14 DAY TRIAL // If you have ever wondered how much Apple spends on the new iMac, and how much they are making on each piece sold, your questions have been answered.
A Silicon Valley research firm called iSupply conducted a 'teardown' analysis of the new $1,299 17-inch iMac that contains an Intel chip. These types of analysis are used in the industry to determine how much a computer manufacturer pays for all the components and estimate what the profit from sales is. According to iSupply, it costs Apple $898 to assemble a iMac before it is bundled with software and placed inside the box.
Of that, a large chunck of money goes to Intel for the Core Duo processor. The estimate from iSupply is $265 a piece? "We made a conservative guess that Apple is getting a 10% discount on that chip," says Andrew Rassweiler, manager of iSuppli's teardown team. "But Apple is Apple. It's such a tough negotiator, that discount could be higher." Besides the main brain, two other Intel chips stand between the Intel Core Duo and the other systems in the computer, each costing $14 and $31, respectively. Adding all that up we see that over a third of the costs of the new iMac, $310 to be precise, are for the Intel chips. This is, of course, an estimate.
Are they spending more or less money than they did on the G5 version? Hard to tell? For one thing, Apple does not talk about the costs of components they acquire from suppliers, and the suppliers in turn do the same.
Some believe that Apple might have been paying less than $100 for the IMB single-core PowerPC 970 chip that went into the final iMac G5, which would mean a cost increase of over $200 per piece.
"I don't know how much Apple pays for that IBM chip, but you can bet it's absurdly low," said Nathan Brookwood, head of market researcher Insight64. "Apple has this crazy idea that it shouldn't have to pay as much as everyone else. And whatever it's paying for the IBM chip, I'm sure it's paying more for the Intel chip."
The comparison is even further complicated by the fact that while Apple used the IMB chips, they designed their own custom chip that stood between the PowerPC and the other parts of the computer such as the main memory and graphics chips. With the move to Intel, Apple has also replaced its own custom chip with the two cheaper ones from Intel, meaning that the costs have been reduced here.
"It's really not an Apples to Apples comparison, if you will," says Instat/MDR chip analyst Kevin Krewell.
At the end of the day, Apple was not interested in short-term profit when it made the switch to Intel. The company's laptops had been trailing behind for quite some time because IBM was not able to produce a PowerPC 970 processor that could be used, mainly because of the heat-generation and power consumption issues. Like with all things, Apple has planed this as a long-term move, and even if it means spending more today, it certainly plans to make it back tomorrow.