BusinessWeek is reporting that Apple’s Shuffle 3G – retail price $79.99 – is made up of parts costing just $21.77.
Those costs, which include the headphones and packaging, represent just 28% of the retail price, meaning the tiny device likely has a huge profit margin. To put things into context, the components of the first iPod touch cost 49% of the retail price, while those used in the 3G iPod nano were around 40%.
Perhaps surprisingly given the low costs, the key components come from a big-name firm. Samsung provides both the main chip (at $5.98) and the flash memory ($10). The power comes from a lithium battery costing $1.20 which research firm iSuppli says is the smallest it’s ever seen.
Of course, there are other costs involved in producing a device such as research, staff wages and distribution. Apple says its overall gross margin on products is 34.7%. If that same margin applies to the Shuffle it will be taking in just over $20 per unit.
Read the full business week article here and get blown away !
PS: And oh, by the way, the new shuffle has almost no buttons on its body. It has one button which turns it ON and also controls whether it should play in shuffle mode or in sequence mode. The volume/next-track etc button has moved to the headphone cord !