What Your Gadget Really Costs

The cost to make an iPod, Xbox, and other electronics has big bottom-line implications at Apple, Microsoft, and their peers. Some companies are willing to swallow losses on some gadgets—for instance, gaming consoles—in hopes that they'll make up the difference, and then some, on sales of related gear, such as video game software. Other companies, including Apple, are able to sell many products for a healthy profit from the get-go.

Market research company iSuppli takes it upon itself to tear down popular gadgets to find out the price of the component parts and the vendors supplying those ingredients. A rundown of several recent iSuppli teardowns follows—each slide lists the product, maker, release date, retail price on the release date, and iSuppli's estimate of the cost of materials.

Apple

First-Generation 2GB iPod nano

Date: Sept. 7, 2005

Retail price: $199

Cost of components: $98.18

The Apple profit machine rolled on in 2005 with the unveiling of the

iPod nano, thanks to a healthy profit margin earned on each one.

Apple

Video iPod, 30GB

Date: Oct. 12, 2005

Retail price: $299

Cost of components: $151

Apple scored another profitable product in the video iPod, according to iSuppli's calculations.

Microsoft

Xbox 360

Date: Nov. 22, 2005

Retail price: $399

Cost of components: $470

Microsoft was willing to take a loss on the second generation of its video game console. The aim: recoup the losses on sales of games over the long haul.

Toshiba

HD-A1 HD-DVD Player

Date: March, 2006

Retail price: $499

Cost of components: $700

Toshiba was willing to sell its first HD-DVD player at a loss in hopes of an early lead in the next-generation DVD battle with rival Sony.

Motorola

Q

Date: Early 2006

Retail price: $349 (one-year contract); $199 (two-year contract)

Cost of components: $158

By packing its smartphone with several accessories lacking in the rival

BlackBerry 8700, Motorola aimed to upstage Research In Motion.

Apple

iMac, 17 in.

Date: Jan. 10, 2006

Retail price: $1,299

Cost of components: $898

Even the inclusion of a superfast Intel Core Duo chip at a price of $265 didn't keep Apple from turning a profit on the 17-in. iMac introduced last year.

Huawei

E620

Date: June, 2005

Retail price: $272 (converted from British pounds)

Cost of components: $79

Chinese electronics giant Huawei benefited from the rising popularity of cards that help notebook PCs and other mobile devices connect to wireless networks.

Apple

Second-Generation 4GB iPod Nano

Date: Sept. 12, 2006

Retail price: $199

Cost of components: $72.24

Once again, Apple enjoyed a fat margin on a new iteration of its iPod, according to iSuppli's analysis.

Sony

PlayStation 3

Date: Nov. 17, 2006

Retail price: $599 (60GB) $499 (20GB)

Cost of components: $840 (60GB) $805 (20GB)

Much like Microsoft did with the Xbox 360, Sony hoped to score big in the end by taking a hit in the short term. Having a year's head start was good for Microsoft, as falling prices on components turned its $71 per-unit loss of 2005 into a $76 per-unit profit by the end of 2006, by iSuppli's calculations.