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iSuppli teardown of iMac Core Duo reveals sub-$900 BOM

post #1 of 35
Thread Starter 
Apple Computer's 1.83GHz iMac Core Duo is the first desktop system to be based on an Intel-manufactured microprocessor carries and carries a Bill of Materials (BOM) cost of $873, according to preliminary data from an iSuppli Corp.'s teardown analysis.

The new iMac, introduced by Apple chief executive Steve Jobs at last week's MacWorld Expo, is based on Intel's Core Duo microprocessor. Additionally, iSuppli's teardown of the system revealed that Apple also is using Intel's mobile 945 core-logic chipset to support the Core Duo microprocessor. The firm estimates the cost of the microprocessor is $265, while the two-device chipset carries a combined cost of $45.

Together, the Intel microprocessor and Mobile 945 chipset account for 35 percent of the new iMac's total BOM, according to Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

"The Intel chips in the iMac are designed for use in notebook PCs, rather than desktops," the firm said. While this may seem surprising, iSuppli believes Apple's decision to use Intel's notebook-oriented solution in its desktop iMac was a logical move.

"Users want quiet and powerful machines," said Matthew Wilkins, senior analyst for compute platforms research for iSuppli. "Intel is very focused on designing microprocessors that deliver the maximum performance without generating excessive heat or consuming huge amounts of power. For now, the Intel Core Duo fits that bill perfectly."

In addition to the $873 BOM, the iMac carries a $25 manufacturing and test cost, adding up to an $898 cost, said iSuppli. This cost estimate does not account for other items included in the box with the iMac, including the keyboard, the mouse and documentation. Apple is sells the same model for a suggested retail price of $1,299.

According to the teardown, other major elements contributing to the iMac's BOM cost include a 17-inch wide-format LCD panel made by LG.Philips, DiamondMax 10/6L160M0HDD 160Gbyte SATA hard disk drive from Maxtor Corp, Radeon X1600 graphics processor ($30) from ATI Technologies and Double-Data Rate (DDR) SDRAM ($20 per 256MB) from Samsung Electronics.

For additional info on the new iMac Core Duo, check out AppleInsider's closer look at the system's architecture.
post #2 of 35
How does this compare to the the G5 version of the iMac? (what was it's BOM)
+
post #3 of 35
So Apple is selling you $900 worth of parts for $1299? Doesn't sound like a bad deal to me: you have to factor in shipping, support, warranty, R&D and a lot more. That's not to say they're not making money on it, but it certainly isn't a rip off.
post #4 of 35
Quote:
Originally posted by Robin Hood
So Apple is selling you $900 worth of parts for $1299? Doesn't sound like a bad deal to me: you have to factor in shipping, support, warranty, R&D and a lot more. That's not to say they're not making money on it, but it certainly isn't a rip off.

If we also factor in iLife '06 and OS X 10.4.4 (which people normally have to pay for to get), we're approaching 1299$. Sure...it's only software but, to me, software is what *really* counts.
post #5 of 35
Not only did I forget software (thanks for the correction), but I forget advertising as well.
post #6 of 35
Quote:
Originally posted by kim kap sol
If we also factor in iLife '06 and OS X 10.4.4 (which people normally have to pay for to get), we're approaching 1299$. Sure...it's only software but, to me, software is what *really* counts.

I agree. But then, I'm a developer, so I'm somewhat biased.

Regardless, you have to factor software R&D costs into each Mac.
 
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post #7 of 35
This article suggests that Apple may be facing "an increase in materials cost of more than $200 per unit." over the old G5 iMac. If true this will hurt earnings unless they sell a boatload more.

http://www.businessweek.com/technolo...gn_id=rss_tech
post #8 of 35
Quote:
Originally posted by WelshDog
This article suggests that Apple may be facing "an increase in materials cost of more than $200 per unit." over the old G5 iMac. If true this will hurt earnings unless they sell a boatload more.

http://www.businessweek.com/technolo...gn_id=rss_tech

Or Apple isn't paying that much.
post #9 of 35
Quote:
Originally posted by WelshDog
This article suggests that Apple may be facing "an increase in materials cost of more than $200 per unit." over the old G5 iMac. If true this will hurt earnings unless they sell a boatload more.

http://www.businessweek.com/technolo...gn_id=rss_tech

It is possible that they wanted to sweeten the specs to make a better PR bang for the first Intel Macs, so they take a bit of a hit on profits to do that. That would make subsequent updates a bit tougher though.

