MacBook Air more profitable than other Apple laptops, says analyst

Apple uses its huge appetite for flash memory to push profits

Apple's lowest-priced MacBook Air costs the company $718 to manufacture, giving the company a heftier margin for the line than for its other notebooks, an analyst said Friday.

The MacBook Air sports margins between 28% and 37%, said Brian Marshall of Gleacher & Co., who estimated the new notebooks' bill of materials (BOM). That's significantly above the approximately 20% margin for Apple's entire notebook line.

Marshall's estimates account for hardware and manufacturing costs, as well as royalties and licensing fees, but it excludes design and software development costs, advertising and marketing expenditures.

"The updated MacBook Air will be a phenomenal 'mobile content creating' device that won't be cannibalistic with the iPad," Marshall said.

Others agreed that Apple is in a position to do what its rivals cannot: Leverage its huge consumption of non-volatile flash memory to drive up profits.

"If they're not the world's largest consumer of [flash memory], they're one of its largest," said Andrew Rassweiler, the director of El Segundo, Calif.-based iSuppli's hardware teardown group. "At that point, you're almost a producer, so the more memory you put into a device, the more you make."

Marshall's numbers bear that out.

According to his preliminary BOM, the 64GB of flash memory used for the SSD (solid-state drive) inside the $999 11.6-in. MacBook Air costs Apple $80, putting that component in a tie with the Intel Core 2 Duo processor as the laptop's second-most expensive part. The priciest, at $180, is the 11.6-in. LED-backlit screen.

Marshall pegged the 64GB MacBook Air's margin at 28.1%.

But by doubling the storage space to 128GB, Apple boosts the profit margin of the same 11.6-in. MacBook Air to 34%. How? By charging consumers $200 more while incurring only $73.60 in additional costs.

The numbers are almost as impressive for Apple on the 13.3-in. Air. The 128GB model, which features an SSD that costs the company $154, pencils out with a margin of 33%. For $300 more, consumers get the same 13.3-in. notebook with 256GB of storage space. But the doubling of flash capacity costs Apple just $141, said Marshall, which pushes the profit margin to 37%.

This isn't a new strategy for Apple.

64GB SSD
The lowest-priced MacBook Air features a 64GB SSD in place of a traditional hard drive. (Photo courtesy of iFixit)
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