iPod Shuffle parts costs $22 in materials

Chauncey Dupree
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April 13, 2009
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Businessweek is reporting that the iPod Shuffle costs less than $22 to make, and Apple retails it for $70.  That is a very healthy profit margin for Apple.  Remember, getting it down to that size and making it useful without a screen took a lot of (unaccounted for?) engineering. Apple also spends more than the average MP3-maker company on marketing.

...a teardown doesn't account for the costs of design, software, manufacturing, or shipping, these cost estimates help fill in the blanks toward estimating the profit on each device sold.

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.

Oh, on that note, we've got an earnings call coming up shortly.

Comments (7)

9to5Mac Noob (not verified) | April 13, 2009 - 8:20am

I don't think I understand the word profit. I always thought it meant how much you have left after EVERYTHING--paying all your employees, manufacturing, sales force, customer service, the technical support you'll provide over the life of the product, etc.

So, if a company has money left over after paying everyone and accounting for everything, is that what a profit is? Like when they say Apple posted profits of $XX billion, is that left over money? And if so where does that money go? Is that money they save or they invest in R&D, or is money invested in R&D considered part of operating revenue? I would assume it is. So, who gets the left over cream? Is it related to the stock price somehow? Like how some companies pay dividends...OK, enough "dummy" questions :)

farmboy (not verified) | April 13, 2009 - 10:26am

Well, there's gross profit and net profit. Very broadly, gross profit is what's left after the obvious related costs--parts, labor, shipping, etc. Net profit (again very broadly) is what's left after R&D expenses, tooling, taxes, insurance, payroll and all the other fun stuff businesses have to lay out.

BW is only GUESSING as to the costs--they have no Apple insider in accounting that provides this kind of information. Always take these guesses with a big giant boulder of salt. They're just filling space with conjecture.

Khürt Williams (not verified) | April 13, 2009 - 8:47am

I work in the bi-pharma industry. Although the manufacturing cost for a single pill might be very small there are additional cost that need to be accounted for the in the sale price of a pill including:
cost of research and development
cost of clinical trials
cost of FDA submissions
cost of all the drugs that failed to make it ( there are a lot of failures)

So ... instead of focusing on what it cost to manufacture the products, focus on buying shares in a company that knows how make a profit.

9to5Mac Noob (not verified) | April 13, 2009 - 10:11am

The $22 is only for the parts.

After design, manufacturing, retail expenses, and warranty costs, legal, accounting support, marketing and advertising, software implementation and updates, the cost to Apple is substantially more than $22. Maybe more like $50? Just a guess.

ulfoaf | April 13, 2009 - 8:53am

$80 for 4GB plus the small form factor, looks hard to damage. Kudos to Apple. I'd buy one if my iPod mini quit working.

powers | April 13, 2009 - 6:11pm

Wow, this is a big surprise. Not.

 

mac (not verified) | April 14, 2009 - 7:04am

I think everyone can agree that the price of all iPods and for that matter everything could be cheaper but companies like Apple will simply continue to price at whaatever they think people will pay, and with the popularity of iPod, they will always be more expensive than similar models - even if they are superior in features etc.

So, the fact that Apple makes a big profit is not really a surprise - however, as a consumer it would be nice to be looked after once in a while?

Free iPods - http://www.gimmeitfree.co.uk