

Re:Call me back... (2, Interesting)

ceoyoyo (59147) | more than 6 years ago | (#20661451)

I love it when people do those sorts of "analysis." They like to do them for digital cameras too. Guess a value for this, guess a value for that, add it all up and get this tiny little number then scream at how much they're being ripped off.

I guess if they think it's true they should go into business building whatever it is for a fraction of the cost. Funny how none of them ever do.

Manufacturing Costs (3, Informative)

nurb432 (527695) | more than 6 years ago | (#20659935)

Are not all that go into the final street price. You got R&D, Marketing, Logistics.. Steve's Salary...

Re:Manufacturing Costs (0)

Anonymous Coward | more than 6 years ago | (#20660223)

Stevie get's paid $1

Re:Manufacturing Costs (1)

nurb432 (527695) | more than 6 years ago | (#20660457)

I was joking.

I know his *salary* is nill, gotta keep the tax man at bay. But have to maintain his level of perks.

Re:Manufacturing Costs (1)

Oopsz (127422) | more than 6 years ago | (#20661013)

Even if his salary is nil, his stock options are taxable as gross income (basis in stock) and in capital gains (appreciation at sale).

Re:Manufacturing Costs (1)

justme8800 (633959) | more than 6 years ago | (#20660529)

Joe Slashdotter reading the thread:

"Man, Apple charges way too much for their crap"
"Well, to be fair, there are marketing, R&D, and other costs at play, here..."
"The surplus is to pay for Steve Job's $1 salary?! Bwahahah- Waitasecond, that word is misspelled! Oh the humanity! Oh, Grammar, I hardly knew ye!" *sob*

Anonymous Coward, the place where funny jokes go to die. :(

Now, where's my "-1, Apostrophe" mod?

Uninformed guess: (5, Funny)

jstockdale (258118) | more than 6 years ago | (#20660409)

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.

Re:Uninformed guess: (1)

sethstorm (512897) | more than 6 years ago | (#20661515)

Steve's Salary: $1 ... ...
Having your CEO cost less than your annual paperclip budget: priceless
...seeing the reaction when tax code catches up to him in the form of unescapable taxes: Epic.

Some things are meant to be business-friendly, the Club for Avarice [clubforgrowth.com] complains about the rest.

Re:Manufacturing Costs (1)

rm999 (775449) | more than 6 years ago | (#20660629)

At this point, it is obvious Apple is making massive profits off each iPod. A lot of development costs have been done in previous models, e.g. software.

From a simple economic theory stand point, competitors should have reduced their pure profits (after paying salaries and advertising, etc) to almost 0 - this is what would happen in an entirely competitive capitalist model. The fact that Apple can still sell millions of these at at such a large return indicates not that Apple is greedy, but that their competitors are utterly incompetent. If there was at least one other competent competitor, these iPods would be going for 70-100 dollars (more in line with what portable music players cost before the iPod.)

It has nothing to do with Apple being "cool," I know plenty of people who would rather not buy an iPod, but grudgingly do so because it's the only player they find comfortable to use.

Re:Manufacturing Costs (1)

nurb432 (527695) | more than 6 years ago | (#20660813)

Wasnt debating if they were charging too much ( i also feel they are ) i just wanted to make the point that its more then the absolute manufacturing cost that goes into play here.

Re:Manufacturing Costs (2, Insightful)

lymond01 (314120) | more than 6 years ago | (#20661535)

The fact that Apple can still sell millions of these at at such a large return indicates not that Apple is greedy

Apple may be greedy, but the fact iPods sell for so much is a quality of the market, not Apple. Apple has a great product and people are willing to pay more for it and its related items (iPods, iTunes, iPod-related devices made by 3rd parties, etc, all of which a user buys into). An iPod is a luxury item and it is being sold for what the market will bear.

Gasoline, however, has become a necessity, and the gouging oil companies need to ease off. This will allow more people to suck up the last of the gasoline and the world will then be powered by people dancing to their latest iTunes hits. QED.

