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Breaking News: Mac Minis Are Cheap To Make

My mailbag has been bigger than usual in the last couple of weeks. And I have to agree with the guy who sent me this, it is sorta funny. Especially the subhead.

Dissecting the core of Apple's Mac Mini

The sleek Mac Mini from Apple Computer costs $499 at retail, but the total sum of the parts is less, says research firm iSuppli.

Analysts at the research firm dissected one of the Mac Mini computers and estimated that the total component bill likely comes to $274.69.

"With manufacturing costs added, the total rises to $283.37," iSuppli stated in a recent research note.

The total does not include costs for intellectual property, software, licensing fees, shipping, marketing or other expenses, so Apple's total bill for putting a Mac Mini together is actually higher.

The dissected Mac Mini included a 1.25GHz PowerPC chip, 256MB of memory and a 40GB drive. The Mac Mini does not come with a keyboard, screen or mouse and is generally more expensive than similarly configured computers housed in bulkier, larger chassis.

To cut costs, Apple adopted a number of technologies and components from the PC world. The optical disk drive, for instance, is a standard laptop unit. The chipset has also been reduced from two pieces of silicon into one.

Foxconn Electronics, which is based in Taiwan and has factories in China, likely serves as the contract manufacturer, iSuppli concluded. A number of connectors inside the box come from Foxconn.

"In general, the Mac Mini's high level of integration makes it one of the most cutting-edge systems iSuppli has ever dissected," iSuppli stated.

Well, now we know that the cheapest Mac ever made is actually cheap to make... Something I'm sure you were losing sleep over.

Actually there is value to the story you just have to take it in context. iSuppli often rips apart new tech products to guess how much they cost to make. For example they did it with an HP printer and they guesstimate that HP losses money on each printer sold... Now you know why your ink cartridges are so high.

The story also has links to other reports the company has done on other products.


Comments (14)

Boy, aren't you brave for a... (Below threshold)
Joe Edmon:

Boy, aren't you brave for allowing comments on a Mac post. Paul should be ashamed.

Anyways, the price seems too high. That leaves just $217 for Apple and the vendor to split. Especially when you start throwing shipping, insurance, advertising, yada yada. Then again, maybe the computer retail business is more cutthroat and bareboned than I realized.

Which begs a question. If the costs are that high, and profits that low then why are people bitching so much about shoddy customer service?

Well Joe I've just decided ... (Below threshold)
Paul:

Well Joe I've just decided to be quick on the delete key... to coin a phrase, "Screw em."

>Then again, maybe the computer retail business is more cutthroat and bareboned than I realized.

Have ya been under a rock? lol

--

As for your last question I don't know either. Many years ago I was at a local (Mac) users group meeting. The president of the users group got up to give his monthly presentation and he told everyone to mail order equipment rather than purchase it locally because local people charged too much.

THEN he said just a few minutes later that if they had any problems, to call the local Apple store because they should support it - and that they should do it for free!

I cornered him after the event and asked him about it and he got downright pissy. He said that since they sold Apple products they should support them... I replied that they do.. For the people who buy it there!

No matter what I said, he replied that since they sold Apple products they should give the whole world free technical support even if they mail ordered it. When asked why the mail order houses should not, he said, "That's not their job."

We went round and round and he never did figure out the problem with those two attitudes.

(I'll let you guess his political persuasion ;-)

That's one heck of a slim p... (Below threshold)

That's one heck of a slim profit margin. Is iSuppli quoting the retail cost of components or the wholesale? Part of the reason for Mac hardware being so expensive was that they had to cover the software R&D costs that Microsoft managaed via sales volume. I wonder if this is a loss-leader (or gateway drug, if you will) to bring folks over to the Mac Side.

The deletion of idiots a... (Below threshold)
Palmateer:

The deletion of idiots and trolls continues on Wizbang.

As a user of both platforms, I fail to see why some people go nuts when they see the word Apple and think platform choice is a religion.

The reality is that more than I'm tired of dealing with idiots and that is not likely to change anytime soon.

Edited by management... guess which parts

I have used these reports i... (Below threshold)

I have used these reports in the past for work (semiconductor marketing). They are considered generally accurate, although someone always finds a mistake or two when it comes to pricing. iSupply doesn't know what suppliers are offering Apple or their outsource manufacturers for components.

However, for people in the industry is not the price/cost ratio that is important in the report, but rather which components and materials that are being used, usually for competitive reasons (whose memory are they using? Can we replace them in the system?).

