$22 iPod Shuffle shocker: components tiny, inexpensive
By Joseph L. Flatley 
posted April 13th 2009 10:23AM
posted April 13th 2009 10:23AM
When iSuppli recently reported that the parts and packaging of the iPod Shuffle 3G cost only $21.77, a mere twenty-eight percent of the unit's retail price, PMP Today asked a most reasonable question: Where are the new Shuffle KIRFs? According to Business Week, Samsung is making a killing on these things, supplying not only the unit's ARM-based processor ($5.98), but the storage ($6) on at least a few of the units as well. The lithium ion battery, described by iSuppli as "the smallest we've ever seen," has an asking price of $1.20. As for things like capacitors and resistors, they're being described as "about the size of a grain of salt" and cost fractions of a penny each. Of course, none of this takes into account things like paying engineers and designers, and royalties paid to patents owned by other companies. Not that the KIRFsters of Shenzhen worry about these sorts of things. Maybe the wherewithal required to produce a phony Shuffle is (for the time being) beyond the capabilities of the pirates? Or maybe they're just having too much fun cranking out NOKLAs.
Read - iPod Shuffle 3G Costs $22 to Make: Where are the Clones?
Read - Deconstructing Apple's Tiny iPod Shuffle
Read - iPod Shuffle 3G Costs $22 to Make: Where are the Clones?
Read - Deconstructing Apple's Tiny iPod Shuffle
after you factor in R&D and all that good stuff, it probably costs them about $40-$50 a unit. and then they want to turn a profit. they think they can sell them at that price, so why not? They are in it to make money, regardless what people think. Apple is not a charity, they are a corporation. I would never buy one, but I agree with their pricing strategy. If you can sell it at that price, then why not?
DON'T CLICK THE ARTICLE IF YOU DON'T LIKE IT.
It's just an estimate. iSuppli has no real knowledge of how much any custom part costs (like the main CPU or the case), because you cannot buy it on the open market to find out what it really costs.
And this iPod is mostly custom parts.
Also, this doesn't seem to include the cost of the headphones, which must cost a little more of normal since they have buttons on tem.
Finally, where are the clones? You'd be a fool to clone this. No one is going to buy a player with such limited functionality from a clone vendor. You can get devices with dbuttons and displays for less already.
Plus it's just an estimate of the gross margin. Most of the commenters here don't even know what that is, nor do should they really have to as consumers, but they seem to think that a consumer electronics company walks away with the rest of the money, as if they have no operating costs. Apple spends an inordinate amount on R&D and marketing. Much of the value of Apple's product is in R&D and marketing.
But thank you for being rationale. I don't really understand the objective behind the new iPod shuffle either but I also know there's more to financials than just gross margin. Besides, the market will decide if the shuffle is overpriced.
Rational. Not rationale. Sorry.
It disturbs, but doesn't surprise me, how ignorant some of the people posting here are regarding the manufacturing and sale of consumer electronics.
Zero R&D? LMAO!!!
R&D, along with marketing is the biggest expense for manufacturing successful products.
I'm a little disappointed with general point of view that iPod should cost 40% less.
I mean I only make $82k a year n feel $229 for touch is a steal,.
Unless people r really that broke,.
you mean your dad makes 82K a year?
It doesn't matter who made the iPod shuffle. It would still be rubbish.
Do you own one? I am going to bet "not".
I bought one when it was released, and it's fantastic. It's perfect for my gym workouts and when I go running, because it's completely out of sight, out of mind- it's so light and small, yet hardy for the 2-3x it's hit the ground as I was running (just like the 2nd gen iShuffle that was super durable).
It also looks great, sound quality is more than fine for me, and the voiceover feature is fantastic- who wants to be staring at a screen whilst trying to run? (People who've never gone running before, that's who!). How often do you even need to change the song in a playlist you picked out for a certain task anyway (e.g. exercising music), that you couldn't just quickly press the buttons located near your head on the earbud wire?
