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Cost to Make the Apple TV? Just $64

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iSuppli (via BusinessWeek) has gotten around to tearing down the new Apple TV (s aapl) and assessing its manufacturing cost. The final tally? Only $64, a considerably smaller sum than the $237 the previous generation Apple TV, introduced in 2007, cost to make. So why the big difference?

Well, much of the cost of the original came from the Pentium chip from Intel (s intc) and its chipset, which accounted for $68 alone according to 9 to 5 Mac. That means today’s Apple TV costs less to make in its entirety than just the brains behind the previous generation. The new version’s case is also cheaper, and even its most expensive parts — the A4 chip and the 8GB of RAM — are only $16.55 and $14 respectively. It’s definitely one of the benefits of going in-house with your processor.

Plus, Apple is actually making more money, percentage-wise, per unit sold. It was making 20 percent margins on the old Apple TV (minus any non-production costs) and now it’s making 35 percent. The cost to manufacture also means that even if things don’t go all that well for the new Apple TV, the company won’t be taking that much of a bath.

Because Apple TV keeps its cost down using its own chips, we might see much higher prices on Google TV (s goog), which will be based on Intel-produced processors. It’s yet another example of Apple starting to turn the tide in terms of its reputation as the high-cost electronics company, beginning with the iPad’s price vs. that of competing devices.

As is the case with other tablets, it’s likely we’ll see manufacturers try to offset the cost of their own competitors by bundling devices with subscription packages. Google TV will be incorporated into actual televisions, which could help hide the actual cost, and we might see cable providers shipping units as part of bundles for new subscribers. Price discussions will likely be on the agenda next month at NewTeeVee Live, when Google TV’s product lead Rishi Chandra takes the hot seat. Whether defraying costs through partnerships proves more or less effective than Apple’s decent-price-without-strings-attached method remains to be seen.

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3 Responses to “Cost to Make the Apple TV? Just $64”

  1. “iSuppli (via BusinessWeek) has gotten around to tearing down the new Apple TV and assessing its manufacturing cost.”

    iSuppli does NOT estimate the “manufacturing cost,” but only the cost of the parts. They do not include: assembly; distribution; warranty (allowance for returns, problems, tech support); R&D; software licenses; overhead; and more, like marketing. iSuppli keeps failing to make this distinction and “journalists” and “bloggers” keep swallowing it. Now, I’m sure that the folks at iSuppli understand this, but they keep putting out releases that purport to have a “cost estimate” for a product.

    They’re on firmer ground when they make comparisons, like between the original Apple TV and the current model, as there is a big difference in the parts cost. (There’s also probably a difference in other costs, like assembly, as the new Apple TV appears to be simpler to put together, as it has fewer parts and many can be assembled automatically. It would also cost less to distribute as it’s smaller and lighter.)

  2. Steve Auerweck

    I can’t imagine the flawed business sense that equates total cost of parts with “cost to make,” and then decides there is a “profit” of 35 percent. Parts cost is just that. an interesting number, but only part of the picture.