Analysts at IDC estimate that Apple makes a 35 to 40 percent profit margin on each iPod shuffle the company sells, and stands to make even more from expected drops in flash memory pricing. IDC said the iPod shuffle’s flash memory, made by Samsung, is the most expensive component used in the device. IdaRose Sylvester, a senior semiconductor research analyst at IDC, estimates that the 512MB chip in the $99 shuffle costs Apple around $37.50 for each player—about two thirds of the estimated $59 that the company spends on total materials needed to make each 512MB shuffle.
“Apple is making very, very good margins on the shuffle,” Sylvester says. “We based our cost analysis on fourth quarter production prices, which would have been when they sourced [the components]. At some point they’ll switch to cheaper flash and the margins will improve.”