October 05, 2010, 4:47 PM — The new Apple TV costs less than $64 to manufacture and get out the factory door, an analyst with iSuppli said today, putting Apple's living room entry at the low end of the profit margin.
"To me, this is at the lowest end of the margin," said Andrew Rassweiler, the director of El Segundo, Calif.-based iSuppli's teardown services, after taking apart the Apple TV and estimating its likely bill of materials, or BOM. "Of the number of teardowns I've done, this is what I would call 'margin challenged,'" said Rassweiler.
Apple, which introduced the new Apple TV Sept 1, sells the device for $99.
According to Rassweiler's BOM estimate, the most expensive component in the Apple TV is the A4 application processor, which runs $16.55 each. The same Apple-designed A4 with 256GB of system memory powers both the iPad and the fourth-generation iPod Touch. The iPhone 4 also relies on the A4, but packages the processor with 512MB of system memory.
Apple's use of the A4 across multiple lines is a key reason the company can keep its costs low, Rassweiler argued. "It's part of the reason for the low cost of the Apple TV, but more importantly, it's key to the overall low cost for the Apple platforms that use it."
The Apple TV also illustrates Apple's ability to use similar components in a variety of devices, ranging from smartphones and tablets to the new media streaming device. "None of them have exactly the same layout [on the logic board], but Apple's building block approach is unique," said Rassweiler.
Like others who have digested earlier teardowns from the likes of iFixit.com, Rassweiler noticed that the Apple TV sports an empty slot that's a perfect fit for another flash memory chip. It would be easy for Apple to double the current 8GB of storage space in a future Apple TV, he said.
"They could at least double the capacity to 16GB, maybe even [increase it] to 32GB," Rassweiler said.
The reason Apple didn't do so off the bat was its desire to keep costs in line with the $99 price. "That's a magical price point," Rassweiler said.
Another 8GB flash memory chip from Toshiba, the supplier of the current chip in the Apple TV, would add $14 to the BOM, bringing it close to $80.