That be said, the electronics mfg "rule of thumb" is that the components and mfg cost is about 50% of the end-price of the system (although there are exceptions, like printers which you noted). In this case they are higher than that, so my guess is that they will be beating pretty hard on their vendors to get the costs below $250.

I would be a little skeptic... (Below threshold)
jmaster:

I would be a little skeptical with isuppli’s numbers on this one. I am very familiar with Foxconn/Hon Hai, and it is damn near impossible to do a cost analysis of anything they make.

For those unfamiliar, they manufacture most Apple desktop products, along with most Dell, and quite a bit of HP and Cisco products too.

Hon Hai is extremely vertically integrated, and owns companies that manufacture just about every part and component that goes into a PC, except for the silicon. Instead of buying their components on the open market, they rely heavily on inter-company transfers.

Only their accountants know the real costs involved in a system such as this. And based on some past interactions, I wouldn’t be surprised if even they aren’t completely sure.

The sleek Mac Mini from... (Below threshold)

The sleek Mac Mini from Apple Computer costs $499 at retail, but the total sum of the parts is less, says research firm iSuppli.

My God... someone could make a profit!

Hey Paul, I owe you an apol... (Below threshold)
Joe Edmon:

Hey Paul, I owe you an apology. I don't know why, but I thought Jay Tea had posted this. What I should have said, was "Hey Paul, thanks for not letting the idiots spoil the fun for the rest of us." I don't understand these guys who's only joy in life is going around pissing all over the blogosphere. I guess it must be a pretty daunting task having to deal with them all the time.

On a different note, is it too early to say welcome back? Or, have you just been doing the blogger emeritus thing and gracing us with your presence when you're bored? While I still hate you guys for your April Fool's prank Wizbang wasn't the same without you.

I come and go like the wind... (Below threshold)
Paul:

I come and go like the wind... Mostly I sit on the bench and wait for "big news" to break. If you look at your London Bus coverage that was mostly me.

My schedule is such that I have time to post 3 times today then nothing for 3 days. I'm beginning to think it is impossible to be a "real" blogger and have a life.

But I'm not as tolerant of fools as I used to be... If I'm going to be accused of being too fast on the delete button, I may as earn that rep. KnowhatImean?

P

I was going to write someth... (Below threshold)

I was going to write something up about this very thing and then take a Mac mini and shove it's parts down Paul Thurrott's throat. My basic premise was that the price of the hardware has nothing to do with the bundled programs (iLife, Quicken, other stuff) that you just don't get in the bargin-basement Celerons. but I thought better of it, and I didn't write the story.

still wondering about the parts shoving and Thurrott's throat.

Another thing not taken int... (Below threshold)
Zaxxon:

Another thing not taken into account is that aside from the CPU and GPU. Apple designs their integrated I/O chip in-house, and custom chip design and production cost $$$

Fortunately, Apple said that they will use standard chips in the intel based Mac that will be released next year, meaning that they will stop using their own I/O chip and use intel's instead.

Apple's high margins makes them much less vulnerable to component price fluctuation. Dell was recently hurt because of this.

The Wintel PC market is full of firesales: companies, distributors, and retail stores being forced to sell parts and motherboard rapidly being obsoleted at prices that are sometimes less than what the company paid for. If you want to encourage this kind of economy, go for it, build yourself a cheap PC :) I'd rather encourage a healthy economic model where companies make profits and employees have good working conditions. (And no I'm not rich by any means)

This shouldn't be surprisin... (Below threshold)
Tom:

This shouldn't be surprising to anyone, frankly. PC maker boxes work the same way. I've put together desktops/towers that are virtually identical to those that cost double or more, just based on going to enough shows and buying trade publications - the fact that Apple works the same way isn't a big deal. They've got to make money somehow.

Tom basically led into what... (Below threshold)

Tom basically led into what I was going to say.

Of COURSE it costs less to make than it does to sell. If you're not going to make a profit, then what's the point.

I give Apple huge kudos for being able to get people to buy things simply because they have the Apple brand name on them -- the iPod, most notably; seriously, how many people do you see with a Dell Music Player? Good for Apple for being able to charge a lot more than the cost of the product. They've created a demand. They're playing the market.

We really shouldn't be complaining. It's our own fault.

And I'm not even an Apple user. But I do have an iPod.

The estimate of the compone... (Below threshold)
John S.:

The estimate of the component costs doesn't include the cost of shipping the product to the U.S. from the Red Chinese slave labor --er-- reeducation camps/factories. But the current slim profit margin doesn't compare to the early 1990s when Apple had as much as $8,000 profit on a single $12,000 unit. THOSE 68020 boxes were grossly over priced.




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