While these days few people are nuts enough to claim that the iMac isn't a smash success, back when it was first announced (and continuing all the way through its first couple of months on the shelves) there was no shortage of naysayers predicting a spectacular flop. There were many reasons bandied about for the iMac's inevitable failure: the lack of a floppy drive, the inability to add functionality with PCI cards, the incompatibility with literally every Mac peripheral then on the market, etc. But probably the biggest disadvantage in many people's eyes was the iMac's price; would consumers really pass up sub-$1000 cheapo PCs for the privilege of shelling out $1299 for a prettier computer?

History says "yes," of course, but it was a valid concern. And as PC prices tumble ever lower, the iMac has had to evolve to remain competitive. The processor speed and graphics systems keep getting faster, and the price has dropped a hundred bucks since the first systems shipped. Given that sales are still brisk, apparently Apple isn't being hurt too much by those sub-$1000 Windows boxes. But now that Wintel prices are dropping even lower, you've got to wonder just how Apple's going to fight back. How cheap can they price an iMac without sacrificing quality? In the not-too-distant future, we expect Apple's going to have to offer the iMac at $999 at the very most. Finding ways to lower the production cost of the unit is, therefore, pretty crucial. Outsourcing production turned out to be a great step, but it's not going to be enough.

So, according to a CNET article, Apple's trying to cram as much functionality onto a single chip as possible. This is a page taken from the Wintel playbook; manufacturers playing in that super-competitive market where price is (quite literally) everything have been trying to move the whole computer-- networking, graphics, memory controllers, etc.-- onto a single chunk of silicon to reduce manufacturing costs and keep things simple. iMac on a chip? You betcha, according to "sources close to Apple." Come some time next year, iMacs will be powered by a single central chip, allowing Apple to keep costs down and margins high. Can Apple sidestep the various incompatibilities and bugs that have plagued other manufacturers taking this approach? We'll tell you next year-- assuming Apple ever really ships a single-chip iMac.