Apple's new iPod Nanos retail at around three times the build cost
Analysts identify iPod Nano rip-off
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20 Sep 2007, Iain Thomson , V3
Analyst firm iSuppli has taken apart the new iPod Nano and found that it gives Apple its biggest gross margins yet.
The build costs for the new Nano run to $58.85 for the 4GB model priced at $149, and $82.85 for the 8GB version priced at $199. This makes it the most profitable iPod in Apple's history.
"The changes in components have resulted in significant cost reductions in the Nano design, allowing Apple to offer a product that is less expensive to build and that has enhanced features compared to its predecessor," said Andrew Rassweiler, senior analyst and teardown services manager at iSuppli.
Overall the study found that Apple typically charges around double the manufacturing cost of its products, but that the new line retails at around three times the build cost.
The teardown showed that the new 4GB Nano is 18.5 per cent cheaper to build than the previous model.
The estimate does not include costs for manufacturing, software, intellectual property, accessories and packaging.
The figures also do not include research and development costs, since such data cannot be derived from a teardown and component analysis.
© Incisive Media Investments Limited 2010, Published by Incisive Financial Publishing Limited, Haymarket House, 28-29 Haymarket, London SW1Y 4RX, are companies registered in England and Wales with company registration numbers 04252091 & 04252093
Do you agree?
Business is Business
You're suprised that apple is selling one of it's greatest products at a substantial markup? It has the premier product on the market, so you're suprised they are charging a premium for it while they can?
Do you think those $270 Gucci sunglasses contain more then about $15 worth of material and labor. Get off your high horse.
Posted by Brian, 20 Sep 2007
more rip-off on the SW side
Apple didn't mention it, but the new iPods aren't compatible anymore with 3rd party software like Linux' GTKpod or WinAmp.
Only iTunes can now upload new files & playlists.
Posted by Andy, 20 Sep 2007
Analysts Identify Another Stunning Rip-Off
Analysts announced today that as unbelievable as it may sound the bottled water industry is grossly overcharging for their product. A tear-down showed that bottle water is mostly cheap H2O, readily available at most places on planet Earth. The tear-down also showed that most bottled water products use a small amount of plastic (by weight) as an inducement to trick consumers into buying a product that is otherwise available from most faucets distributed throughout the civilized world. "We believe that the use of highly stylized plastic containers tricks people into buying a product that is otherwise practically free every where," said a headline seeking analyst who ask for anonymity out of fear of being ridiculed as a cheap publicity hound.
Posted by Gary Mack, 21 Sep 2007
boo hoo
I guess if you don't want to pay a manufacturers mark up, build your own.
Posted by Geoff, 21 Sep 2007
Value rather than Cost
I have to disagree with that article of yours I'm affraid. We must not take the real cost of an item into consideration, but rather the value the object brings to us compared to its market price.
The new nano has more features, more memory, better performance for a price that, if I'm not mistaken has not changed drastically.
The building process is not really the customer's concern I guess. What is the customer's business is whether they like the item offered and whether they find the price fair.
It's called marketing, and it's been around for quite some time now :)
Posted by Augoustinos, 21 Sep 2007
Premium product???
I have to take issue with the use of the term "Premium product" to describe the IPod. Although the IPod is a perfectly adequate piece of kit as a music player and has, thanks to Apple's legendary design skills, become a "must-have" accessory for the fashion-conscious non-techy, it is not a premium product in anything except price.
I can buy an MP3 player for less than £20 which does everything the IPod can do plus a lot more besides, which has a much better battery life than the IPod (on several occasions I've run my player constantly for more than 10 hours on a single battery), which costs considerably less to maintain/replace and on which I can connect to virtually any personal computer, running virtually any operating system, anywhere in the entire world without the need for specialist software (i.e. ITunes).
The fact that using this device also means I don't have to faff around with the inordinately stupid piece of junk that is ITunes is an added bonus of course :)
With regards to this debate on the price of the Nano, I don't see why this is considered a rip-off. Every sensible person knows that the key to making money from items such as this is to secure the best possible build quality for the lowest possible per unit price - that's all Apple have done. It's a standard business practice and as the article points out, the research and development costs aren't factored into the production costs given here.
Posted by Mike McGowan, 21 Sep 2007
Economics
As Economics would state. A product is worth what a person will pay for it. I was thinking today how good Apple is as a company for its prices. It brings out new models and keeps them at a price which is not unreasonable, so much so that the proucts do not fall down in price a few weeks later. Also iPod dont keep their old products out to sell, meaning that there are not price gaps between each model which would make the new ones even more expensive in shops. Simply put, if iPods were a rip off, they would not be bought and by buying an iPod you acknowledge that it is not a rip off as you would prefer the iPod than the money in your pocket, or the opportunity cost of that iPod (A zen or something like that) If you dont like the price. Dont buy.
Posted by Louis, 21 Sep 2007