iSuppli came out with another cracker this week.
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 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.
DavidBelfast from Twitter reckons this is okay when I suggested my displeasure at “measures” like this:
@cimota irrational hatred won’t help justify away the cost! 😛 #whyphone #trolling
It’s not irrational.
Macrumors writes:
iSuppli’s calculations consider only the actual parts of the device and do not include research and development, manufacturing, distribution, and patent royalty costs.
Because evidently, in the world of hard components, all of these things are free. It was free to develop the software, the folks working on VoiceOver and the packaging worked for free. The truck drivers who delivered the components and also who delivered the finished product to stores worldwide worked for free. The building in which these things were designed, built, stored and sold, were all built for free and are free to maintain.
Justify the cost? iSuppli are a waste of space. They add nothing to the conversation except providing headline soundbites. Surprise surprise, the basic hardware components of a device are only a fraction of the actual cost of the device.
I agree, you can factor in the fact that Apple are a huge company who can command very special (and secretive) component deals with manufacturers too.
The acid test is this, go ahead and spend $21.77 and make a shuffle. You won’t have a nice case to put all the components in, you won’t have it delivered to your house, and you won’t have the firmware on the device or the software on your computer to interact with it.
So I agree, total sloblocks.
Cheers, Matt. I couldn’t be bothered writing about the pointless talk that surrounds every teardown iSuppli does.
I do think it’s interesting seeing the raw component costs though.
Hey Matt,
Last I checked iSupply explicitly mention that their cost estimations only cover parts. I think Apple gear is a bit overpriced, but after considering some non-quantitative factors such as user experience and general aesthetics, I think the price is somewhat justifiable (I wouldn’t be typing this on a MacBook otherwise).
The one good point you make is that the costs include patent licensing, but without concrete evidence we can only compare Apple’s costs with manufacturers of similar devices. My Nokia 6120 Classic, which sports a platform capable of supporting more features (that I would use) than an iPhone, costs nothing more than a £15/6 month contract.
Per your Twitter reply, of course I believe in recuperating R&D costs, but this should not be some arbitrary sum. Having an intern spend a week no getting the easing just right on the way a window slides into view is only worth so much, certainly not the premium you pay on the hardware (nor for that matter the 33% they take on e.g. 3rd party iPhone software – let’s not even do back of the envelope calculations for that).
In any case if I could afford more Apple gear I’d probably buy some, it’s still a snap when compared to a full Church of Scientology membership. 😉
“This suggests the per-unit profit margin on the shuffle is higher”
Actually, David, it doesn’t suggest anything. iSuppli are reaching for headlines – it’s a meaningless statistic trumpeted by anyone who thinks PCs should be built and not sold and who thinks R&D is worthless (as opposed to priceless). And don’t get me started on “Free” software.
It’s hard to believe but DELL actually spends money on R&D. Apple spends a fortune on R&D and the comment made when I was in Cupertino last month was that several individuals, with experience as wide as Nortel, Cisco and doing university research, could not fathom how they managed all of this on that budget.
It’s ridiculous to compare a Nokia 6120 to an iPhone. Ludicrous.
@David, are you serious?
“non-quantitative factors such as user experience and general aesthetics”
You can measure user experience – most commonly in unit sales.
Aesthetics is also an easy one – people like you on the internet literally cry if something fugly makes it into production.
Moving on, Matt makes far more than one “good point”, and you obviously have absolutely no real world experience of manufacturing and design. Take it from someone who has worked for a NI Medical devices company, just designing a case for your components costs thousands, including many iterations and revisions.
As I am also a software engineer, I can give you real world experience here too, interns may well get the “window gloss” jobs, but who do you think writes the device firmware? the tea boy? no – generally at Apple they hire pretty much the best, so a very good, highly paid, embedded engineer has been working on the shuffle software. If you have ever used a small mp3 player from another manufacturer you will see the saving they have made here.
These are just two examples of where there is far more cost into this sort of thing that you think, and to be honest if you don’t grasp things like this, there is little point me continuing.
Your argument is also belittled by likening using a Macintosh computer to that of adhering to Scientology. Not all Mac users are fan-boys. I like Apple, but don’t agree with everything they do, their AppleTV is a horrendously crippled device.
I also don’t and never have bought the ‘premium’ on apple products. They simply don’t have cheap low end consumer products. Most laptop comparisons forget that you can’t buy an Apple without things like bluetooth, dvd burner, etc. Yet people still match up a dell with a cd drive and only wifi and go “Mac Sux, more expensive! suxor”
Matt: ludicrous only in that there is no pose associated with using such a device in public. It, too, “just works”, is “easy to use”, comes with a “powerful developer platform”, features “enterprise application integration”, and basically all the rest of the Apple marketing regime. I just elected not to pay for the gloss.
It even supports Flash.
Gaz: I love how you turned a single quote into a 5 paragraph rant without addressing my sole point: recuperation of costs should occur within reason.
Finally, hatred is never rational. 🙂
@David,
Now I know you are merely a spotty internet troll.
As my post pointed out how pointless your rationale about the costs were, and you have chosen to ignore it in favour of petty insults, have a nice day trolling elsewhere. Smiley face.