Neowin.net - 2GB iPod nano Only Costs $100 to Make

2GB iPod nano Only Costs $100 to Make

Posted by anthony on 23 September 2005 - 15:14 · 74 comments & 7395 views

After disassembling the iPod nano, iSuppli discovered something that’s bound to make iPod nano owners angry. The entire cost of materials inside the nano adds up to a measly 90.18 and if you add 8 dollars per unit for labor, Apple still makes $100.82 per 2GB iPod nano sold.

Other interesting discoveries include Apple’s first home built clickwheel, thus dropping it's previous supplier Synaptics. iSuppli also noted that the nano includes a PortalPlayer5021C audio controller chip, a Wolfson WM8975G codec part and a Cypress CY8C21x34 used to manage the input from the clickwheel. The key to Apple’s savings is apparently the Samsung NAND Flash, the 2GB nano includes two 1GB flash memory chips adding up to only 54 dollars.

View: iSuppli Corporation

Japanese software sales for September 12 - September 18:

Platform - Title - Publisher - This week's sales (Total sales) - Weeks on sale

1. PS2 - Shin Sanghoku Musou 4 Moshouden (Dynasty Warriors 5: Xtreme Legends) (Koei) - 203,000 (NEW)
2. GBA - Famicom Mini: Super Mario Brothers (re-release) (Nintendo) - 187,000 (NEW)
3. NDS - Tamagotchi no PuchiPuchi Omisecchi - Bandai - 150,000 (NEW)
4. PSP - World Soccer Winning Eleven 9 (Konami) - 107,000 (NEW)
5. GBA - Super Robot Wars J (Banpresto) - 95,000 (NEW)
6. NDS - Gyakuten Saiban (Phoenix Wright: Ace Attorney) (Capcom) - 65,000 (NEW)
7. GBA - Dr. Mario/Panel de Pon (Dr. Mario Puzzle League) (Nintendo) - 53,000 (NEW)
8. NDS - Nou wo Kitaeru Otona no DS Training (Brain Training for Adults) - 37,000 (552,000)
9. GBA - Mario Tennis Advance (Mario Tennis: Power Tour) (Nintendo) - 34,000 (NEW)
10. NDS - Yawaraka Atama Juku (Brain Training for Kids) (Nintendo) - 24,000 (491,000)

Japanese hardware sales for September 12 - September 18:

GBM 170,306
DS 72,167
PSP 70,152
PS2 24,396
GBASP 11,147
GC 1,882
GBA 624
Xbox 109

News source: Hardware: Games Are Fun

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(1 reply) #1 Posted by Samurai-HQ on 23 Sep 2005 - 15:17: Of course Apple are going to get as much money as they can.

What really "gets my goat" is the fact that no one does anything about it. Sony could charge $1000 for a PS3 and people will still buy it. I just hope one day people have enough sense to boycott such firms when they release overpriced goods.

(2 replies) #2 Posted by Yakkob on 23 Sep 2005 - 15:18: Hardly surprising really.....is it?

I mean wheres the news in this.

It's been going on for years.

Hell it didn't even cost a quid to make a cd when they first come out.

#3 Posted by Adster on 23 Sep 2005 - 15:19: The entire cost of materials inside the nano adds up to a measly 90.18 and if you add 8 dollars per unit for labor, Apple still makes $100.82 per 2GB iPod nano sold.

Isn't there something wrong with the math there? Shouldn't the labor be more along the lines of $10.64?

#4 Posted by mrk on 23 Sep 2005 - 15:20: a cd costs a few pence to make but sells for £15 in stores.

nothing new tbh

(2 replies) #5 Posted by haisdeaks on 23 Sep 2005 - 15:20: $90.18 + $8 = £100.82

(2 replies) #6 Posted by johnston on 23 Sep 2005 - 15:20: lets not forget about their other costs, machinery, premises, electricy phone calls rates etc etc. also the development of the nano, shipping costs, packaging, marketing etc etc

thats pointless doing that

(1 reply) #7 Posted by MadDog on 23 Sep 2005 - 15:22

QUOTE

lets not forget about their other costs, machinery, premises, electricy phone calls rates etc etc. also the development of the nano, shipping costs, packaging, marketing etc etc

And, heaven forbid, profit! This is one of the biggest non-news stories yet.

#7.1 Posted by roadwarrior on 23 Sep 2005 - 18:33: Yep, this one is right up there with iSuppli's breakdown of the Mac mini that didn't bother to include the software that comes with the system.

