iSuppli: new iPod nano costs Apple less than $83 in components

The iPod nano is the "most popular music player in history" according to Steve Jobs. So there's nothing like an iSuppli teardown of the new, 3rd gen device to get the ol' analyst juices flowing. So get this: iSuppli claims that for every $149 4GB nano and $199 8GB nano sold, Apple's components costs are just $58.85 and $82.85, respectively. That's an 18.5% lower direct materials cost than the previous nano. In other words, a substantial increase in margins for what should be a tidy boost in Apple profit after covering R&D costs. The teardown also indicates that Apple has once again opened the money trough to a whole new bevy of suppliers including Dialog Semiconductor, Intersil, and Synaptics. Micron is the big winner here as they supply the NAND flash storage whereas Toshiba provides it for the iPod touch. Could be that the effects of Samsung's NAND factory power outage are starting to show. Enjoy it while you can suppliers, chances are you'll be begging for Apple's business once the next round of product refreshes goes down. Bill of materials after the break.

[HineyWipe @ Sep 19th 2007 9:18AM]

Meh. They never factor in that the cost is based on QUANTITY purchases of 1000 minimum.
And where is the labor cost for assembly? Packaging? Engraving?
(right..read the bottom of that and they leave out the non-parts costs...)

You $30K car cost $4K in materials. nuff sed.

And hello? Apple makes its money off hardware. Duh. You want Apple to have a sale already?

[Alan Partridge @ Sep 19th 2007 9:24AM]

I doubt that list at the bottom of things they havent factored in will cost more than $15-$20 per iPod

[milrtime83 @ Sep 19th 2007 10:26AM]

"That's an 18.5% lower direct materials cost than the previous nano."

For anyone complaining about not taking into account software development, marketing, etc, that 18.5% number should at least mean something to you...

That percentage would be basically all profit assuming the other costs for apple stay approximately the same.

[stevesreed @ Sep 20th 2007 1:16AM]

It is 18% cheaper to make, but also 25% less expensive to buy (4G was $199, now $149), so how is Apple making more money on the deal?

[Mike Lembo @ Sep 19th 2007 9:21AM]

Good for them. They created a high quality product it is worth $200 and thats why it sells. A company that works as hard has apple needs that extra cash to pay for their extensive research and advertising. These ideas don't just pop into Steve Jobs head while hes sleeping. People pour their sweat and blood into making sure their products are the best out there.

[Xavier Gill @ Sep 19th 2007 9:26AM]

High quality? The bigest complaint, even from Apple fanboys, is that Apple have cleary cut corners on quality on the new generation of iPods

[Grant @ Sep 19th 2007 10:36AM]

It's true.
word from the interwebs is that there are issues with nano screen tilt that effects the majority of units. and there are contrast issues with the touch.

I have faith that apple will have these issues resolved fairly quickly, and to the satisfaction of most, but at the same time its going to cut into that nice newly made higher profit margin.

[Tyler McPheeters @ Sep 19th 2007 9:27AM]

I love how the battery costs $1.40, yet is not replaceable...

[Nate @ Sep 19th 2007 4:06PM]

I think it was even Engadget that said that the replacable battery would make the form factor much thicker than it is.

[Typhoid Mary @ Sep 19th 2007 8:48PM]

You can have Apple replace it for you cant you? For $50 I think.
Now thats a nifty profit.

[Sean @ Sep 19th 2007 9:36AM]

Jesus. I've never posted on an apple story crying about how engadget posts ANYTHING apple just to get viewers to it's site...but this is just getting fucking old. This same article appears anytime there is a new ipod, iphone, imac, etc. Ever think of how much much work went into R&D on the new ipods? They've been working on it for years. What about advertising, packaging, promotions, training, and everything else?

Do you not want apple to make a profit? they have a company to run, employees to pay, etc. If they make good profit on an item, so what? It's not like they make $50 and spend it right away. They need to put $ aside for future R&D, advertising, etc. You want the next iPhone to be 2x better than the current one, and not to have ANY flaws/bugs when it comes out? Ok...fine. But that requires an enormous amount of $ for R&D and testing.

stop being such bitchy iFanboys. If it makes you that mad, get a damn Zune already. Stop posting lame apple stories just to get traffic.

