The iPod shuffle might cost only $99 for the 512 Mb version, that still leaves Apple $35 to $40 in profit, according to an estimate by research firm IDC.

About two thirds of the costs are gobbled up by the 512 Mb flash memory chip that the portable media player uses to store its music.

The iPod shuffle uses the STMP3550 digital music decoder chip from SigmaTel Inc. Those willing to speculate should pay attention to the fact that the chip also supports the decoding of Windows Media audio files, although Apple has it programmed for AAC and Audible music formats.

The chip also offers support for an LCD display (!!!), voice recording and FM tuner.

Especially the lack of a display in the iPod shuffle has been a major point of criticism. The decoder chip supporting such a display however gives Apple the option to easily add one in future models.