Honestly, so many people claiming so much and yet knowing so little. Like all the anti-Apple commenters declaring how Apple is ripping us off because THEY know R&D and engineering costs nothing! THEY know that MS would never charge or make a profit on their own products! THEY know the product sucks without ever using it.
Grow up, kiddies.
Keep in mind that these things use a tiny fraction of the number of electrons to play a song relative to their larger, screenful cousins.
And their larger screenfull cousins have the space for a bigger battery so can play for the same relative amount of time.. your point is?
Bottom line comment to silence all
. the day zune puts out $22 mp3 ,
I will cease to buy apple products for life .
Crickets n silence from winmo fanboys,.
Applause n cheer from everyone else.
Zune is a company?
Go figure.
And $22 4GB MP3 players are a dime a dozen these days.
Several high quality units such as the Sansa Clip can be had for a little more than 2x that price.
Admit it, if this unit had Samsung written on it (as it SHOULD) instead of the Apple logo, it wouldn't receive half the attention or have half as many iDiots rushing to its defense.
...nor the blathering attentions of iHaters like you Hamid.
i know! and i bet they don't even make WoW for it. now if you'll excuse me, i'm off to create a powerpoint masterpiece.
durrr
Apple must have the weight to force component developers to eat more NRE to make reductions in component size, weight, and power required to design this device. So you have a layer of suppliers betting Apple will sell lots of these to justify their own R&D and tooling expenses; you have Apple's system level design and engineering which was an iterative development with the suppliers (this is why it costs more to be first); and then you have the system level tooling, software, test, etc. to manufacture these devices.
This how things get done. Apple's ability to accurately predict sales of lots of these small things allows the production base to move forward. Hopefully because of Apple's "leadership" other companies will be able to make innovative small things without as significant levels of investment or predicted product run sizes.
I also would expect more from this baseline from Apple; that microcontroller can do more then the shuffle is asking of it -- why?
"Maybe the wherewithal required to produce a phony Shuffle is (for the time being) beyond the capabilities of the pirates"
I seriously doubt it. Either they don't think it's a good product to copy or they have the pirate models already in their product pipelines.
Anyway: go chipods!!!
I took my friend's apart and there wasn't a dime inside. Should I notify him that he got ripped off and probably bought a fake?
there is a dime inside each ipod shuffle? cool.
@Zak
According to common sense, you are correct that smaller things cost more. However, this does not apply to electronic chips. The creation of a wafer costs about the same no matter how small the components are; therefore, the smaller the components, the more chips/wafer, the cheaper a chip is. Research/Development is not an issue in this, because it is not Apple eating up those costs, but rather the chipmakers. About the same R&D effort would be required by apple as the previous shuffle.
And also, do not forget that screens are a major component cost - one which the shuffle doesn't have.
Apple did NOT make this out of raw materials. They purchased the components from other companies. The website is estimating the cost of the components NOT the raw materials. And please do not act as if the shuffle is the only player in the world which takes R&D. Every player on the market took lot's of work, and yet their component costs are closer to 50% vs the shuffle's 28%. The shuffle is not worth it from an economical standpoint. That is a fact. All that matters in the end is whether you are getting $80 worth of mp3 player. If you do from the shuffle, all the more power to you.
Apple is trying to make money!!!!! How hard is that to understand??? They are making a profit off of this thing, and as a shareholder I greatly appreciate that. No business would survive if they sold everything at cost. Profit is what makes a business survive.
apple is ostensibly making the shuffle more minimalistic but really increasing the profit margin. Shows why Apple is a great marketing company first and probably an engineering company second.
Read it and weep:
http://www.businessweek.com/technology/content/apr2009/tc20090410_507831_page_2.htm
Quote from Daring Fireball:
BusinessWeek’s Arik Hesseldahl takes yet another of iSuppli’s component price estimates of an Apple product at face value:
"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."
