Delving into the cost structure of the Mac mini

Ever since the transition to Intel, I've been wondering why the entry level Mac mini costs $600, instead of the previous (G4-based) entry-level price of $500. And with each successive generation, I have the hope that Apple will get back to the magic $500 price-point, but so far, all of my hope has been for naught.

So it was with great interest that I read AppleInsider's cost breakdown of the latest Mac mini:

Mac mini cost breakdown (source: AppleInsider)

Although the numbers come directly from iSuppli (a group which frequently produces sketchy results), I have reason to believe these numbers because the Mac mini is basically a PC, and pricing for PC components should be rather easy to get.

So, this breakdown points out a few areas where Apple is paying more -- using the Mobile Intel CPU, and the Nvidia chipset. I thought that Apple was spending a lot on the case, but in general it looks like the case itself isn't what makes the Mac mini so expensive -- rather, it is the small components that must be used in order to get the entire computer into such a diminutive case.

For comparison, let's check out the "ZT Systems E5300 2.6GHz" PC that I saw recently while browsing Costco's website. For $500, you get an Intel dual core CPU, 4GB of RAM, 500GB of hard drive space, Intel integrated graphics, Windows Vista Home Premium and Microsoft Office Home & Student 2007. In order to get a better break-down on the costs, I tried my best to figure out what each component costs. Note these prices all derive from Pricewatch, and are what an end-user would pay. I'm sure that ZT Systems, since they are buying in lots of 1,000, can achieve cheaper prices. The following table is thus best used as an estimate:

Based upon my rough pricing guide, the raw components for the PC come out about $50 cheaper than those for the Mac mini. My guess is that the more favorable pricing that ZT Systems is able to achieve by buying in bulk would easily account for the other $50. And while the Mac mini does provide more functionality in certain areas (Nvidia graphics, built-in WiFi and Bluetooth), the ZT Systems machine provides a faster CPU, nearly 4 times the hard drive space, and 4 times the memory. Thus, it looks like Apple's use of laptop components is the biggest contributor to the Mac mini's $100 extra price premium versus a standard PC desktop. And while it's nice to dream of Apple producing a desktop machine that uses desktop-sized components, I don't think we'll see this anytime soon. One other advantage to that the Mac mini probably has over the ZT Systems machine is power draw -- because it uses components engineered for mobile computers, the Mac mini probably draws a lot less power. Since Apple's major marketing push (since the unibody MacBooks were introduced last year) is on green computing, I don't see the Mac mini losing it's laptop trappings any time soon.

-Andy.