How Much Does an iMac Really Cost?

[Swad]

To be honest, stories like this BusinessWeek article "Is the New iMac a Cash Machine?" are always a little hard to accept - ya know, the ones where industry analysts dissect a new computer to determine manufacturing costs, etc. It's especially hard to gauge when you're dealing with Steve Jobs, who could probably sell ice to Eskimos... or at least get cheapo prices from Intel. But, nonetheless, here are the findings:

 

Silicon Valley research firm iSuppli conducted a teardown analysis of the $1,299 17-inch iMac containing the Intel chip. Researchers use such analysis to estimate how much a computer maker pays for components and what profit may be wrung from sales. It costs Apple $898 to assemble the iMac before loading it with software and packing it in a box, iSuppli says.

 

The most expensive component in the iMac is the Intel Core Duo processor. Apple's paying about $265 apiece for the chip, iSuppli estimates. "We made a conservative guess that Apple is getting a 10% discount on that chip," says Andrew Rassweiler, manager of iSuppli's teardown team. "But Apple is Apple. It's such a tough negotiator, that discount could be higher."

 

Two other Intel-made chips, which sit between the Intel Core Duo and other systems in the computer, cost $14 and $31, respectively, iSuppli says. That makes Intel's total silicon content in the new machine worth about $310, or more than one-third of the cost of materials, using the researcher's estimates.

 

But how does that compare to the last PowerPC-based iMac G5, released just last October? Comparisons, it turns out, are tricky. First, Apple rarely sheds any light on the costs of components it buys from its suppliers -- and those suppliers rarely talk about the prices they charge their customers.

 

Some analysts suggest that Apple might have been paying less than $100 for the IBM single-core PowerPC 970 chip that went into the final iMac G5, which would imply an increase in materials cost of more than $200 per unit.

 

"I don't know how much Apple pays for that IBM chip, but you can bet it's absurdly low," Nathan Brookwood, head of market researcher Insight64. "Apple has this crazy idea that it shouldn't have to pay as much as everyone else. And whatever it's paying for the IBM chip, I'm sure it's paying more for the Intel chip."

[myzar]

Benches of the new imac

 

http://www.macworld.com/2006/01/features/i...test1/index.php

[jo2k]

Unfortunately, our tests suggest that the remarkable results of Apple’s published tests aren’t reflected in most of the real-world applications we tested. Based on our initial tests, the new Core-Duo-based iMac seems to be 10 to 20 percent percent faster than its predecessor when it comes to native applications, with some select tasks showing improvement above and beyond that.

 

There you have it. 2X faster? Damn, that's a nice and handy claim Steve!

[Metrogirl]

In the late 90s IBM was reputed to be making well over 200% profit on its line of Thinkpads - and closer to 300% on some models. The biggest single cost to the company was the TFT screen; most of the rest of the works (chips, HDD, motherboard, etc.) either came out of IBM's own factories or its subsidiaries and partnerships. They also benefitted from economies of scale and modular design.

 

IBM was, and probably still is, in a very different position than Apple. When you can more or less make everything, and hold the patents on the parts you buy from others, you can control your prices closely.

 

Nevertheless, I'd be surprised if Apple isn't making more than the amount quoted. The research firm admit that they don't know the discounts Apple have negotiated and these can be very substantial, particularly if they guarantee minimum volume purchases. Plus, I'd think Intel were screwed into a very uncomfortable position because they already had the supreme prize of being named as the processor supplier.

 

Of course, IBM won't be crying too much over the loss of that particular processor market. According to a Google search today, they have manufacturing, marketing and technology relationships with Infineon, Samsung, Toshiba and plenty of other companies who are supplying Apple. I have a feeling they won't be offering particularly deep discounts to their disloyal customer though!

[iMaurice]

lol think about how much money it costs dell to build a $1300 pc

possibly less than $900 in some cases

and about the 2x faster claim, ok its not, but its not slow at all either

btw, even though it costs $900 to build it, if it was a pc that costed $900 to build, remember theyd charge you like $150 for windows xp pro plus if you want something at least kinda like iLife youd get office which would be extra cost, so dont complain......

Edited January 21, 2006 by iMaurice

[Sudar]

http://www.appleinsider.com/article.php?id=1477

[xtraa]

http://www.appleinsider.com/article.php?id=1477

 

Much cheaper than what Microsoft has to pay for every Xbox

[Technobob]

I think the cost is lower then $898 that seems too high. I can buy a Dell for $1000 that's similar in config and they are making a profit. I think the cost is more around the $700 to $750 mark.

[ivel]

i don't know for sure but from what i understand Dell actually barely makes money on their really good deals. When you buy the 299 or so PC, that's about what it costs them, and that's why it comes with only a 30 or 90 day warantee. They make 90% of their money back on selling warantees and service contracts. I've even been told this by a few dell corporate sales people that i've strung along for a bit for the cheap computers and never bought a service contract from them. I don't see where apples prices are that bad, i mean i'd rather see the company grow by making money than shrink by breaking even. I'm sure after they get established they can re-negotiate [think ipod] for greater volume discounts and such. Also i don't think of apple like i think of dell; dell is mainly a distributor and systems assembler. What do they do inhouse? Not even tech support unless you buy a business contract from them. They even did some of that in india until lots of businesses got mad at them. I don't know, my marks may be all off if the 1000 dells are significantly different than a <500 one.

[Metrogirl]

If you want to play with prices and costs, there's a good PC Manufacture simulator here -

 

http://broadcast.forio.com/sims/pricing/

 

You can play at being DELL, IBM etc. and manipulate factors to see if you can stay in business or not.

[R. Bear Helms]

As someone who used to sell Apple products retail, I know that the profit margin on Apple products used to be a healthy 35%. Those days are long past.

 

The PC industry tends to run on a profit margin so small that you probably can make more money from running any other kind of business. The major brands exist primarily because their volume makes up for tiny margins.

 

Apple likely is making less profit margin on a Mac Mini and iMac Core Duo than they've made on previous products. I've never heard of 35% profit margin be called making money hand-over-fist. It's healthy, but with a large International Corporation, 35% gets spread pretty thin.

 

Remember that Apple had a number of consecutive quarters of loss, and Jobs managed to turn them around to profitability again - and often faster or better than financial analysts predicted.

 

Make no mistake Apple isn't giving away product in vain hopes of gaining market share, but also realize they are feeling a squeeze trying to be competitive with the low PC prices that dominate the industry these days. Depending on supply chain and various bargains, Apple may be getting components and labor at a rate that could conceivably give a 25% margin - maybe more. I do not mass wholesale computer parts so I don't know what pricing dynamics exist.

[fOZf8]

I'm sure the healthy profits they gain from the excessively priced iPods and nanos helps make up for alot of the lack of profit from moving to intel machines...just my thoughts though, they are more reasonably priced nowadays, they were bloody outragous not too long ago though.

[Sabr]

And the only thing holding me back from buying a Mac is the price itself. I think so many more people would buy their computer's if they just stopped selling their products so expensive!

 

I would much rather spend $1700 on a PC than a Mac, because I know I will get twice as better components. Even if I have to run Windows, I don't mind if it means having a PC twice as powerful.