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Andy Hertzfeld revealed that the CPU for the original $2495 Macintosh cost just $9.00. How much did the rest of the computer cost? Was the markup really greater than Pepsi's markup on sugar? How much would it have cost to use 512K memory instead of 128K at the start?

dave
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Aleksandr Dubinsky
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    Should it help anybody, the active components are really just: the 68000, a Zilog 8530 SCC, a 6522 and one of Apple's IWM disk controllers. There's memory-mapped video with a single output mode and audio is a combination of extra data fetched by the video circuitry and an on-off toggle routed out from the 6522. The variable disk motor speed is also keyed to the audio fetching mechanism. There's no logic for indicating a bus error to the 68000, and even proper phase between video and 68000 RAM access is handled at launch in software. It's a really simple machine. – Tommy May 22 '19 at 07:18
  • @Tommy Seems an ideal machine for cloning. Why haven't we seen much of that? – Omar and Lorraine May 22 '19 at 07:34
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    @Wilson because the ROMs were protected by copyright and Apple were fairly diligent in enforcing it. The software is what made the Mac special (and expensive), not the hardware. – JeremyP May 22 '19 at 08:26
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    So should the BOM include the software cost? – Omar and Lorraine May 22 '19 at 08:29
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    Actually, I forgot: the keyboard is connected as a serial device, and has an 8021 to deal with that. Also there's a custom Apple real-time clock. – Tommy May 22 '19 at 08:56
  • Isn't there some kind of MMU as well? I seem to remember Apple made a custom one for a macintosh, though that could be a later model. – Omar and Lorraine May 22 '19 at 11:26
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    @Wilson First-party software cost is not included in the BOM. – Aleksandr Dubinsky May 22 '19 at 12:05
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    The was no MMU in the first Mac, it uses a really simple fixed memory map: the first quarter of address space is the RAM, the next quarter is ROM, the final half is peripherals. Though you can optionally put the ROM at the start instead of RAM, which is how the 68000 reset vector is properly fed. Then in software the Classic OS uses code in small segments that is require to use PC-relative addressing, and all jumps between segments go via the loader. If the target segment is already loaded, the jump completes; otherwise some shuffling occurs first. – Tommy May 22 '19 at 12:17
  • (aside: I'm presently engaged in writing an emulator, hence my awareness of some things, but complete ignorance on bill of materials) – Tommy May 22 '19 at 12:18
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    @Wilson The BOM is the incremental cost of building a machine. It does not include software development costs (it should include the media cost of disks included with the machine), hardware development (engineering) costs, costs of custom molds, tooling, etc. to produce the hardware, all of which are required before producing the first machine. It also does not include warranty support, marketing and other real-world (but people not machine) costs. And of course it does not include profit (which is the motivation of most manufacturers). All those "costs" are built in to the retail price. – manassehkatz-Moving 2 Codidact May 22 '19 at 14:46
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    @Tommy: You need to also add RAM, board manufacturing and materials, Caps, transistors, analog board with it's own caps, flyback and power supply transformers, picture tube, cables, connectors, case and more to the bill. Also, don't forget, soldering everything together also costs money. Each cost might be only cents but all accumulates to a considerable stack. No computer is just made of CPU and accompanying chips. – PoC May 23 '19 at 07:16
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    Yep, that's what I attempted to imply through my description of only 'active components'; I probably should have been more clear. – Tommy May 23 '19 at 07:30
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    There's no MMU in the original Macintosh. And in addition to the custom IWM disk controller chip, there was also a semi-custom CMOS real-time clock chip. – hotpaw2 May 23 '19 at 16:07
  • And, it seems, the retail price of a piece of equipment like a computer (at least that of a new, revolutionary model) is in no way related to its cost. It will be based on what the market is willing to pay. – tofro May 26 '19 at 21:47

2 Answers2

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The incremental cost, or "BOM cost", of the original 128K Macintosh was approximately $750 at the time.

This answer is trivially determined from the 1982-83 Apple Computer Inc. public financial results, along with the historical account provided by Andy Hertzfeld. Historical Apple Computer Inc. financial results indicate a Gross Margin of 50.6% in 1982 and 48.5% in 1983 ref.

From the financial statements at the time, it is clear that Apple was aiming for ~50% gross margins in its business. These margins would compress in later years, undoubtedly due to the pressures of rising competition in the personal computer market. However, Mr. Hertzfeld states that the Macintosh team was aiming to match the then-current profit performance of the Apple II.

We also know from Mr. Hertzfeld's historical account that the Macintosh team was still aiming for a wholesale price of $1,500 late in the development cycle (with a stated final retail price of $1995). Given the 50% gross margins, this would strongly suggest a production cost of $750 per unit.

Knowing that the system cost $750 to produce at the time makes it easy to work backwards to a BOM cost structure, albeit with some conjecture about the relative costs of different components. My conjecture would lead me to a breakdown such as: Printed Circuit Boards (x2)......$60 Major IC components (x6).........$30 Additional IC components (x43)...$86 Discrete electronics.............$44 Connectors and wiring............$40 CRT..............................$100 Case.............................$60 Keyboard.........................$60 Packaging & Media................$20 (manual, disks, etc.) Manufacture/Assembly/Distro......$250 Total............................$750

Brian H
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  • Agree with general concept. But allocating 1/2 the cost to a nebulous Manufacture/Assembly/Distro seems a bit too vague. – manassehkatz-Moving 2 Codidact May 26 '19 at 17:26
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    This is wrong on many fronts. First of all, 50% gross margin means a $1500 computer costs $750 to make. Compare margin to markup: https://en.wikipedia.org/wiki/Gross_margin Second of all, Apple's margin doesn't include dealer margin. If the dealer's margin is 20%, the computer would cost $600. Third, the margin reported on a financial statement is likely muddied in various ways. – Aleksandr Dubinsky May 27 '19 at 05:51
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    To drive the third point home, today Apple reports 38% gross margin, even though the $1k iPhone X costs about $370 to make (or, 60% margin, if including distribution costs). – Aleksandr Dubinsky May 27 '19 at 06:11
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    Sorry. Obviously, not an accountant and was mistaken on the use of the term "gross margin". Correcting my answer to fix those numbers. As far as retail markup goes, my takeaway from the historical account was the $1500 price was wholesale and the final retail prices was suppose to be $1995, accounting for retail markup. – Brian H May 27 '19 at 15:28
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I don't have a specific answer, but a good rule of thumb for machines built in the mid-eighties was that buying the chips for a machine at retail would end up costing about a third of the retail price of the complete machine.

Obviously, there are additional costs for PCB, connectors, wiring, assembly, the casing, the PSU, the CRT and its circuitry for an all-in-one Mac, and so on. But the chip prices shrank considerably when you started buying in hundreds of thousands.

John Dallman
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  • And wasn't there another rule of thumb that buying parts wholesale was 3 times cheaper than retail? So 9x total? Anyway, while it helps to provide context on how other companies priced machines, the question is specific to the Macintosh, which Andy Hertzfeld accuses of being particularly overpriced. – Aleksandr Dubinsky May 22 '19 at 16:10
  • The version I heard was that the retail price of the complete machine was three times manufacturing cost; if labor is only 5-10% of this, that's pretty nearly the same as saying the retail price of the complete machine is three times the wholesale cost of the components. Do you have a source for your version? – rwallace May 22 '19 at 23:00