Or maybe Intel cut them a better deal than the iSuppli estimates would suggest. These estimates are tough to verify because it is difficult to know what prices Apple managed to negotiate.
post #10 of 35
My questions are, where the heck can you buy 512 MB of DDR2 667 for $20, and where can you buy a Radeon X1600 for $30?!?

Obviously Apple gets a discount on these components over what even the most saavy consumer would pay, but even so, the prices still seem suspiciously low.
post #11 of 35
From my own personal experience of working in IBM and Lenovo, you are never going to find out the actual price of what companies pay the likes of Intel or Microsoft for their products compared to the end pass-on price to the customer.

If it were a $900 BOM and a $1299 retail price, then as already said, storage, assembly and distribution costs are certainly going to eat up the difference.


( i used to know how much each step of an assembly process cost . . . like it costs ?? $ for a person to sellotape a box closed etc etc . . . pity i cant remember now how much it was )
post #12 of 35
Quote:
Originally posted by Chris Cuilla
Or Apple isn't paying that much.

You're right we don't know. It's just like buying a car. We think we are getting a good deal at $200 over "invoice". But the "invoice" price is a fake number and no one but the dealership owner really knows what the dealer cost is.

Steve knows and he isn't talking to us or isuppli.
post #13 of 35
Quote:
Originally posted by bigmig
My questions are, where the heck can you buy 512 MB of DDR2 667 for $20, and where can you buy a Radeon X1600 for $30?!?

$20 per 256MB or $38 for the 512MB, is what they just told me. I've updated the article.

Hope this helps,

Kasper
EIC- AppleInsider.com
Questions and comments to : kasper@appleinsider.com
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EIC- AppleInsider.com
Questions and comments to : kasper@appleinsider.com
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post #14 of 35
Well, at least we're getting past the "with Intel Apple can cut prices" notion that somehow got circulating. It never made any sense, and I think Apple has done well just to hold their price points.

It's probably the best we can expect from the rest of the Intel machines with IBM/FS equivalents this year, and at that Apple is probably giving up some margin to avoid negative impact on growing market share.

In fact, as has been suggested, I wouldn't be surprised if the iMac is acting as "loss leader" for the transition, getting the word out there that the transition is going smoothly and that the new machines are powerful, compatible and not more expensive, all of which is what we're hearing and a is vitally important idea for Apple to hammer home at this point.

Going forward, who knows? Intel may allow Apple to sell some new configurations at lower prices than they would have, simply because Intel has such a broad offering and Apple can pick and choose in a way they never have been able to before.
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post #15 of 35
Quote:
Originally posted by bigmig
My questions are, where the heck can you buy 512 MB of DDR2 667 for $20, and where can you buy a Radeon X1600 for $30?!?

Obviously Apple gets a discount on these components over what even the most saavy consumer would pay, but even so, the prices still seem suspiciously low.

When I was designing equipment for my company I used to figure parts cost as being about 25% to 50% of what that part would cost in the finished product.

So, if I bought a part for $25, it would add $50 to $100 to the finished price. That's just an average, it's more complex than that, but you can use it as a general consideration.

And, no, you can't buy them at these prices.
post #16 of 35
Here are the maths:

Parts cost: $950 (with keyboard and mouse)
Price sold: $1300

That means 27% margin. Yet, since Apple gets parts much, much, much cheaper because it buys quantities in millions (remember the flash memory deal with Samsung), the real margin may be in the 40-50% range.

So, not bad... for Apple. In other words, it could be much cheaper (in fact, it could be sold as $990, for instance), as PC makers do. That is why Macs are much more expensive than PCs out there. Apple margins are much higher. The only way to get cheaper Macs would be having Mac clones. As in the PC world. That is the final reason why Macs are so expensive: the Apple Mac monopoly! You may like it or not, but that is the truth. And do not take me wrong. I use a Mac. But dozens of millions of PC useres out there will not switch just because of the price.
post #17 of 35
Quote:
Originally posted by zunx
Here are the maths:

Parts cost: $950 (with keyboard and mouse)
Price sold: $1300

That means 27% margin. Yet, since Apple gets parts much, much, much cheaper because it buys quantities in millions (remember the flash memory deal with Samsug), the real margin may be in the 40-50% range.

So, not bad... for Apple. In other words, it could be much cheaper (in fact, it could be sold as $990, for instance), as PC makers do. That is why Macs are much more expensive than PCs out there. Apple margins are much higher.