[Thomas Ricker @ Sep 19th 2007 9:52AM]

@sean,

When you get your panties unbunched, read again. We mention R&D and never, at any point, make a complaint about Apple making a profit. We post this because it's incredibly interesting to us (and hopefully, most of you) to see the component costs and who is getting a slice of the iPod pie -- especially when it's their best selling nano.

Thomas

[Ta @ Sep 19th 2007 9:37AM]

Right how about assembly, packing, shipping, design, marketing, curious what would be if it all fractured in

[Scooter @ Sep 19th 2007 9:55AM]

Precisely.

Assuming a 20% margin (not markup) for retailers would mean shops only pay $120 for the 4GB.

So apple would have to fund development, marketing, freight and import taxes out of the remaining $50 (assuming it wants to make a $10/10% profit on its investment, which nobody would deny them). Of course Apple also sells direct in order to obtain retail profits as well, though that has its own costs attached, both online and in-store.

You can appreciate at this juncture the basic b-school maxim of first trying to cut costs (to increase profit) rather than raising prices. If Apple can cut costs further it will, though for brand positioning it will try to enhance the product over time rather than drop the price.

[Calculon @ Sep 19th 2007 9:38AM]

How dare they try to profit off of us!

[James Ollier @ Sep 19th 2007 9:41AM]

Surely the idea of business is to make money??

[rudebo @ Sep 19th 2007 10:05AM]

offcourse and the ideea behind a customer is that he is getting his moneys worth

[Brooks @ Sep 19th 2007 9:47AM]

Tighter quality control? iTouch displays?
They seem to be at a great place in terms of product lineup. I know Apple is a smallish company (when compared to some of the other hardware/software giants), but with their success, they could further firm up their place as a powerhouse by refining every product they put out the door.

[k4j3 @ Sep 19th 2007 9:47AM]

You also have to remember that it isnt just apple that sell these, amazon and other independents dont just sell them for the fun of it, also the apple run stores all cost money to run......

[jilie @ Sep 19th 2007 9:55AM]

Down with Apple!

[Mugsy @ Sep 19th 2007 9:57AM]

I find it interesting that every post here assumes that someone is irate over this and yet, nobody's really complaining (except maybe about the battery not being replaceable). For that matter the blog entry itself is entirely neutral.

Take a deep breath people.

[mmmmmkay @ Sep 19th 2007 3:09PM]

Totally. But I will say that it's always my first instinct to defend capitalism when I see one of these posts because there's an innate resentment of profit taking, especially in this crowd, as if the heads of these companies owe us amazing products at the cost it would take us to assemble it ourselves, assuming of course we had the technical know how (capital), machinery (capital), and everything else that requires a shit load of investment. Nevermind all that, gimme gimme gimme!

But this is just information and it's left to the reader to interpret it. Bottom line is that there's profit potential (assuming they don't blow all of that margin on TV spots).

[bruckwine @ Sep 19th 2007 10:13AM]

No wonder the audio quality is sh*t - they're skimping on the parts! Most popular player but still one of the worst in audio quality.

[keith waddington @ Sep 19th 2007 10:20AM]

Listen to Bruckwine. he's obviously and expert. LOL.

[bruckwine @ Sep 19th 2007 11:22AM]

"keith waddington @ Sep 19th 2007 10:20AM

Listen to Bruckwine. he's obviously and expert. LOL."

Listen to keith he's obviously AN expert on me being AN expert..obviously lmao!

[FrankTheCrank @ Sep 19th 2007 10:15AM]

Wow...that's a hugeamongous profit margin.

A profit margin Bill Gates would die for.

They could sell the 4GB at $99 and still make money.

JEEEEEEEEEZUS!!!

[James Ollier @ Sep 19th 2007 10:32AM]

Windows Vista Component Cost Breakdown:
DVD - $1
Packaging - $1

[Grant @ Sep 19th 2007 10:41AM]

years of development, yet still buggy as hell: Priceless

[Rainier @ Sep 19th 2007 10:15AM]

iGiveUp!



Ok, I'll go buy one now.

