Apple TV not priced for profit?
With a suggested retail price of $300, you'd expect iPod maker Apple Inc. to pocket some hefty change from the sale of each new Apple TV set-top media box.
Not so, according to a recent product tear-down by market research firm iSuppli, which notes that the Cupertino-based company is moving the streaming media devices at just above break-even once miscellaneous charges are thrown into the mix.
After tearing-down an Apple TV and itemizing the cost of each internal component, iSuppli arrived at an approximate BOM -- or Bill of Materials -- of $237. That amounts to a meager 20.7 percent gross margin, the firm said, well below the 40 to 50 percent margins Apple has been generating through sales of its iPod digital music players. The BOM estimate also does not account for other costs, including cables, packaging and marketing expenses, meaning that Apple?s actual margin is likely somewhat smaller.
"This suggests that Apple is taking a market-penetration strategy for the Apple TV, rather than the simple profit-per-unit approach it has always used in the past,? said Andrew Rassweiler, teardown services manager and senior analyst for the firm. "The Apple TV itself is a very low-cost design, primarily due to its use of a trailing-edge microprocessor."
With Apple TV not expected to generate much profit, Apple's goal for the product appears to be one of infiltrating the living room with its highly-successful iTunes digital media service. It's a high risk gamble, says iSuppli, noting that previous attempts by companies to deliver Internet content to the television have failed miserably.
To his credit, however, Apple chief executive Steve Jobs recently categorized Apple TV as a company "hobby" rather than a business like the Mac, iPod, and soon, iPhone.
So if Apple isn't seeing high returns from Apple TV, who is? It could be the Mac maker's primary silicon provider. With the microprocessor and associated core logic, Intel accounts for the largest single bundle of dollar value of any component supplier in the Apple TV, according to the tear-down. The combined estimated value of the Intel microprocessor and the northbridge and southbridge core logic chips is about $68.
In terms of semiconductor components, other major cost drivers include the Nvidia GeForce Go 7300 Graphics Processing Unit (GPU), which has an estimated value of $15, the unit's 40GB Fujitsu 2.5-inch hard disk drive ($37), a Broadcom Mini PCI-E WLAN Board ($19), and 36W power supply from Delta ($7.25).
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Despite some limitations and an initially undefined product identity, iSuppli believes that Apple's successful track record with the iPod and iTunes makes it likely that the company will be able to sell a significant number of Apple TVs this year and next.
The biggest challenge may be lining up compelling content, according to the firm.
"Apple has good access to content, but there will be lots of complications," said Mark Kirstein, vice president, multimedia content and services for iSuppli. "Already Starz Entertainment has sued Disney, because it has exclusive television distribution rights for certain Disney properties. This wasn't an issue when Disney licensed to iTunes for personal media players, but becomes one for TV-based distribution."
Still, the firm believes Apple TV shipments will reach about 1 million units during 2007, and 1.4 million units in 2008.
"There?s a slew of these Digital Media Adapter devices on the market today that offer similar capabilities to the Apple TV," said Kirstein. "Yet, nobody has found the secret sauce to get more than a few hundred thousand units shipped. However, if any company can find the right formula for success, it's Apple."
For those interested, we've published an exploded view and some additional shots of the Apple TV's primary logic board on the next page.
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Not so, according to a recent product tear-down by market research firm iSuppli, which notes that the Cupertino-based company is moving the streaming media devices at just above break-even once miscellaneous charges are thrown into the mix.
After tearing-down an Apple TV and itemizing the cost of each internal component, iSuppli arrived at an approximate BOM -- or Bill of Materials -- of $237. That amounts to a meager 20.7 percent gross margin, the firm said, well below the 40 to 50 percent margins Apple has been generating through sales of its iPod digital music players. The BOM estimate also does not account for other costs, including cables, packaging and marketing expenses, meaning that Apple?s actual margin is likely somewhat smaller.
"This suggests that Apple is taking a market-penetration strategy for the Apple TV, rather than the simple profit-per-unit approach it has always used in the past,? said Andrew Rassweiler, teardown services manager and senior analyst for the firm. "The Apple TV itself is a very low-cost design, primarily due to its use of a trailing-edge microprocessor."
