My point is that when your average Joe buys an ipod, iphone or whatever theyre not buying a piece of hardware. They're buying the cultural cache of owning an Apple product. They're buying the seamless user experience (which comes more from the software by the way). They're buying the ability to show off a new toy to their jealous friends.

They're not buying a box of transistors, a quantity of RAM, a camera etc. The hardware is just a box used to deliver a shipment of easy to use, cool enhancement. That's what people are buying. Not hardware.

Apple could never charge what they do if people were just buying hardware. You buy comparable hardware for a fraction of the cost but it doesn't have the other emotional/social stuff and that's where Apple makes their money.

This graph isn't necessarily saying that they make all the money on hardware.

Each of the ipod, mac, iphone are a combination of apple hardware AND software. That isn't split out. Where the graph shows software, they are referring to things like final cut, iwork, etc.