[strider_mt2k @ Sep 19th 2007 10:38AM]

Yeah, but this one's got a new hat!

[Grant @ Sep 19th 2007 10:42AM]

I doubt apple even gives retailers that much of a profit.
Most of apples sales are done direct for that reason, and the only people who are certified apple retailers are the ones who are big enough to make up for the lack of margin in volume, for example walmart and best buy.

[Grant @ Sep 19th 2007 10:44AM]

i give up on trying to trying to reply to peoples comments.

Engadget, fix your fucking embedded links, because they don't work after you have posted a comment and try to reply to another

[kEiThZ @ Sep 19th 2007 10:57AM]

Everyone criticized iSuppli for their breakdown of iPhone costs...seems they were bang on, now weren't they?

R&d costs? Gimme a break...Apple is using the same OS across its product lines to save money. Handicapping it to fit the nano is not major R&D, neither is putting in a color screen or a new form factor. This was an incremental update with very little product development.

Assembly costs? Do any of you know how cheap Chinese labour is? It probably does not cost more than 5-10 bucks to produce a nano in China.

Packaging? 2 dollars worth of plastic if that.

Marketing....now here's where they spend the dough...

I like and use Apple products but lets not pretend they are here to serve consumers. They are here to make their shareholders rich but making you part with your hard earned dough.

As a practising engineer, I say these estimates are bang on. Given that the margin for most electronics is about 30%, and given Apple's high profitability at the moment, these estimates are definitely spot on.

And those of you whine or defend Apple, wait till they drop the price on the nano, how will you feel then? Information from teardown analysis at least warns the consumer to anticipate price drops or updates. Given the huge margin on the new nano, its a matter of time....

[Kizorblade @ Sep 19th 2007 11:13AM]

Last time I checked, the majority of iPod price drops are actually from introducing a new product and not cutting the price after it has been announced.

[dj-kenpo @ Sep 19th 2007 12:09PM]

$10 for chinese labour?

i bet it's closer to 80cents per ipod. nike pays about 3cents per shoe. stevo's no saint, 80cents might be a little generous.

when screens go in tilted, that's a sign those putting the parts together are being rushed and uderpaid.

[Samurai Jack @ Sep 19th 2007 11:57AM]

18.5% decrease in component costs. . . $50 decrease in price over the last generation. It's not like Apple isn't passing on at least some of the cost savings to the consumer.

[Future Man @ Sep 19th 2007 12:29PM]

Apple's not a charity? They are a corporation? Apple's making profit off of us??!

Wow man, great insights. We didn't realize all of that until you instilled us with your vast knowledge.

We buy Apple products because we love Apple products.

[David Becker, Sr. @ Sep 19th 2007 12:31PM]

I don't care what they make. As a PC Boy and Apple convert, Apple stuff rocks, and as they say "it just works". Took me 59 years to find Apple, and jump in, and all I can say is I hope Jobs lives to 150, oh Buh-Bye Bill! (maybe you can get Vista to work as well as XP,what CRAPWARE)

[Harry Wagstaff @ Sep 19th 2007 12:41PM]

If I could get a colour mini LCD screen for $10 I'd have covered my wall in them by now.

[Pierluigi Rotundo @ Sep 19th 2007 1:16PM]

I'm still happy with my 3gen ipod...

[- @ Sep 19th 2007 3:00PM]

Hey me too, no click buttons to wear out! Though the 40GB hard drive is a bit of a space hog.

[bigmofobubba @ Sep 19th 2007 3:04PM]

Well you morons have been giving to apple's piggy bank for a while. Duhhhh

[kirk @ Sep 19th 2007 7:15PM]

How come people always complain about hardware prices and not software prices? Software costs less than a dollar to stamp out a CD-ROM, yet design suites like Photoshop and AutoCAD can cost more than $1000. Look at the price of PS3 and Xbox games. They cost less than a dollar to manufacture, and no one complains about high margins.

[nano @ Sep 19th 2007 10:44PM]

Then it's scary to even think what it costs SanDisk or Samsung to build their DAPs. They _make_ flash memory, you know, and they don't have to charge themselves extra for it.

[c. baines @ Sep 21st 2007 12:22PM]

That soundtrack is amazing.