IDC: The iPod shuffle has decent margins

Macworld has published an article detailing IDC's comments about the costs of the iPod shuffle. It states:

The iPod shuffle's flash memory, which was supplied by South Korea's Samsung Electronics in the model examined by IDC, is estimated to be the most expensive component used in the player by far, said IdaRose Sylvester, a senior semiconductor research analyst at IDC.

She estimated the 512MB of flash in the cheaper of Apple's two iPod shuffle models costs the company around $37.50 for each player. That's about two thirds of the estimated total $59 that Apple spends on materials needed to make each 512MB iPod shuffle. The product retails for $99 giving the company a profit of about $40, or roughly 40 per cent.

Although the above numbers do not include assembly and other costs, the iPod shuffle does seem like a fairly simple device overall and thus such costs are likely low. Consequently, margins on the iPod shuffles are likely reasonably high. Specifically, despite the very low prices of the shuffle, this screenless iPod is not a loss leader. Apple is making decent profit off of each and every iPod shuffle sold, while still undercutting prices of competitors' flash-based players.

[Update 2005-01-27]

Apple's CFO Peter Oppenheimer contradicts the IDC claims. He states that the average 2004 margin on the iPods was 20 percent, and that the shuffle's margin is lower. While this does not mean the shuffle is a loss leader, perhaps the margins on the shuffle would be better described as mediocre by Apple's standards. However, it will still be a significant profit generator for Apple, given the shuffle's high volumes.

6 GB iPod mini released

As expected, a new 6 GB iPod mini was released yesterday, in 4 colours (with gold no longer available). Colour screens, although widely rumoured, are not a feature of the new iPod minis. More importantly, however, is the massive increase in the battery life. The mini is now rated for 18 hours. The 6 GB unit is priced at $249, which is the same price as the old 4 GB, although it no longer includes a power adapter or a Firewire cable. The 4 GB is also offered now in the same four colours, but has dropped to $199 (sans accessories).

Many people never use the power adapter, so it makes sense to offer it only as an add-on accessory. What was a little bit surprising however was the choice to stop including the Firewire cable. From a business perspective it does make sense, since at this price point, even with the $20 Firewire cable the 4 GB iPod unit is cheaper than it used to be, and most people with newer computers can simply use USB 2.0.

However, many older Macs do not have USB 2.0 support, and those with older laptops or all-in-one machines like the iMac, cannot add USB 2.0 at all, so Firewire becomes a necessity. Furthermore Firewire is a technology invented by Apple. Yet despite all of this, Apple has made the financial decision to make Firewire an added cost option only. It is wise from the business perspective, but it signals the end of an era for Firewire. Firewire has truly become niche only, and Apple is capitulating to the dominance of USB 2.0. Fortunately, Apple continues to sell the Firewire cable, and a plethora of cheaper third party cables are available, including retractable ones.

Not surprisingly, Hitachi and Seagate both have announced 6 GB 1" hard drives. It is not entirely clear who provides the drives in the 6 GB mini however. Ironically, the bare 6 GB drive costs $299, which is $50 more than the 6 GB iPod mini, and the 4 GB drive costs $199, the same as the 4 GB iPod mini.

In addition to the new iPod minis, the iPod photo line has been revamped. The 40 GB iPod photo no longer exists, but there is now the much cheaper and thinner new 30 GB iPod photo, dropping $150 from the previous $499 price to $349. The 60 GB iPod photo stays the same, but also drops $150, from $599 to $449. Again, much of the price drop is due to the removal of accessories, but overall, the price drops are still substantial.

Because it is so new, the iPod shuffle line remains unchanged. One point of note however is the new iPod shuffle ads no longer specify that the units are PC and Mac compatible. Only an Apple logo is displayed. It seems that in the short lifetime of the iPod on Windows, Apple has already established enough mind share so that just the Apple logo suffices.

Toshiba struggling with iPod shuffle demand

Toshiba, a supplier of flash memory to Apple for the iPod shuffle, is increasing production capacity of flash memory chips to meet demand. Demand for the iPod shuffle is so high that Corporate Vice President Masashi Muromachi has this to say about the iPod shuffle: "Demand created by this new machine is so vast that our current capacity can in no way meet their needs."