Re:Manufacturing Costs (2, Interesting)

Eli Gottlieb (917758) | more than 6 years ago | (#20661551)

Admittedly, very few people have heard of the Trekstor Vibez [amazon.com], which really deserves to at least become the geek's DAP of choice. It mounts as a USB mass-storage device; supports MP3, Ogg Vorbis, Ogg FLAC, FLAC, and WMA (with DRM); comes with a small cable for the headphone jack that lets you pipe your DAP music into any stereo with audio-in; and comes with firmware built from that of the Rio Karma.

But the company is German and doesn't market in the USA, so nobody gives a damn.

Re:Manufacturing Costs (1)

pedrop357 (681672) | more than 6 years ago | (#20661773)

Why should people outside the USA care about it if the maker can't bother to market it to one of the most consumerist nations on the planet? Marketing is a great way to let people know that you make a product.

On a side note, I don't usually find myself in the market for any GM Holdens, Citroens (spelling?), Skylines or any other car that's not marketed in the US.

Who cares? (2, Interesting)

vrmlguy (120854) | more than 6 years ago | (#20659947)

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.

Re:Who cares? (1)

The Living Fractal (162153) | more than 6 years ago | (#20661277)

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.
I suppose so...but what would be an example? I am thinking an entire wing built from bludgeoned children [hecklerspray.com] would pretty much do the trick.

News Flash! (4, Funny)

EggyToast (858951) | more than 6 years ago | (#20659949)

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.

Worthless Numbers (5, Informative)

Guanine (883175) | more than 6 years ago | (#20659963)

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 [daringfireball.net], I hope to see the same thing in this instance.

Yeah, but the price dropped too... (5, Informative)

nweaver (113078) | more than 6 years ago | (#20659965)

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.

Re:Yeah, but the price dropped too... (0)

the dark hero (971268) | more than 6 years ago | (#20660173)

One day flash memory will be cheap. I can't wait for that day to arrive. Luckily, when recently purchased my sister's 2GB nano i shelled out the extra 20 dollars at bestbuy for the product replacement plan. I have 2 yrs to break the sucker to get a new one at the same price. Surprisingly the wait was only 2 months. She's quite excited to be getting double the capacity and video capability :] Now all we need to do is drop it on the hold button.

Re:Yeah, but the price dropped too... (0)

Anonymous Coward | more than 6 years ago | (#20660229)

This is fraud and you will probably get railroaded here on /., but I say, in my anonymous cowardly fashion, nice. I do that kind of stuff alllll the time and I love it.

Re:Yeah, but the price dropped too... (0)

Anonymous Coward | more than 6 years ago | (#20661167)

Try it at Dick's Sporting Goods. They don't even make you return the old item, and they give you store credit so you can even get something different!

Re:Yeah, but the price dropped too... (1)

aliquis (678370) | more than 6 years ago | (#20660249)

Wow, you mean that even Apple products gets cheaper as prices on the components falls!?!

However this is totally irrelevant when one have no idea what the other players cost to make and sell for, and even that is rather unintresting.

Only thing I care for is what I get for the money I have to pay, and in that regard there are many players which offers more value for your money than Apple (and not only more value but also better players, or lower prices.)

Re:Yeah, but the price dropped too... (1)

2nd Post! (213333) | more than 6 years ago | (#20661081)

You're probably smarter than most people then. I know plenty of people who could not operate something much more complicated than an iPod.

Unfortunately for you the average IQ is 100, and is probably 80% of the population.

Anguished Cries (1)

BSDetector (1056962) | more than 6 years ago | (#20660029)

Where are the anguished cries over excessive profit margins? Oh - never mind - that's only when it applies to Microsoft!

Gross margin borders on gouging (0, Interesting)

Anonymous Coward | more than 6 years ago | (#20660067)

That's a large gross margin by any metric since the thing sells for almost 3 times as much as it costs to make, assuming the numerbs are correct.

Re:Gross margin borders on gouging (2, Informative)

notthe9 (800486) | more than 6 years ago | (#20660227)

Price gouging? It's a luxury product. Does that concept even really apply?