Apple's computer margins are around 30%. That's well known, and according to their own statements.
post #18 of 35
Quote:
Originally posted by addabox
In fact, as has been suggested, I wouldn't be surprised if the iMac is acting as "loss leader"

I would be very surprised. Apple, wisely, does not appear to be selling anything at a loss.
post #19 of 35
Quote:
Originally posted by Chris Cuilla
I would be very surprised. Apple, wisely, does not appear to be selling anything at a loss.

Right, I should have been more clear. I didn't mean literally, just that Apple might be willing to accept lower margins, possibly much lower margins, on this machine for the time being, because it is such a critical piece for garnering good will for the transition.
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post #20 of 35
Quote:
Originally posted by zunx
Here are the maths:

Parts cost: $950 (with keyboard and mouse)
Price sold: $1300

That means 27% margin. Yet, since Apple gets parts much, much, much cheaper because it buys quantities in millions (remember the flash memory deal with Samsug), the real margin may be in the 40-50% range.

So, not bad... for Apple. In other words, it could be much cheaper (in fact, it could be sold as $990, for instance), as PC makers do. That is why Macs are much more expensive than PCs out there. Apple margins are much higher. The only way to get cheaper Macs would be having Mac clones. As in the PC world. That is the final reason why Macs are so expensive: the Apple Mac monopoly! You may like it or not, but that is the truth. And do not take me wrong. I use a Mac. But dozens of millions of PC useres out there will not switch just because of the price.

The $900 BOM is already made out of these reduced bulk prices you are talking about, so it is really a 27% margin, and it really cost around $900 to Apple to build each iMac. If it was sold $990, Apple would lose money if you take into account distribution cost and the software development.
post #21 of 35
Quote:
Originally posted by VL-Tone
The $900 BOM is already made out of these reduced bulk prices you are talking about, so it is really a 27% margin, and it really cost around $900 to Apple to build each iMac. If it was sold $990, Apple would lose money if you take into account distribution cost and the software development.

Beat me to it.

Almost certainly the dual Yonah is costing Apple more than the G5. That, and the improvements in other components such as the vid card suggest that Apple is accepting lower margins on this machine than the previous IBM iteration.

For Apple to set prices much lower, they would have to change their business model and start down the slippery slope to commodity hell.

In PC land, you either differentiate and protect your margins (ala AlienWare), or you compete with Dell to shave another 3¢ off a component price.

I for one much prefer the way Apple has done it so far, even if it means paying a bit more.
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post #22 of 35
Quote:
Originally posted by addabox
Right, I should have been more clear. I didn't mean literally, just that Apple might be willing to accept lower margins, possibly much lower margins, on this machine for the time being, because it is such a critical piece for garnering good will for the transition.

Fair enough. That I could see happening. Plus, Apple has become more adept at working to shave pennies and nickels off the costs of their products to improve margins (as well as millimeters and ounces). Witness iPod. I get the sense that they are a very cost-concious company.
post #23 of 35
Is OSX worth nothing?

If you add the price of OSX of $129 and iLife at $79 then you have a differant equasion all to gether, say a $100 profit
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post #24 of 35
OK, so any people want to hazard an informed guess at the CoreDuo processor price (for Apple) after ~ 6 months and maybe ~ 12 months?.
post #25 of 35
Much the same as it is now because Intel is in the habit of just dropping in new models and if Apple wants to stay competitive they will upgrade their machines to it. I expect far more frequent upgrades for Apple's machines now.
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post #26 of 35
Quote:
Originally posted by Telomar
Much the same as it is now because Intel is in the habit of just dropping in new models and if Apple wants to stay competitive they will upgrade their machines to it. I expect far more frequent upgrades for Apple's machines now.

Intel drops the prices of its cpu's on a regular basis. What sells for $200 today, might sell for $150 3 months from now, and $125 3 months after that.
post #27 of 35
Quote:
Originally posted by addabox
Well, at least we're getting past the "with Intel Apple can cut prices" notion that somehow got circulating. It never made any sense, and I think Apple has done well just to hold their price points.

It's probably the best we can expect from the rest of the Intel machines with IBM/FS equivalents this year, and at that Apple is probably giving up some margin to avoid negative impact on growing market share.

In fact, as has been suggested, I wouldn't be surprised if the iMac is acting as "loss leader" for the transition...