With Apple TV not expected to generate much profit, Apple's goal for the product appears to be one of infiltrating the living room with its highly-successful iTunes digital media service. It's a high risk gamble, says iSuppli, noting that previous attempts by companies to deliver Internet content to the television have failed miserably.
To his credit, however, Apple chief executive Steve Jobs recently categorized Apple TV as a company "hobby" rather than a business like the Mac, iPod, and soon, iPhone.
So if Apple isn't seeing high returns from Apple TV, who is? It could be the Mac maker's primary silicon provider. With the microprocessor and associated core logic, Intel accounts for the largest single bundle of dollar value of any component supplier in the Apple TV, according to the tear-down. The combined estimated value of the Intel microprocessor and the northbridge and southbridge core logic chips is about $68.
In terms of semiconductor components, other major cost drivers include the Nvidia GeForce Go 7300 Graphics Processing Unit (GPU), which has an estimated value of $15, the unit's 40GB Fujitsu 2.5-inch hard disk drive ($37), a Broadcom Mini PCI-E WLAN Board ($19), and 36W power supply from Delta ($7.25).
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Despite some limitations and an initially undefined product identity, iSuppli believes that Apple's successful track record with the iPod and iTunes makes it likely that the company will be able to sell a significant number of Apple TVs this year and next.
The biggest challenge may be lining up compelling content, according to the firm.
"Apple has good access to content, but there will be lots of complications," said Mark Kirstein, vice president, multimedia content and services for iSuppli. "Already Starz Entertainment has sued Disney, because it has exclusive television distribution rights for certain Disney properties. This wasn't an issue when Disney licensed to iTunes for personal media players, but becomes one for TV-based distribution."
Still, the firm believes Apple TV shipments will reach about 1 million units during 2007, and 1.4 million units in 2008.
"There?s a slew of these Digital Media Adapter devices on the market today that offer similar capabilities to the Apple TV," said Kirstein. "Yet, nobody has found the secret sauce to get more than a few hundred thousand units shipped. However, if any company can find the right formula for success, it's Apple."
For those interested, we've published an exploded view and some additional shots of the Apple TV's primary logic board on the next page.
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Source: iSuppli (June 2007)
Comments
PS. Will the iPhone go WiFi through an Airport base station?
What ever happened to the ipod HI-FI?
I think the Hi-Fi was a test product. Obviously the sales weren't good enough to warrant frequent updates, and I'm sure their engineering resources have been consumed with pending iPhone and OS X updates.
I'm in the market for a Hi-Fi this year, I hope they come out with an updated version.
This could really open up the Mac gaming market too; if the ATV became a successful game platform, it would be a piece of cake to port an ATV game to the Mac, seeing as they're both running OS X.
for $15 apple should put this in the mini, mac book, mac book black with 128 mb?
and the low end i-mac.
The AppleTV could make a terrific gaming console. The USB port could be connected to a controller hub of some sort, and the hard drive could store games. The unit's more than powerful enough to handle modern games (NVidia 7300 comes in handy here)--as is, it's already more powerful than the Wii. All they'd need would be developers.
This could really open up the Mac gaming market too; if the ATV became a successful game platform, it would be a piece of cake to port an ATV game to the Mac, seeing as they're both running OS X.
For gaming 256 system ram is small with os over head.
Nvidia GeForce Go 7300 Graphics Processing Unit (GPU), which has an estimated value of $15
for $15 apple should put this in the mini, mac book, mac book black with 128 mb?
and the low end i-mac.
Now they can't make the "Low end" computers too powerful, you know that...
Al
Today's engineers trudy accomplish wonders. All of those electronics on a double-sided PCB. It's amazing how it all works.
Unlike software programming, computer design has been very workable into parallel business practices since day one. This is because it's roots are in analog design, which is inherently parallel. You'd be surprised how good the tools and the business practices are for designing electronic devices. Oh, the engineers are good too.
On an entirely different note, does anyone have an AppleTV? It seems really cool, but in order for me to buy one, there needs to be more functionality than just streaming low-resolution videos from my computer to my TV screen. Sladduch's idea of making a video game console out of it is interesting: it has more in every way than the XBox 1, and probably the Wii too. I think it would be sweet if a company like Ambrosia took it upon themselves to release some of their library onto the AppleTV.
