14 DAY TRIAL // While initially there was talk about Apple margins on the iPods taking a slight dip, tear down analysis reveals that the company has actually managed to cut down on the costs of the components when compared to previous models.
It didn't take long for research firm iSuppli to conduct its now customary teardown of the new iPod nano. Despite the significant improvements of the new model, the firm observes that the component of the 4GB model that sells for $150 cost less than $60, while the components for the 8GB model that sells for $200 cost under $83. For both models this is a significant reduction over the previous generations, of approximately $13 when compared to the second-generation Nanos, and $31 with the 2GB Nano from 2005.
Considering the fact that the nano is by far the most popular model of iPod, cutting the cost of components could prove to be very important for Apple, reaching across nearly half of all iPods made. While the components may be cheaper, other factors such as assembly, packaging, distribution and marketing also factor into the equation, not to mention all the work that was done on moving to OS X as a platform for the new iPods and redesigning the interface. If anything, these price cuts will play an important part in keeping Apple's margins from going lower, rather than increasing them significantly.
iSuppli analyst Chris Crotty suggests that the cheaper components are a direct result of Apple actively pushing competition. The clickwheels for the new models are made by Synpatics, who also provided them for the original iPod, but ended up being replaced by Cypress Semiconductor. The change back has saved Apple an estimated 13? per part. Similarly, Apple is stimulating memory suppliers by adding Intel and Micron to the list of suppliers that previously included Hynix, Toshiba and Samsung.