Business Week looked at the report from iSuppli, and the tear down of the new iPod shuffle reveals that the player only contains $22 worth of components, including packaging. Half the cost is estimated to come from two Samsung components: the main controller chip, and the 4GB of flash memory, costing about $6 each.
All told, the cost of the shuffle’s components, the headphones, and the packaging it ships in comes to $21.77, according to iSuppli’s estimates. That’s about 28% of the device’s retail price. The smaller the component cost as a percentage of price, the higher the potential profit. This suggests the per-unit profit margin on the shuffle is higher than on other iPod models. The component cost for the first iPod touch released in 2007, for instance, amounted to about $147, or about 49% of its $299 retail price. The component cost of the third-generation iPod nano, also released in 2007, amounted to about 40% of its retail price.
iSuppli’s estimates don’t count for cost of research and development, as well as shipping and manufacturing costs, though the simple breakdown of parts per device would make up the majority of the cost. The iPod Shuffle sells for $69 and is the center of a controversy over the lack of buttons on the device, and the requirement of proprietary headphones to operate the unit.