But then:
"The device’s so-called passive components — capacitors and resistors — are unusually small. Known by their numeric label 01005, which in electronics shorthand describes their dimensions in millionths of a meter, they’re about the size of a grain of salt and cost fractions of a penny each. But they’re half the size of what had previously been considered the smallest device of their type, those labeled 0201."
So these components are half the size of anything seen before but iSuppli knows exactly how much they cost?
-------------------------
That's what I'm talking about. This is why iSuppli's estimates are very likely WAY off the actual cost of these parts, and it still doesn't take into account the R&D that had to happen in order to make it work at this size.
This is a simple case of a product not worth imitating. If you were a chinese knockoff factory, would you bother reverse engineering the special headphone cable on this thing just to release a copy of the worst MP3 player ever made? I certainly wouldn't.
"Worst MP3 player ever made"
You have the sales or facts to back that up, do you? Just what do you base this on, besides your own arrogant opinion?
So how long until we can strap the cheap parts to a regular usb drive and make our own ipod shuffle?
KIRFs, why? even the guys making copies in china know that if yo make a copy of a turd it is still a turd
Most of the commenters are probably too cheap to take their girlfriends out for dinner, because they can't grasp why restaurants charge so much for fucking vegetables and a bottle of wine. Fucking hilarious.
"cost only $21.77, a mere twenty-eight percent of the unit's retail price"
Ground control to Major Tom, this is higher than I would have expected.
There are a LOT of other costs in addition to direct material costs.
Sheesh, get real people.
I love the site, but there seems to be a real lack of understanding of pricing structures here on Engadget.
Yet another reason i refuse to buy anything from apple... Sorry if I didn't read any of the long and numerous comments above, but still... The whole headphone thing with the new shuffle just infuriates me so much...
Make no bones about it. Apple, Sony, Microsoft, or any other company out there that is in business is out to make a profit. Its called CAPITALISM... It works. They build things that consumers want and the consumers in turn keep funding new developments and better products. Quit complaining in forums and comments and make a difference. Another thought here, if you think that there is a thing called the Apple Tax, there is also a thing called the Apple Tax refund, its called stock ownership, and the higher apples profits the happier the share holders become and the more that apple tax refund grows... Quality products will always ultimately lead to a better stock value.
Not to mention the Microsoft tax, the Sony tax, the Nintendo tax, the Dell tax, the HP tax, etc.
Or are we expected to believe nobody makes profits except evil Apple?
Aside from the fact that materials is just a piece of the operating costs, Apple can charge what they want for their stuff. If you don't like the price, don't buy it :)
Apple is the wholesaler. They will mark up about 25-50% when they sell to retailers. The retailers generally sell it at double cost. How much is this shuffle going for?
It's actually quite sad when you see this. They make it so cheap and yet they either must or just want to sell it for such a high price.
This price ratio is pretty common. It's product design 101.
Retail price for small consumer products is usually double wholesale.
Wholesale is often roughly double the cost of production (including R&D). Out of that, half the production cost is making the thing (half is developing it). So we're around 12% of retail to manufacture the item. Ideally, less than half of that is the cost of parts. So 6% or less of the target retail price will be parts or materials.
My guess is that those parts don't cost nearly that much for the quantities that Apple buys and that 6% is close to the amount of retail price the parts comprise. As opposed to the 28%.
You're paying for the right to own an Apple! C'mon! Doesn't everyone wish they could have all Apple gear??? ;)
This is why I avoid Microsoft AND Apple. I've loyally stuck to third party hardware like Sansa's line of mp3 and mp4 players. I think rhapsody is a way better music system than Itunes but still have to stick to it for movies and such. In my mind consumer electronis should be a three way set of checks and balances. Producer-content provider-consumer In the end you will always pay to much.
VIVA VA LINUX!!!!!!!!!!!!!!!!!!!!!!!!!!!!