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“iSuppli on Tuesday published the results of its Apple TV teardown, which found a total preliminary estimated production cost of $63.95,” Lane reports. “That price includes the cost of additional item boxes with the product, the research firm said.”
Lane reports, “The most expensive component was estimated to be the custom-built A4 processor, which sports 256MB of RAM. The Samsung-manufactured chip has an estimated cost of $16.55… ‘The Apple TV’s remote control represents more incredible mechanical engineering from Apple,’ said Andrew Rassweiler, director, principal analyst and teardown services manager, for iSuppli. ‘The remote appears to machined from a solid piece of aluminum. Because of this, the electronics of the device must be slid in through small holes on the side, similar to putting a ship in a bottle. It’s a clever and a detail-oriented piece of design that makes the remote very pricey and very unique to Apple.'”
Read more in the full article here.
MacDailyNews Note: As always, these estimates exclude R&D, software, packaging, and marketing costs which all contribute to the final retail price.
[Thanks to MacDailyNews Reader “Lava_Head_UK” for the heads up.]
@predrag (and others)
At a production cost nearly 2/3 of the retail price, it’s fair to say that Apple’s profit margin on the AppleTV is slim-to-none. Though none would be quite out of character for AAPL. However, there are other reasons why a 0% profit margin on the hardware may be quite acceptable. In the case of the AppleTV, the more homes it lands in, the more content is delivered through iTunes. I don’t know what the profit margin is on the 80,000th rental of a $4.99 movie, but I’d venture to say with some confidence that it’s well over 50%.
Another perspective: a year after an AppleTV is sold, how many TV shows and movies have been rented? How many Netflix movies streamed through AppleTV (well, maybe not. I’m sure Apple just asked Netflix nicely if they would stream through AppleTV just so users would be able to stream more content–NOT! Not without some change dropped into AAPL for each streamed item.)
I don’t have TV if it isn’t iTunes, Hulu, Netflix or Internet. I spend $9 a month on Netflix, and maybe $30-40/month on iTunes. Let’s just say $300 for the year. That’s two months worth of cable. I watch what I want to watch, when I want to watch it. Without commercials. Maybe Apple only makes 30% margin on iTunes. So the AppleTV can be expected to turn a break-even at time of sale into a 100% markup after 1 year, and pure gravy after.
Apple is changing. And don’t think for a minute that this change is any less well designed than the iPhone or iPad. Watch.
maclouie,
You’re a fscking moron.
maclouie,
You’re a fscking moron.
@maclouie is not that far off, mental health “professional,” since Apple TV is now indeed designed to be a gateway box for rentals.
I was saddened that the Apple Remote didn’t have any volume controls. I tested it in the Apple Store, and the YouTube video I played was very loud. I don’t want to have to reach for my TV remote to reduce volume, nor my iPod touch’s remote app. Bummed with Apple TV on this issue.
Apple’s stock (and many others) probably jumped on news out of Japan that the Central Band cut their prime interest rate to near Zero percent to spur some economic recovery. The market looked very favorably on this news.
@maclouie is not that far off, mental health “professional,” since Apple TV is now indeed designed to be a gateway box for rentals.
I was saddened that the Apple Remote didn’t have any volume controls. I tested it in the Apple Store, and the YouTube video I played was very loud. I don’t want to have to reach for my TV remote to reduce volume, nor my iPod touch’s remote app. Bummed with Apple TV on this issue.
Apple’s stock (and many others) probably jumped on news out of Japan that the Central Band cut their prime interest rate to near Zero percent to spur some economic recovery. The market looked very favorably on this news.
“A $99 retail item that costs $62+ to build is a loss leader. This is the razor so Apple can sell the blades.”
Clearly if we’re talking about products like Apple TV, the words “Apple” and “over-priced” simply don’t go together. Harking back to my father’s retail store of long ago, our wholesale cost was roughly 60% of retail. So an item we were selling for $10.00 cost us around $6.00. Of course, that’s before paying the store’s rent, utilities, labor costs, business taxes, etc.
“A $99 retail item that costs $62+ to build is a loss leader. This is the razor so Apple can sell the blades.”
Clearly if we’re talking about products like Apple TV, the words “Apple” and “over-priced” simply don’t go together. Harking back to my father’s retail store of long ago, our wholesale cost was roughly 60% of retail. So an item we were selling for $10.00 cost us around $6.00. Of course, that’s before paying the store’s rent, utilities, labor costs, business taxes, etc.
The cost of mining diamonds is a pittance compared to the retail price of an engagement ring or a necklace, the stone cutting and design is worth a lot. Apple design is priceless.
The cost of mining diamonds is a pittance compared to the retail price of an engagement ring or a necklace, the stone cutting and design is worth a lot. Apple design is priceless.
@Mental Health Professional
Please explain why.
Retail experience #1: tech store. Markup for expensive hardware (ie computers) where not very good. Like a $2000 printer would cost $1200 wholesale. $800 dollar differential may seem like a lot to the uneducated but in the world of retail when you dont sell that many or you had to sell at a discount, it wasn’t much of a markup. The markups/profits came from the software and accessories.
Retail experience #2: home goods. a $1.75 vase I would sell for $8.95 and lots of suckers would buy them. They flew off the shelves. Same with water fountains. All markups were 3X. If not we would not carry it.
If any of you want to call this moronic then you need to look in the mirror because you all pay these markups while the retailers go to the bank.
To be fair, different markets and different industries have their own ratios. But retail is at least 2X until you get to high ticket items (ie TV and cars etc). As a matter of fact, you have no clue how big the markup is for WalMart and Michaels (flowers). I do and they are big. WalMart may trim a penny at retail but there is dollars of profits underneath.