Currently, wait times at the Apple Store are several weeks for shipment of the iPod shuffle.

iPod mini to get colour screen?

In the last article we said that there might be an iPod mini update next week.

ThinkSecret says that the update will include a colour screen, and that 6 GB is possible. 6 GB does seem likely, as Western Digital and Hitachi both are making these drives in 2005.

New iPod mini and iMac next week?

The iPod mini and the iMac now have shipping times at the Apple Store which have changed from same day shipping to 5-7 and 7-10 days respectively. Usually this means an upgrade is imminent. Furthermore, a post a few days ago at this blog from a supposed Apple employee suggested there may be "something big" coming next week:

i have to take one day off from apple, see, because the taping for def poetry requires it, but the good news is that i will fly to nyc on my day off, tape the next day, which is my day off, then fly out the next day, which is the only day i need off from apple.

but, here's the thing... something big is about to happen at apple, and they won't tell us what it is, but this big thing is happening on wednesday, my day off, and everyone in the entire call center is being put on mandatory overtime from wednesday to friday, which is when i want to leave. it's probably a new product release, probably the new operating system tiger, anyway, i've been told by the lady in charge of allowing for time off that i not only cannot have the friday off, but my normal day off of wednesday is being switched to tuesday for this week. like, with no asking, with no notice, just buh-blam.

Curiously, that post has since been removed.

However, such shipping delays could also simply signify manufacturing issues, especially with the iMac. Still, if you're considering purchasing either product, it may be prudent to wait until next Wednesday. If they are updated, we can expect the iPod mini to be bumped to 5 GB or 6 GB, and the iMac to be bumped to 2+ GHz, with or without GPU upgrades.

[Update: 2005-02-17]

The iMac page at the Apple Store now quotes 3-5 day shipping.

Cell's Power Processor Element: Cool enough for a laptop?

In the last Cell article, we quoted the 4 Watt spec for the Synergistic Processing Element (SPE) in Cell at 4 GHz, which means 32 Watts if one considers all 8 SPEs. However, one of the big questions for Mac users is the power dissipation of the remainder of the chip, most specifically the Power Processor Element (PPE), since it is this portion of the chip that could be most readily used in a Mac.

The RealWorldTech article suggests that at 4 GHz, the entire chip requires somewhere between 50 and 80 Watts. However, if the Sony PlayStation 3 really will use Cell with most of those SPEs at near 4 GHz, then one would expect the 4 GHz Cell's power dissipation to be closer to the 50 W estimate, since heat dissipation is a big concern for a console. This would also go along with the rumours that suggest that the PPE x 3 is similar to what will appear in Xenon, the chip destined for Microsoft's Xbox 2. A (lower clocked) three-core CPU based off the PPE would make for a chip appropriate for a console, but only if the PPE unit were relatively low power. The Electronic Design article gives a more specific estimate of approximately 60 Watts for the entire chip. If this estimate is close to accurate, it would suggest that Cell at 4 GHz without the SPE units would come in at under 30 Watts, which is perfect for laptop use.

What is unknown is how IBM's PowerPC 970FX (or some other unreleased 9xx series chip) is doing in terms of power utilization. IBM has hinted that they could hit the sub-30 Watt window with a G5 chip clocked at 1.9 GHz or less.

So what will Apple use in their next PowerBook? That is of course still unknown to us. However, while I do think it's most likely that Apple's future PowerBooks will sport a G5 variant, it is nice to see that there are several possible options:

1) IBM G5 970FX 1.8 GHz (with 512 KB L2) or 970GX (with 1 MB L2).
2) Freescale G4 7448 1.8 GHz (with 1 MB L2).
3) IBM Cell PPE 3.5-4.0 GHz (with or without integrated memory controller)
4) Freescale e600 1.8 GHz with integrated memory controller

The potential low power PowerPC options for Apple haven't looked this good for quite some time.