Re:Gross margin borders on gouging (5, Funny)

catbutt (469582) | more than 6 years ago | (#20660663)

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.

Re:Gross margin borders on gouging (1)

fbartho (840012) | more than 6 years ago | (#20660789)

I've met too many stupid people in recent times, so I think my sarcasm detector broke. Either you're really funny (and sarcasm is nearly too subtle for me) or somebody should make disparaging comments about your iq.

Either way, good job.

Re:Gross margin borders on gouging (0)

Anonymous Coward | more than 6 years ago | (#20661439)

No, he's really funny. Mod him up, someone!

Re:Gross margin borders on gouging (0)

Anonymous Coward | more than 6 years ago | (#20660865)

That's a large gross margin by any metric since the thing sells for almost 3 times as much as it costs to make, assuming the numerbs are correct.

So what? Other manufacturers have access to roughly the same components at roughly the same prices and they make crappy MP3 (and WMA) players for a bit less than the iPod. A lot of "software development, intellectual property, packaging, final assembly, and distribution" costs went into making the iPod a cut above its competition, and the fact that people are willing to pay a premium for the device reflects that. If anything, these numbers tell us the extent to which sound design, software, and engineering is important in the music player market.

But really, Adobe sells Photoshop for around 10 000 times the price of the CD. Is that super-duper-"price gouging?"

Am I supposed to be shocked? (1, Insightful)

Anonymous Coward | more than 6 years ago | (#20660181)

Am I supposed to be shocked that there's a significant markup beyond the price to assemble the product? Don't, for example, the retailers need to make a profit (and yes, Apple is one of those retailers, which is why they have a store)?

If you are going to stir us up why not include the costs and markups of other products as comparison? Do you have any idea what the markup is on clothing for example (easily 1000% or more, depending on the label)?

Isn't capitalism about charging what the market will bear? If the price is too high it won't sell, and if you prefer to pay less but still want an ipod there are plenty of options (Apple's refurbished store sells last year's model with warranty for about 60-70% of the price)

And no, I don't own an iPod and have no particular allegience to Apple.

Plus the bankroll for ex Mosaad guys (-1, Troll)

DysenteryInTheRanks (902824) | more than 6 years ago | (#20660201)

Of course the parts cost is one small part of the picture. Apple also has to pay Jonathan Ive's salary, plus hush money every time he strangles someone with an iPod cord [mqc.com].

Which means that poor Steve Jobs is barely making any money on these things, he can almost not commute to work in the chopper.

But don't count on the investigatory journalists at BusinessWeek to report on that, no matter how many people Jonathan Ive leaves dead and bloodied along the way.

What the fuck? (1)

Eli Gottlieb (917758) | more than 6 years ago | (#20660501)

Ex-Mosad guy who strangles people with iPod cords? Dude, you're so paranoid even the Shin Bet will feel no need to touch you!

The devil is, as always, in the details... (2, Informative)

Caerdwyn (829058) | more than 6 years ago | (#20660251)

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.

Cost of parts, not cost of development (2, Insightful)

DavidJSimpson (899508) | more than 6 years ago | (#20660265)

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.

Real cost (2, Insightful)

dizneedave (1089861) | more than 6 years ago | (#20660297)

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.

Hardware costs are misleading (0)

Anonymous Coward | more than 6 years ago | (#20660299)

Does iSuppli count the massive advertising campaign on TV? I see about 10 commercials a day on TV and that's just on couple of channels. Stretch it out over few networks and now you're talking serious coin. How about print advertisements? A full page ad in few dozen mainstream magazines isn't exactly a small investment. What about billboards? iPod revenue gains are offset by the media blitz which I don't see other manufacturers doing.

I bet the actual cost of Nanos is a lot closer to 100-110 dollars per unit once you account for marketing expenses, support costs, and R&D.

