BusinessWeek: iPod nano teardown shows ‘fat’ profit margins for Apple

“When leaked photos of the latest iPod nano first appeared on enthusiast blogs, it quickly gained the nickname “little fatty,” owing to the squat shape required to accommodate a wide-screen video display,” Arik Hesseldahl reports for BusinessWeek.

“But the adjective ‘fat’ could also be used to describe the apparent widening of profit margins on the nano, which has become the most popular member of Apple’s (AAPL) iPod lineup in just two years. An analysis of the component costs by the market research firm iSuppli suggests that, despite the addition of a video screen, the new nanos boast the widest margins yet for the line,” Hesseldahl reports.

“After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 model with 4 gigabytes of storage capacity, and $82.85 for the 8GB version priced at $199,” Hesseldahl reports.

“ISuppli’s estimates don’t account for nonhardware costs, including software development, intellectual property, packaging, final assembly, and distribution. Apple declined to comment,” Hesseldahl reports. “Analyst Shaw Wu of American Technology Research cautions that there are other less-tangible costs to consider in guessing the overall cost of the nano. Among them are reserves to cover warranties on defective units.”

Full article here.

Nowhere in Hesseldahl’s article are marketing costs mentioned, but they should be, if BusinessWeek was interested in giving their readers the complete story. If you think those iPod nano TV commercials that are currently peppering prime time are free, Think Different.

40 Comments

  1. “”ISuppli’s estimates don’t account for nonhardware costs, including software development, intellectual property, packaging, final assembly, and distribution.”

    I’m sure that can’t be any more than $1 US per Nano. Right? I can’t believe that iSuppli’s “reports” actually get re-distributed at all.

  2. BusinessWeek: iPod nano teardown shows ‘fat’ profit margins for Apple

    Yea and the quality is slipping tremendously too. Crooked screens, faulty OS installs, cheap LCD screens on the iPod Touch and Fatty. Low quality screens and reduced (yes reduced) graphics performance on the new AL iMac’s. (Lawsuit is pending on the LCD’s.) Of course the glossy displays.

    Apple is going after Dell all right, following right in their footsteps for poor quality. I’m half expecting my MBP battery to explode like cheap ass Dells.

    Please Apple, return quality and functionality to your products.

  3. “ISuppli’s estimates don’t account for nonhardware costs, including software development, intellectual property, packaging, final assembly, and distribution.”

    Where does Apple add value. In their hardware on in their software (user interface). By excluding software development and intellectual property, this report is excluding the things that are truly valuable to the making of the nano.

    It’s like building a custom house and only counting the cost of construction materials. Construction and design costs are ignored.

    Not only is this report inaccurate, it’s highly misleading.

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