On an entirely different note, does anyone have an AppleTV? It seems really cool, but in order for me to buy one, there needs to be more functionality than just streaming low-resolution videos from my computer to my TV screen. Sladduch's idea of making a video game console out of it is interesting: it has more in every way than the XBox 1, and probably the Wii too. I think it would be sweet if a company like Ambrosia took it upon themselves to release some of their library onto the AppleTV.
I have an Apple TV and really enjoy it. As you already know it can be seen as an iPod for your TV (use it to view podcasts, videos, TV shows, etc. and play music) or I think I remember it referred to as an Internet DVD player. It plays back 720p HD content - which you can get from the iTunes store and out on the net. And as you've probably heard, we'll soon be able to experience YouTube content on our HD TVs through the Apple TV. (It's up to you to decide if that's good or bad
I love the device - when it first came out my family and I went to our Apple store to check it out and my wife said that we had to get it! Now my wife isn't an Apple fan girl nor is she enamored with tech, so for her to dig it at first glance, and want to purchase it... well, you know Apple's got something here!
Today's engineers trudy accomplish wonders. All of those electronics on a double-sided PCB. It's amazing how it all works.
Most computer double sided boards actually aren't. They look to be that though.
Actually they are anywhere from four to eight layers in these boards.
Now they can't make the "Low end" computers too powerful, you know that...
Al
No. Because that $15 to Apple would result in $30, or more, to the consumer in a normal machine, which this one doesn't seem to be, if iSupply's numbers are correct.
Most computer double sided boards actually aren't. They look to be that though.
Actually they are anywhere from four to eight layers in these boards.
Eight layers is the norm for high-speed printed-circuit boards, but the board itself comes out of manufacturing as a single board. Still, the floor-planning of high speed boards takes a lot of thought, and 9 out of 10 boards you'll see could definitely be made more efficient. Being able to utilize both sides often makes it a little bit easier.
Some of the most elegantly designed boards come from unlikely devices: cheap, sub-900MHz radios. . . Particularly the ones with antennas built into the boards.
Eight layers is the norm for high-speed printed-circuit boards, but the board itself comes out of manufacturing as a single board. Still, the floor-planning of high speed boards takes a lot of thought, and 9 out of 10 boards you'll see could definitely be made more efficient. Being able to utilize both sides often makes it a little bit easier.
Some of the most elegantly designed boards come from unlikely devices: cheap, sub-900MHz radios. . . Particularly the ones with antennas built into the boards.
Very true. I can also tell you that de-soldering, and soldering such boards can be a bitch, even though my equipment is designed to do it.
I think the Hi-Fi was a test product. Obviously the sales weren't good enough to warrant frequent updates, and I'm sure their engineering resources have been consumed with pending iPhone and OS X updates.
I'm in the market for a Hi-Fi this year, I hope they come out with an updated version.
I don't know what the recent numbers are, but for a while, it was #2 in money spent and #4 in sales volume with respect to iPod speakers.
Today's engineers trudy accomplish wonders. All of those electronics on a double-sided PCB. It's amazing how it all works.
A lot of boards have components on both sides. I don't know how they do the soldering for that though, I've only seen older soldering equipment.
Interesting, and probably close to true. However, for me, I'll wait for revision 2 or 3 for it, as I will the iPhone.
Why not just get and enjoy it now? Get the revision when that comes out too?
PS. Will the iPhone go WiFi through an Airport base station?
Yes, we are lead to believe it will through any WiFi access point.
For gaming 256 system ram is small with os over head.
Isn't it about what the original XBox has?
On an entirely different note, does anyone have an AppleTV? It seems really cool, but in order for me to buy one, there needs to be more functionality than just streaming low-resolution videos from my computer to my TV screen.
I have it and like it a lot. Don't confuse iTunes movie resolution with AppleTV resolution: home videos from my Sony HD videocamera look good, though admittedly it's not full 1080p and doesn't match Discovery HD-quality for obvious reasons.
I use it mostly for photos & music. I have several thousand photos that are organized into playlists via iPhoto. Whenever I listen to music it's nice to have various slideshows in the background.
Some could argue that this is an expensive way to stream music & photos, but it is an elegant solution for getting all my content from the computer to the TV/stereo.
I'm sure version 2.0 will do a better job of appealing to the mainstream, but this is still a nice device and $299 isn't all that much considering the investment in the TV, stereo, computer, video camera, etc...