But lets, for the sake of argument, assume that Apple does take $70 profit from each (lower-end), and $120 (higher-end) iPod nanos. Why is there a controversy about this every time this topic comes up? There is a market for it and the majority of the market is willing to pay the price. How is it in Apple's interests to commoditize its products? Or for that matter in market's interest? Samsung and Creative are dominating the sub-$100 display DAP space. I think it would be bad for them to have Apple in that bracket with a display MP3 player. It would just murder all the smaller manufacturers who are competing with Apple on price. Apple is doing everyone a favor by pricing its products a little higher to allow for healthy competition in the third tier.

Profit margins are irrelevant (5, Insightful)

Overd0g (232552) | more than 6 years ago | (#20660377)

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.

Re:Profit margins are irrelevant (1)

PsychosisBoy (1157613) | more than 6 years ago | (#20660797)

Profit margins are irrelevant except for Apple ownership.

This isn't always true. What about buyers who are opposed, in principle, to companies charging what they (the buyers) feel to be an exorbitantly inflated amount (based on the price to the company)?

Re:Profit margins are irrelevant (1)

kharchenko (303729) | more than 6 years ago | (#20661493)

> Each person needs to decide ... Thus is the nature of freedom.

You make it sound like an obligation, whereas freedom of choice means exactly the opposite. I may choose, for instance, to purchase XBox to make myself a DVR just because I know that it costs more MS to produce it than the retail price :P

Losing a lot of money (1, Offtopic)

LoverOfJoy (820058) | more than 6 years ago | (#20660459)

Man, they must be losing a lot of money. All the ads I see for them say, "Free ipod nano!"

Maybe they're hoping to make the money back in itunes sales?

Re:Losing a lot of money (1)

proxy318 (944196) | more than 6 years ago | (#20661829)

I always figured that was a political movement, like "Free Tibet!" Of course, I never understood who imprisoning iPod Nano in the first place...

FANBOI? (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20660463)

I heard Shaun Earsom is one of the biggest Apple Fanboiz alive. Hes fat. A coward. a true coward at that. And he would like nothing more than to have a mouthful of a japanese mans balls. He overly worships anything japanese. If Apple ws japanese he would totally shit himself. I know for a fact he has tasted a mans sperm more than once. If you look at you tube .. he is the exact look alike of the fatass starwars fanboi doing the light saber fight alone. because he has no friends. Just another knowitall fat wannabe japanese apple fanboi. nothing more. BTW.. he only wishes to date asian women. fuckin weirdo.

Looks very nice (1)

ackthpt (218170) | more than 6 years ago | (#20660621)

Too bad I dropped off the fence a bit too soon, but I did have to do some long flights and radio plays were a great help passing the time. I picked out a video iPod without realising it's meant to watch videos as well as play music. Considering battery life that's a bit optimistic. Perhaps thirty minutes of video and the battery is well gone. Listening to mp3s it can go for several days, though already the battery after 9 mos. is showing a decrease in life.

I was a bit shocked when my brother pointed out all the features of mine. All I ever do is listen to radio plays and have a collection of under 100 tunes ripped from my CD collection. Rather than have the battery sucking display, I think I'd rather have more battery life.

Around Dodge City and in the territory on west, there's just one way to handle the killers and the spoilers and that's with a U.S. Marshal and the smell of gunsmoke.

Re:Looks very nice (0)

Anonymous Coward | more than 6 years ago | (#20661309)

I picked out a video iPod without realising it's meant to watch videos as well as play music.

All I ever do is listen to radio plays and have a collection of under 100 tunes ripped from my CD collection. Rather than have the battery sucking display, I think I'd rather have more battery life.
Ok, I'm not even going to touch the fact that you bought a VIDEO iPod without realising it was meant to play videos.
They had an iPod nano 9 months ago as well, and its battery life was even better than the current one (in case you can't tell by the new enlarged screen). It was meant to *gasp* just play music, the current one now plays videos too.
Not only did you "drop off the fence a bit too soon" (WETM), you didn't even look at the next product over when you bought a video iPod.

Wow.