(2 replies) #8 Posted by Ateoto on 23 Sep 2005 - 15:23: R&D and Marketing. Prices will drop after they sell more. Like every other electronics device in the world.

(2 replies) #9 Posted by S7R1K3R on 23 Sep 2005 - 15:25: yea it all adds up a business is a business u think they only wanna make $1 off you. i mean their computers suck so they gotta make sales somehow.

#10 Posted by Sane404 on 23 Sep 2005 - 15:26: A company has gotta make a profit.

(3 replies) #11 Posted by ECEGatorTuro on 23 Sep 2005 - 15:28: Uhhh guys, that's just the way it is man. It costs Intel cents to make a chip but if you think about it, it costs billions to build a fab, it costs billions in R&D, it costs millions in employee salaries, etc.

Plus, how in the world do you think a company would get by if they only charged a few dollars more than the cost of the product? They would be bankrupt in no time. Granted, they are making a ton of money off of this thing but that's business and economics. If people are willing to pay for it, they will sell it at that price to maximize profits.

If you were a business, why in the world would you sell some product of yours a lot cheaper than people are willing to pay for it? You are shooting yourself in the foot! If you don't want to pay for it, don't buy it... it's that simple. There are plenty of other small mp3 players on the market!

#12 Posted by djsaad1 on 23 Sep 2005 - 15:29: Doesn't it cost nike like 20 cents to make a shoe and yet they sell them for $160. Its buisness people will buy the product no matter what it costs to make it. I really thought that apple made more profit out of their ipods didn't think that it costs 100 dollars to make one, I was thinking more around the 50 dollar range.

(1 reply) #13 Posted by quigley0 on 23 Sep 2005 - 15:29: As soon as I saw the nano, I thought "that looks nice, and the price aint bad", but, then after realizing it was flash based, I was like "who are they kidding?"

#14 Posted by [bear] on 23 Sep 2005 - 15:31: people who do these studies can be real morons. Obviously apple has marketing costs, research and development costs etc.. It is fully justified as to why they charge the amount they do.

(4 replies) #15 Posted by Moredhel on 23 Sep 2005 - 15:36: I dont get what the deal is
This guy needs to live in the real world
Distribution costs money and retailers get their cut too
Apple workers have families ...
Ipods are quite affordable as they are
and have nowhere near the profit margin of other products in the market
Anthony Barboza, get over it

#16 Posted by kronik on 23 Sep 2005 - 15:39: ummm $100 is far more than I expected, how can you say only? this is actually a pricey device to manufacture

#17 Posted by ThunderRiver on 23 Sep 2005 - 15:49: Evil Apple like usual eh?

Well, I am sticking with my 4G iPod.

#18 Posted by XanDaMan on 23 Sep 2005 - 15:51: The clickwheel by apple is no itnresting discovery...its common knowledge...

#19 Posted by Foub on 23 Sep 2005 - 16:00: You're not paying extra for the product. You're paying extra for the name. The Apple name has always been over priced.

(1 reply) #20 Posted by loeakaodas on 23 Sep 2005 - 16:09: The key to Apple’s savings is apparently the Samsung NAND Flash, the 2GB nano includes two 1GB flash memory chips adding up to only 54 dollars.

I wish I could buy a 2GB Flash Drive for that much they cost a lot more

(1 reply) #21 Posted by Netrack on 23 Sep 2005 - 16:10: 100$ profit is huge for a device this size, obviously if you think that ever product sold out there is makeing 100% profit you are vastly uneducated...and for all this resarch talk? its penneis per nano that the put into the price to make it back and to pay for it...100$ profit on this is far to much

(1 reply) #22 Posted by Fark on 23 Sep 2005 - 16:16: what a pointless news post.

Last time I checked, Apple were a BUSINESS not a Charity.
What do BUSINESSES do? They make profit.
How do they make profit? They charge more for their product/service than it costs them to make it.

Shocking news this - company charges more for product than it costs them to make

(1 reply) #23 Posted by Silence on 23 Sep 2005 - 16:20: Not only is this news post extremely unspectacular, it's also very misleading. As few have pointed out, these are merely the costs of the inputs; other production, R&D, distribution, etc costs are ignored.

#24 Posted by aero9 on 23 Sep 2005 - 16:26

QUOTE

Not only is this news post extremely unspectacular, it's also very misleading. As few have pointed out, these are merely the costs of the inputs; other production, R&D, distribution, etc costs are ignored.

i have to agree, but also, ots good to know that a nano has only 92$ worth of parts in it.
i think it was a good thing to read.

