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.
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