The cost to make an iPod, Xbox, and other electronics has big bottom-line implications at Apple, Microsoft, and their peers. Some companies are willing to swallow losses on some gadgets—for instance, gaming consoles—in hopes that they'll make up the difference, and then some, on sales of related gear, such as video game software. Other companies, including Apple, are able to sell many products for a healthy profit from the get-go.
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Market research company iSuppli takes it upon itself to tear down popular gadgets to find out the price of the component parts and the vendors supplying those ingredients. A rundown of several recent iSuppli teardowns follows—each slide lists the product, maker, release date, retail price on the release date, and iSuppli's estimate of the cost of materials.
Apple iPhone 3GS
Date: June 19, 2009
Retail price: Starting at $199
Cost of components: $179.16
Usually the cost of components goes down from one generation of a product to the next. The iPhone 3G, released in July 2008, cost $53 less to build than the original iPhone, released in 2007. But costs rose by about $5 for the iPhone 3GS. One reason is that the price of memory hasn't declined as quickly as in the past. The newest iPhone comes in two flavors, 16 gigabytes and 32 gigabytes, while the high-end version released in 2008 had 16GB of memory. An improved 3-megapixel camera with auto-focus costs more than the camera used in the previous generation. Finally, a new Samsung applications chip, at $14.46 a pop, costs a dollar more than last year.
Date: June 6, 2009
Retail Price: $199.99 after $100 mail-in rebate
Projected Cost of Components: $137.83
Palm needs a winner in the Pre, and it's up against some formidable competition in a smart phone field that includes Apple and its iPhone and Research In Motion, maker of the BlackBerry. Boasting a completely new operating system called WebOS, the Pre bears little resemblance to the Treo line of smart phones that Palm has sold for years. Like the iPhone, the Pre sports a so-called multi-touch display that lets the screen react to more than one finger touch at a time. In an analysis of the probably cost of Pre components, iSuppli estimates the display alone runs $39.51, or almost one-fourth the total hardware expense. Add in $15.96 for eight gigabytes of flash memory, $15.41 for wireless components, and $12.39 for the 3-megapixel camera, and you've accounted for more than half of the Pre's estimated hardware cost.
Amazon Kindle 2
Date: Feb. 9, 2009
Retail Price: $359
Cost of components: $185.49
Amazon's second device to bear the Kindle name is thinner than its predecessor, and in some ways more sophisticated. The main cost-driver is the $60 display designed by E Ink Corp., while a wireless module from Novatel Wireless adds another $39.50 to the cost of materials. An applications chip from Freescale Semiconductor adds another $8.64 while two kinds of memory chips from Samsung add another $6.10. Add in $4.45 for the enclosure, $7.50 for the battery and you've accounted for most of the materials and manufacturing cost of the device, according to iSuppli estimates.
Research In Motion BlackBerry Storm
Date: Nov. 21. 2008
Retail price: $249 before rebate
Cost of components: $202.89
Research In Motion's latest effort to outpace Apple in the hotly contested smart phone market, the BlackBerry Storm sports a unique touch screen design that evokes the iPhone in many ways. Reports say RIM sold more than a half a million Storms in its first month on the market. All told, the materials used to make it cost $202.89, according to an iSuppli teardown analysis. Surprisingly, its most expensive component is not the screen, but its Qualcomm-made wireless chip, which costs nearly $35.
Apple iPod Touch (First Generation)
Date: September, 2007
Retail price: $299 (8GB), $399 (16GB)
Cost of components: $147 (8GB), $179 (16GB)
Was the First Generation of the iPod Touch, introduced in the fall of 2007, really just an iPhone missing all the features of a phone? Yes and no. Having excluded all the chips related to running the phone, Apple made the iPod touch thinner, but also managed to cram more flash memory into the 16GB version, or twice the storage capacity of the iPhone available at that time.
Microsoft Xbox 360
Andy Rain/Bloomberg News
Date: Nov. 22, 2005
Retail price: $399
Cost of components: $470
Microsoft was willing to take a loss on the second generation of its video game console. The aim: recoup the losses on sales of games over the long haul.
Toshiba HD-A1 HD-DVD Player
HD DVD Promotion Group via Bloomberg News
Date: March, 2006
Retail price: $499
Cost of components: $700
Toshiba was willing to sell its first HD-DVD player at a loss in hopes of an early lead in the next-generation DVD battle with rival Sony.
Apple iMac, 17 in.
Ken James/Bloomberg News
Date: Jan. 10, 2006
Retail price: $1,299
Cost of components: $898
Even the inclusion of what was at the time a superfast Intel Core Duo chip at a cost of $265 didn't keep Apple from turning a profit on the 17-in. iMac introduced in 2006. Since then the 17-inch model has been retired and the iMac now comes in 20- and 24-inch models.
Sony PlayStation 3
Date: Nov. 17, 2006
Retail price: $599 (60GB) $499 (20GB)
Cost of components: $840 (60GB) $805 (20GB)
Much like Microsoft did with the Xbox 360, Sony hoped to score big in the end by taking a hit in the short term. Having a year's head start was good for Microsoft, as falling prices on components turned its $71 per-unit loss of 2005 into a $76 per-unit profit by the end of 2006, by iSuppli's calculations.