(2 replies) #25 Posted by nvizible on 23 Sep 2005 - 16:32: "it's" previous supplier? I'm not quite sure what's meant by "it is previous supplier".

(1 reply) #26 Posted by jim87654 on 23 Sep 2005 - 16:35: If anything I think $100 cost is a low estimate for a device like the nano. Design, R&D, labor, and marketing add a lot more than $8 per unit to total costs.

#27 Posted by Julius Caro on 23 Sep 2005 - 17:33: I don't see anything wrong AT ALL, sorry. In fact, is cool, because it means that nano's price can eventually lower.

#28 Posted by fuzzy_logic on 23 Sep 2005 - 17:34: As many people have pointed out, what about R&D, advertising cost? Going by iSuppli's method of analysis, if you open up a copy of Windows XP Professional, you'll find out that it costs almost nothing to manufacture. So Microsoft is making a whopping $266.99? I don't think so.

#29 Posted by wa22guy on 23 Sep 2005 - 17:41: What kind of "news" story is this? Every company out there does the same thing. How do you think Microsoft became one of the richest companies in the world?

Windows XP CD and box costs about $1 yet they sell it for $199 for the Pro version.

Come on people.... this article was created just to slam Apple.

#30 Posted by dagamer34 on 23 Sep 2005 - 17:59: It is not $100 profit. It is $100+ in terms of revenue.

You still have to spend money to make money. Then again, no one complains about name brand shoes which probably cost $15 in some sweatshop and sell for $50+

#31 Posted by russ0943 on 23 Sep 2005 - 18:30: thats the whole point isn't it? ofcourse they make that much profit. Look at the build cost vs price ratio's of other things. Where this is only 1/1, most are at least 3 or 4 times greater.

(2 replies) #32 Posted by Pliskin on 23 Sep 2005 - 19:19: If Microsoft was doing the same, everyone would be screaming bloody murder. Gotta love the kiddies on Neowin.

(1 reply) #33 Posted by nic on 23 Sep 2005 - 19:38: WHO CARES!?!?!?

This is nothing new at all. Frankly, I'm surprised it costs $100.82 in parts+labor. If I had to guess, I would put it at around $60 or lower (they are buying all these parts in bulk, remember).

The fact that apple still sales the device at $200 doesn't surprise me in the least, nor do I find that unreasonable. Its called capitalism; you set the price to something that the market can bare.

(3 replies) #34 Posted by MaxMonster on 23 Sep 2005 - 19:55: No it won't make apple users mad, this has been the norm for years.

#35 Posted by superrcat on 24 Sep 2005 - 00:07: I don't understand why people would be upset. But then again, I understand that it takes a lot of money to plan a concept, design a concept, meet with component manufactures, apply for trademarks, film commercials, buy advertising space, develop the firmware, and so on and so on.

It's not only about "charging what a consumer will pay". It's also about charging enough to cover the expenses to bring a product to market and fund further development for future products.

#36 Posted by virtorio on 24 Sep 2005 - 00:11: Not another one of these stupid news posts, who keeps putting these things on the front page? The Nano didn't just exist, it had to be developed (R&D) plus the huge marketing costs. Get something more worthwhile to worry about.

#37 Posted by Neomac v6 on 24 Sep 2005 - 01:53: Welcome to the free market economy! You can either agree to pay the asking price for a product, or not. It seems most people reckon iPods are a decent deal. Don't forget that retailers have to take their cut too.

There's also that intangible quality called the "user experience" that makes iPods worth more than the sum of their parts.

#38 Posted by imtoomuch on 24 Sep 2005 - 05:27: If it is any secret that companies make a killing off of most electronic devices, you need to step into the 2000s.

#39 Posted by nicedreams on 24 Sep 2005 - 20:35: Did you know that the shoes from Nike cost only a few dollars, but they sell the shoes for many many times more money. It's called business. It sucks that it's expensive, but that is a dicision that Apple made being it good or bad. It gives other companies a chance at least...

#40 Posted by dhitb on 25 Sep 2005 - 06:06: Couldn't they spare a $0.30 LCD protector?

#41 Posted by samwise622 on 26 Sep 2005 - 21:58: Alright,

Now let's discuss about how much Microsoft would make per XP CD they sell.
Box + Case + CD + Manual ...
or
How much would Intel make for every P4 EE they sell?

You can't just determine the price by combining the price of just materials inside.
Gotta consider shipping fees, seller commissions, design fees, initial investment (building factory, etc), and bunch of others.

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