Re:Looks very nice (1)

ackthpt (218170) | more than 6 years ago | (#20661923)

Ok, I'm not even going to touch the fact that you bought a VIDEO iPod without realising it was meant to play videos. They had an iPod nano 9 months ago as well, and its battery life was even better than the current one (in case you can't tell by the new enlarged screen). It was meant to *gasp* just play music, the current one now plays videos too.

I picked mine up at CostCo. Not exactly well known for selection. They had the 30 GB and a larger model which I thought would be overkill. I didn't opt for the nano 2GB or 4GB as I figured I needed at least 10 GB for my collection of Gunsmoke, Jack Benny, Fred Allen, X Minus 1, Dimension X, Have Gun Will Travel and perhaps some more series to pick up later. I discovered these shows were available through Satellite Radio and have picked up a few DVDs of mp3 files of entire runs.

I think the battery suffers more from turning the display on and off, which is rather automatic, everytime I change volume level, pause/restart or just want to see how much time is left or what time it currently is. Perhaps continuous viewing would make the battery last a bit longer. All in all, it serves it's purpose and only set me back $230.

Re:Looks very nice (2, Funny)

Hamilton Lovecraft (993413) | more than 6 years ago | (#20661393)

Strange, on my last cross-country flight I watched "L.A. Story" and two episodes of Lost without coming close to killing the battery, on my first-rev iPod Video. Perhaps you're speaking ex recto?

Don't buy from apple (0, Troll)

JamesRose (1062530) | more than 6 years ago | (#20660641)

SEriously, they'll sell you, an iPod with a good capacity (160gb) OR an iPod with Wifi OR an iPod with a touch screen.

Yes, they could sell you a product with all the features you want, but they'd never be able to go for another 4 generations with no new innovation. I'm sorry, but I prize my features for the mp3/4 player over cutting another 1mm off the back of the case. All 3 of these iPods are small enough to integrate and get a killer product. So why aren't they making one other than they can milk each product separately without giving the consumer what htey want.
Does it really surprise you that whilst they are doing this rediculous cut-our-product-in-3-and-sell-them-all-for-the-original-price scheme that they are also taking huge cuts from the overpriced products.

Sorry for the rant, but I can't stand it when companies deliberately hold back, and i find it worse when a company like apple, which everyone loves (i have no idea why, just not being as bad as MS isn't enough) rubs it in people's faces, and people are still shouting OMG STEVE I WANT YOUR BEBIEZ!!!111!

Re:Don't buy from apple (2, Informative)

tm2b (42473) | more than 6 years ago | (#20660911)

SEriously, they'll sell you, an iPod with a good capacity (160gb) OR an iPod with Wifi OR an iPod with a touch screen.
Uh, what? You second "OR" is nonsense - the iPod Touch (as well as the iPhone) has a touch screen and WiFi.

Re:Don't buy from apple (1)

JRGhaddar (448765) | more than 6 years ago | (#20660971)

You are completely wrong in every sense ...oh my god,,,is that steve?!... OMG I WANT YOUR BEBIEZ!!!111.....like I was saying Apple makes great products, and they are always dedicated to improving the design interface and technology associated with those products. Apple takes approx.. 2 years from start to finish in creating and working to perfect every detail. I am sure they have some crazy things that they are holding back, but what sets apple apart is that they won't release something until they have it polished. Companies that do that always do well.... Blizzard has had that mentality and it has done very well for them as well.

MS and most other companies, tech specifically, have no clear vision on what they want to do... this is where jobs...OMG DID SOMEONE SAY JOBS!!! I WANT YOUR BEBIEZ!!11!....is better than most CEO's. He has a very clear vision for his products and his company. They focus on the product and and do it VERY VERY well. Then they improve on that product on each generation tweaking and making it better and better.

Video on the ipod nano is new, and it is the SAME resolution as the larger ipod video predecessor. They unleashed a touch interface that is MILES ahead of everyone else in the industry, and yet they somehow are "holding back". Flash memory is expensive, and once the price for it comes further and further down they will make larger storage space available for these already small form factors.

