An autopsy of Apple Computer’s new iPod nano MP3 player conducted by iSuppli Corp.'s Teardown Analysis service reveals a new design that delivers reduced cost and greater capability compared to the previous-generation product.
"Due to design changes and component price declines, iSuppli estimates that Apple has reduced the Bill-Of-Materials (BOM) cost for the new USD 199 retail-priced 4Gbyte nano to USD 72.24, less than the USD 89.97 that was estimated for a first-generation 2Gbyte nano upon release," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.
The key contributor to the manufacturing savings comes from a new System-On-Chip (SOC) design that Apple utilises, reducing the total amount of chips required by consolidating functionality to a single chip.
Apple used a Samsung SOC, which is based on an ARM microprocessor, includes a flash disk controller, eliminating the need for a separate controller. The integrated design saves costs as well as power, however severs its ties with previous SOC provider PortalPlayer.
Apple also moved to CapSense technology, replacing Synaptics technology as the circuitry behind the iPod’s characteristic click-wheel interface.
Craig Berger, the semiconductor analyst at Wedbush Morgan says he thinks Apple’s gross margin on the new Nanos could be 'as high as 50%' given the 'substantial price declines' in NAND flash memory prices this year.
He notes that one year ago, the high-end Nano had USD150 worth of NAND, compared to USD 92 today. He notes that the USD 58 savings is 23 points of gross margin.
The fact that the new nano is not video-capable, even though many of its micro-sized rivals are, has baffled iSuppli's analysts, who were expecting 'nano video' to coincide with the new model's brighter display.
Senior analyst Chris Crotty believes this could put the nano at a disadvantage against Microsoft's upcoming Zune player.
But Apple might still have time, Crotty said in a statement, to release one more set of iPod enhancements before the holidays, perhaps in a move to throw off competitors. It could also be shifting its development focus from portable to home entertainment, he said, with the announcement of its 'iTV' streaming video device under development. That shift of focus could be a signal, he added, of Apple's confidence in its leadership position in portable media.
Will the new iPod receive mixed reviews like Zune? We will have to wait and see who usurps the number one position in the downloadable music territory.
