Apple not getting rich with Apple TV

Posted by Wolfgang Gruener

El Segundo (CA) – There have been rumors about Apple TV not selling too well and now there is indication that the device also has a profit margin that is unusually low for Apple.

According to a teardown analysis from iSuppli, Apple has to spend about $237 to get a 40 GB Apple TV, which retails for $299, out the door. If the market research firm is right than Apple takes a profit of just over $60 for each sold Apple TV device – which translates into a margin of just over 20%. Add in marketing cost of typically 7% as well as another portion for shipping expenses - both factors are not included in the iSuppli teardown - and you have a product that may make about $30 profit per unit.

In comparison to other Apple products, this margin is surprisingly low. Especially in comparison to the 4 GB iPhone, which is expected to have a similar bill of materials of about $246, but a suggested retail price of $499 (49.3% margin), Apple isn’t exactly collecting piles of cash with the TV device. The popular iPod Nano is estimated to have a profit margin of close to 40% as a 2 GB model.  

iSuppli believes that the integrated 90 nm Pentium M Dothan processor (1 GHz) is the item with the highest cost ($40) among all hardware parts. Other pricey components are the 945G chipset for $28, the 40 GB hard drive for $37, the 802.11n card for $19 as well as the Nvidia GeForce Go 7300 graphics processor for $15.

Apple recently began offering a 160 GB hard drive upgrade for $100, which should overall boost the profitability of the device.

iSuppli estimates that Apple will be shipping about 1 million Apple TVs in 2007 and about 1.4 million units in 2008.