Teardown Analysis Service
concludes that Apple isn’t selling its Apple TV for huge profits — the company is generating 20.7 percent gross margin on the unit, if iSuppli’s numbers are right. That’s considerably less than the 40 to 50 percent gross margin iSuppli suspects Apple sees on its iPod line.
Andrew Rassweiler, iSuppli senior analyst, calls the Apple TV a “LobotoMac.” He explained that the system uses a very low-cost designed based on a “trailing edge” microprocessor and scaled application needs.
iSuppli’s gross margin numbers don’t include cable, packaging and marketing expenses, either, so the company says that the numbers actual margin is somewhat smaller than 20.7 percent.
Without big profits on the line, what’s Apple’s motivation to sell the Apple TV? iSuppli suspects that it’s to migrate content purchased through the iTunes Store to the living room. What’s more, Apple’s taking a crack at a market that other companies haven’t been able to penetrate with any sure success: bringing Internet content — such as YouTube video — to the TV.
The microprocessor used in the Apple TV — an older 1GHz Pentium M model from Intel — probably costs Apple about $40, estimates iSuppli, while other core logic chips add another $28. Nvidia’s GeForce Go 7300 graphics processing unit is also used in the box, and iSuppli estimates its price at $15. Other hardware in the box like the other chips and hard disk are “unremarkable and common to conventional PC designs,” said iSuppli.
The company predicts Apple will sell 1 million Apple TV units in 2007, with 1.4 million moving in 2008. That’s well above the few hundred thousand others have shipped, according to iSuppli vice president Mark Kirstein. No one, he said, has found the “secret sauce” to sell more than that.
“However, if any company can find the right formula for success, it’s Apple,” said Kirstein.