iSuppli says iPod nano is cheaper to build

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Jonny Evans
PC World
Wednesday, September 19, 2007; 3:19 PM

The new iPod nano combines components from a range of brand new suppliers, enabling Apple to offer more features at lower price points, according to iSuppli.

iSuppli has issued a tear down analysis of the nano, finding a completely new design that reuses almost no components employed in the previous model.

Component suppliers making their nano product line debut in the latest version include Micron Technology, Dialog Semiconductor and Intersil, while Synaptics returns to the iPod after an absence.

Components from previous suppliers, NXP Semiconductors and Cypress Semiconductor are not used in the current model iPod nano.

"The changes in components have resulted in significant cost reductions in the nano design, allowing Apple to offer a product that is less expensive to build and that has enhanced features compared to its predecessor," said Andrew Rassweiler, senior analyst and teardown services manager for iSuppli.

iSuppli's Teardown Analysis team dissected the iPod nano, finding that the 4GB model costs US$58.85 in component costs and $82.85 for the 8GB model.

These estimates don't include costs for manufacturing, software, intellectual property, accessories and packaging. Research and development costs are also excluded.

Despite these exclusions, it's still good news for Apple. iSuppli estimates that the component costs of the new 4GB nano are 18.5 percent lower than the preceding version (which cost $72.24).

The current generation iPod nano is the cheapest iPod nano model (in terms of component costs) Apple has ever built, the analysts said.

Apple's products traditionally have been sold at retail pricing that is about twice the level of their hardware component costs, based on iSuppli's teardown extensive analysis of previous devices, iPhone, iPod shuffle and iPod nano. Apple has exceeded this margin in the new models.

Apple turned to Micron for the flash memory used in the new nano. Samsung provides the combined core video processor chip used in the system. This part costs $8.60.

iSuppli tentatively forecasts that total iPod nano shipments will reach about 23 million units in 2007 and 27.9 million during 2008.

"Consumers will be interested in buying the nanos due to their enhanced features, mainly video capability and a high-quality display," said Chris Crotty, senior analyst, consumer electronics for iSuppli.


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