My friend and writing touchstone (and reporter extraordinaire) Aaron Pressman caught this tidbit for me on the iPod Shuffle:
Analysts at IDC recently found that Apple makes a healthy 35 percent to 40 percent profit on each iPod shuffle sold, and will make even more from expected drops in flash memory pricing. “The iPod shuffle’s flash memory, which was supplied by Samsung in the model examined by IDC, is estimated to be the most expensive component used in the player by far, says IdaRose Sylvester, a senior semiconductor research analyst at IDC. She estimates the 512MB of flash in the cheaper of Apple’s two iPod shuffle models costs the company around $37.50 for each player. That’s about two thirds of the estimated total $59 that Apple spends on materials needed to make each 512MB IPod Shuffle. The product retails for $99 giving the company a profit of about $40, or roughly 40 percent. From Apple enjoys 40 percent profit margin on iPod shuffle, Feb. 24, 2004
Apple is in a great place right now. They’re sitting there churning out a product with a high profit margin pushed out by the most effective marketing machine ever. They will sit and make money until their competitors either: a) flee the market upwards, or b) have a price war.
Everyone that leaves the market runs into the iPod Mini. Everyone that conducts a price war with Apple is attempting to compete with the Marketing Juggernaut and the Apple economy of scale. Anything you can buy in bulk to build your Flash player, Apple can buy in bigger bulk.
If you’re a flash player manufacturer right now competing with Apple, it sucks to be you…
Also see my previous Shuffle article