Apple's $79 iPod shuffle Costs $21.77 to Produce

[Rob Williams]

From our front-page news:

One common complaint from Apple naysayers is that the brand carries a luxury tax, and this is a point that even Microsoft is happy to point out in their most recent run of commercials. But, like other luxury items, customers believe the quality is there. The same rule can apply for things like cars, houses, watches, pens, et cetera. Where Apple is concerned, many users consider the design of the machines to be worth the cost-of-entry, in addition to the robust OS.

Many times though, if a product carries a huge price tag, you can be sure that the cost to produce it wasn't cheap either. A Rolls Royce may cost $300,000, but the amount of manpower and materials to be put into one is staggering. There's no 50% profit margin there. But with Apple, it's a different story. Would you believe, for example, that their $79 third generation iPod shuffle costs a mere $21.77 to produce?

The only word I can think of is "wow". If Apple earned $200 on a $1,000 MacBook, that would impress me, but the delta between the production costs of the shuffle and its SRP is just staggering! I'll be the first to admit that I believe Apple's products are over-priced, but let's face the facts... many Apple customers are pleased with the quality, and if a company can deliver that kind of reputation while keeping huge profit margins like this, then kudos.

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.

Source: Business Week​

 

[Kougar]

The only word I can think of is "wow". If Apple earned $200 on a $1,000 MacBook, that would impress me, but the delta between the production costs of the shuffle and its SRP is just staggering! I'll be the first to admit that I believe Apple's products are over-priced, but let's face the facts... many Apple customers are pleased with the quality, and if a company can deliver that kind of reputation while keeping huge profit margins like this, then kudos.

Apple earned an approximate 50% gross margin on their first generation iPhones, not counting the almost $20 per month they now get for every single AT&T 2 year subscription plan iPhone users must buy. That Apple can get away with prices like this still amazes me... but if people want to throw that kind of money at Apple then that's their problem.

I don't see any teardown costs on the Macbook Pro, but I do believe Apple makes $200 or more on a $1k MacBook even after adopting the higher cost of a unibody machine. Regardless of specific numbers, you know Apple is making the highest profit margins off their laptops than any other manufacturer out there.

 

[Rob Williams]

Oh, I figured that Apple made a pretty penny on basically anything they sell, but something to the tune of 75% profit is just incredible. I still say kudos, because if that many people want to willingly give money to Apple like that, then whatever. At least with the iPhone, it does actually happen to be a great phone (one I'm almost considering myself since my contract phone -sucks-). I do think the extra luxury tax on the plan itself is asinine though. Whatever I guess. People pay it, so who's to blame Apple for what they do?

 

[Kougar]

The iPhone is definitely maturing, it helps Apple finally addressed many of the little things like copy and pasting. Although there are still some others like number of open applications and switching between them from what I hear. I think only one app can be run at a time?

I just now looked at AT&T's pricing scheme, I'm not sure when but they added a $70 a month plan that includeds unlimited data... that's more reasonable if still a bit on the high side. Text messages not included, of course. It's still more than what we pay now though, and $200 for a phone is still a bit much for me. But as you say, no point in blaming Apple for getting away with it.