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Innovation

Apple tax? iPod shuffle costs just 28% of retail price

The latest iteration of Apple's entry-level iPod, the diminutive shuffle, costs just 28 percent of its retail price, leading to a fat profit margin, according to BusinessWeek.To be fair, that's the total cost of the components -- not including assembly and R&D.
Written by Andrew Nusca, Contributor on

The latest iteration of Apple's entry-level iPod, the diminutive shuffle, costs just 28 percent of its retail price, leading to a fat profit margin, according to BusinessWeek.

To be fair, that's the total cost of the components -- not including assembly and R&D. Still, it's pretty ovious that there's not much to the shuffle, which was released in March. There are no buttons, and all controls have been moved off the device to the headphone cord. But according to a teardown analysis of the device by market research firm iSuppli, the cost of the shuffle's components, headphones and the packaging it ships in comes to $21.77.

Arik Hesseldahl reports:

This suggests the per-unit profit margin on the shuffle is higher than on other iPod models. The component cost for the first iPod touch released in 2007, for instance, amounted to about $147, or about 49% of its $299 retail price. The component cost of the third-generation iPod nano, also released in 2007, amounted to about 40% of its retail price.

South Korea's Samsung is the manufacturer of the main application chip used in the device, which controls music and other functions and costs $5.98, according to the article. Samsung also supplied the flash memory at a cost of about $6 (Toshiba and South Korea's Hynix Semiconductor also make memory for Apple).

The device's lithium ion battery that costs $1.20. Interestingly, the device's passive components -- capacitors and resistors -- are unusually small, and are "about the size of a grain of salt and cost fractions of a penny each," Hesseldahl writes. That's half the size of what had previously been considered the smallest device of their type.

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