Apple is the manufacturer AND the retailer and a $62/$99 ratio is piss poor. It’s the razor and blade thing. Think about it. It has already been dislosed that Apple TV is the iPAD PCB Assy. What’s missing is the screen. The screen warrants $400? I dont think so. The $62/$99 ratio is not the normal Apple ratio for their other hardware.
@Mental Health Professional
Please explain why.
Retail experience #1: tech store. Markup for expensive hardware (ie computers) where not very good. Like a $2000 printer would cost $1200 wholesale. $800 dollar differential may seem like a lot to the uneducated but in the world of retail when you dont sell that many or you had to sell at a discount, it wasn’t much of a markup. The markups/profits came from the software and accessories.
Retail experience #2: home goods. a $1.75 vase I would sell for $8.95 and lots of suckers would buy them. They flew off the shelves. Same with water fountains. All markups were 3X. If not we would not carry it.
If any of you want to call this moronic then you need to look in the mirror because you all pay these markups while the retailers go to the bank.
To be fair, different markets and different industries have their own ratios. But retail is at least 2X until you get to high ticket items (ie TV and cars etc). As a matter of fact, you have no clue how big the markup is for WalMart and Michaels (flowers). I do and they are big. WalMart may trim a penny at retail but there is dollars of profits underneath.
Apple is the manufacturer AND the retailer and a $62/$99 ratio is piss poor. It’s the razor and blade thing. Think about it. It has already been dislosed that Apple TV is the iPAD PCB Assy. What’s missing is the screen. The screen warrants $400? I dont think so. The $62/$99 ratio is not the normal Apple ratio for their other hardware.
Apple’s usual BOM, Bill of Materials, is about 50% of the retail price, so the ATV, if iSuppli is correct does indeed indicate that the ATV has slim margins. I imagine that the $99 price point was too attractive to pass up. I mean, $129 just does not sound as nice.
Apple’s usual BOM, Bill of Materials, is about 50% of the retail price, so the ATV, if iSuppli is correct does indeed indicate that the ATV has slim margins. I imagine that the $99 price point was too attractive to pass up. I mean, $129 just does not sound as nice.
It’s clearly a loss leader*, but a very smart loss leader.
*Loss leader in the sense that they won’t actually lose money on it, but the margin will be far too low to make a significant profit on the Apple TV sales themselves.
It’s clearly a loss leader*, but a very smart loss leader.
*Loss leader in the sense that they won’t actually lose money on it, but the margin will be far too low to make a significant profit on the Apple TV sales themselves.
Sony sold the PS3 for years taking losses. Only recently did they start turning a profit on it. Most printer manufacturers sell at a loss but recoup their costs in ink-cartridge price gouging.
Even if Apple TV sells for less than it costs to manufacture, the unit is a gateway to the iTunes store. Someday Apple may even give away the Apple TV just so people will rent from iTunes.
Sony sold the PS3 for years taking losses. Only recently did they start turning a profit on it. Most printer manufacturers sell at a loss but recoup their costs in ink-cartridge price gouging.
Even if Apple TV sells for less than it costs to manufacture, the unit is a gateway to the iTunes store. Someday Apple may even give away the Apple TV just so people will rent from iTunes.
A couple of things to consider about AppleTV’s build cost.
1. A4 is sold in iPhones, iPads and now AppleTV. Over 15MM units per quarter. Cost of the processors must be getting lower as a result.
2. Other components are also replicated in the iPhones etc.
3. Apple runs a tight ship in terms of demand and supply and have very efficient manufacturing setup (i.e. not their own). This means they can minimize costs.
A couple of things to consider about AppleTV’s build cost.
1. A4 is sold in iPhones, iPads and now AppleTV. Over 15MM units per quarter. Cost of the processors must be getting lower as a result.
2. Other components are also replicated in the iPhones etc.
3. Apple runs a tight ship in terms of demand and supply and have very efficient manufacturing setup (i.e. not their own). This means they can minimize costs.
The iSupply analysis added only a couple bucks for assembly. They did not include packaging, documentation, shipping let alone the normal R&D and support and overhead costs (dont forget SJ $1 salary) for a MANUFACTURER (which Apple is) let alone a RETAILER (which Apple also is). Just because they do both does not eliminate or mitigate associated expenses.
The quantity pricing is already figured into iSupply’s analysis.
Whether Apple makes a buck or losses a buck is moot. It’s an unusually low cost item that I think is meant to sell the blades. Otherwise, the iPad should be a $129 item.
The iSupply analysis added only a couple bucks for assembly. They did not include packaging, documentation, shipping let alone the normal R&D and support and overhead costs (dont forget SJ $1 salary) for a MANUFACTURER (which Apple is) let alone a RETAILER (which Apple also is). Just because they do both does not eliminate or mitigate associated expenses.
The quantity pricing is already figured into iSupply’s analysis.
Whether Apple makes a buck or losses a buck is moot. It’s an unusually low cost item that I think is meant to sell the blades. Otherwise, the iPad should be a $129 item.
Wait wait guys. Forget about pricing and everything else. You guys do not read between the lines here. Why is there 802.11n Wifi AND Bluetooth?? Can a Apple Bluetooth Keyboard be used on the ATV like the iPad? The ATV has iPad innards. Steve did not say everything on what it can do. Since the iPad pairs up to a bluetooth keyboard, why can’t the ATV? If it can, could the iOS version of Safari come to the ATV? Stay Tuned!!
Wait wait guys. Forget about pricing and everything else. You guys do not read between the lines here. Why is there 802.11n Wifi AND Bluetooth?? Can a Apple Bluetooth Keyboard be used on the ATV like the iPad? The ATV has iPad innards. Steve did not say everything on what it can do. Since the iPad pairs up to a bluetooth keyboard, why can’t the ATV? If it can, could the iOS version of Safari come to the ATV? Stay Tuned!!