Re:Don't buy from apple (1)

antifoidulus (807088) | more than 6 years ago | (#20660973)

Notice you used the word "I" a lot in you rant, there is a clue for you, despite what you may think your preferences are not absolute measures of quality. Everyone has different tastes, neeeds, budgets etc. Just because YOU don't see value in a particular product doesn't mean it sucks, it means that it isn't right for you. Buy something else and move on, or I guess since I bought an iPod I am too stupid to judge you....

Summary changed quotes to make them false (5, Informative)

klossner (733867) | more than 6 years ago | (#20660723)

The comments about how parts pricing != cost to build are all correct. TFA got this right, but then the Slashdot summary changed their wording to make it wrong.

Business Week:

After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 model ...
Slashdot:

BusinessWeek reports that a teardown analysis by iSuppli finds that it costs Apple only $58.85 to build the 4-gig iPod nano
Business Week reported nothing of the sort.

Re:Summary changed quotes to make them false (0)

Anonymous Coward | more than 6 years ago | (#20661095)

BW: iSuppli estimates that all the parts inside cost Apple $58.85 /.: BusinessWeek reports that ... it costs Apple only $58.85 to build
You: Business Week reported nothing of the sort.

Don't despair. A whaambulance is on its way. Or is it a pedantbulance?

And in a related story . . . (0)

Anonymous Coward | more than 6 years ago | (#20660895)

In related news, iSuppli recently released figures showing that it costs Adobe only $5 in parts to package the newest version of Photoshop. With a retail price of about $600, that results in a profit margin of over 10,000%! Analysts estimate that with such high profit margins, Adobe will be making a hefty profit this quarter . . .

I have one. (4, Informative)

ryanisflyboy (202507) | more than 6 years ago | (#20660915)

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.

Re:I have one. (1)

ryanisflyboy (202507) | more than 6 years ago | (#20660981)

Bah! Why didn't I preview!! Shows! Shows! She likes to watch shows not shoes! What is a TV shoe any way?

Re:I have one. (3, Insightful)

DamnStupidElf (649844) | more than 6 years ago | (#20661373)

Bah! Why didn't I preview!! Shows! Shows! She likes to watch shows not shoes! What is a TV shoe any way?

Bah, this is slashdot. We know you don't have a wife and that 'shoes' was a typo for porn!

Re:I have one. (1)

Incadenza (560402) | more than 6 years ago | (#20661807)

Bah, this is slashdot. We know you don't have a wife and that 'shoes' was a typo for porn!
Yep, if you would have typed shoes at PSO Online it would have refused it (or did it scratch it out with asterikses, I forgot) for containing the word 'hoes'.

30 to 40 (1)

scolbert (1122737) | more than 6 years ago | (#20661601)

As others have stated, this is kind of a useless factoid (last I checked Apple has a pretty big payroll, for example). In the end Apple will make between 30 to 40 points gross margin, closer to 40 on this item. Who cares? If you think they will sell a ton, buy Apple stock. If you think this is a rip off, by someone else's (lame) MP3 player and pay that manufacturer a similiar number in terms of "profit".

btw, this new iPod is quite nice, if I didn't have a new iPhone, I'd go buy one straight away.
--
Sammy / with iPhone [personafile.com]

Other Costs (1)

petehead (1041740) | more than 6 years ago | (#20661667)

Did they include the costs necessary to pay the legal department for the forthcoming non-replaceable battery lawsuits?

Kind of OT: AC power mp3 player? (1)

Leuf (918654) | more than 6 years ago | (#20661845)

For years now every so often I take a look to try to find an mp3 player that natively runs off AC power. Everything is either designed to run off batteries, stream from a pc, or plays off a cd. I want to have an mp3 player in my woodworking shop. The life expectancy of a cd player in there is about 3 months. I don't particular want to try a pc there either, and it's completely overkill - I use enough juice in there as it is. Running 8-10 hrs a day every day constantly recharging a battery is going to kill the battery. Why isn't anyone making a simple mp3 player that just has a hdd or flash storage that is designed to be a stereo component? When I search all I find is people like me looking for the same thing.
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