Very unlikely. Apple is in no position to be making one of their top selling products a loss leader. In fact, Apple is known for having the phattest profit margins in the business, and there's little reason to expect that to change with the transition to Intel. Check out other laptops with the same specs or better as the MacBook Pro - most of them cost less and use better parts, so are we to assume that every computer manufacturer, from Dell to Buttmunch, Inc., are making their Yonah laptops into "loss leaders"?

I read somewhere that the profit margins on the new iMacs are ~27%, but I'm not 100% sure of that number, and I forget the source. Suffice to say that I DO remember reading that the Intel iMac has normal profit margins for a Mac.

As for $30 video cards and so forth, remember that Apple buys millions of video chipsets per year from ATI, so of course they get a mondo deal on the purchase. It's the same as how Costco get's better prices on ketchup than the local indy grocery store.

I'd read that Bill of Sale (BOM) as simply BS. Nobody but Apple knows what the BOM is for an iMac, and they aren't telling.
post #28 of 35
Quote:
Originally posted by a_greer
Is OSX worth nothing?

If you add the price of OSX of $129 and iLife at $79 then you have a differant equasion all to gether, say a $100 profit


In the view of the BOM, the OS is worth nothing. The OS will be listed as a single part number to represent the CD and the BOM cost associated with it will be the 1 cent value. Installing the OS on the machine as its manufactured costs just a few dollars at the end of the manuacturing line.


In terms of cost to the customer for a complete machine with an OS installed, I would say that apportioning $100 of the retail price as the license fee for the operating system is about right.
post #29 of 35
As the previous poster mentions, don't confuse retail prices with BOM. Physical software costs merely cents to manufacture, and keyboards and mice are made for a few bucks at most as well.

Apple doesn't buy software from themselves. The only tangible cost is in the physical discs, which amounts to pennies.

Hard drive images (all of the pre-installed stuff) are copied at a rate of hundreds by the hour. The cost of which is also negligible and likely absorbed into the article's mentioned $25 manufacturing and testing.
post #30 of 35
Quote:
Originally posted by fisha
In the view of the BOM, the OS is worth nothing. The OS will be listed as a single part number to represent the CD and the BOM cost associated with it will be the 1 cent value. Installing the OS on the machine as its manufactured costs just a few dollars at the end of the manuacturing line.

In the BOM, yes, but cost to get the product out is higher than that. I think it is odd that they estimate assembly cost but then not development cost, neither are materials and parts costs.

I think the development cost of the software, as well as the design and engineering of the unit should be factored into these estimates. If Apple had to licence the software from elsewhere, then they probably would have those costs factored in as well.
post #31 of 35
BOM: $873
Retail: $1299
Cost of parallel development of OS X on Intel for five years to guarantee a smooth transistion: priceless.
post #32 of 35
Quote:
Originally posted by Junkyard Dawg
I'd read that Bill of Sale (BOM) as simply BS. Nobody but Apple knows what the BOM is for an iMac, and they aren't telling.

End of discussion
post #33 of 35
All this talk of the iMac's BOM and not one mention of the words "labor" or "overhead"?

Material costs represent only a small portion of the BOM for products involving significant engineering. The "M" in BOM isn't just for materials any more... BOMs now typically include all costs. Material cost seldom makes up the majority of a product's BOM anymore.
post #34 of 35
It doesn't matter if Jobs found a million Cure Duos in a cracker jack box making it cost $100 to produce. The price isn't determined by cost of production, it is determined by VOLUME.

Did you people come from the Henrico County School of Economics?!
post #35 of 35
Quote:
Originally posted by melgross
Intel drops the prices of its cpu's on a regular basis. What sells for $200 today, might sell for $150 3 months from now, and $125 3 months after that.

I'm not sure you understand. For instance Intel currently has price changes for the desktop line planned in April and at the same time they will introduce a new model. In fact if you look really closely you see the new model replaces the old top model and everything else just drops down a price point.

So for Apple to get the equivalent processor 12 months down the line will cost them the same amount. Sure they could buy the old CPUs cheap but then they'd lag quite badly compared to what other PC manufacturers are doing. All they'll gain is frequency or features. The exception would be through competition.

Now if you wanted to know what Intel does with outdated processors well just take a look at Pentium M pricing. For low costs jump down to higher yield bins or to the Celeron ranges. If you want to see how it will change that's easy but it isn't going to effect Apple's current models unless they want to out date them.
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