Elizabeth Millard,
Newsfactor.com
Apple's new iPod Nano may provide a significant boost to the company's bottom line by giving the company a greater profit margin on each device. According to a new report from research firm iSuppli, the materials in the new 4GB version of the music and video player cost $17 less per device than in the company's first Nano.
The research company did a "teardown" of the Nanos, reducing them to their components and estimating the costs of each part. The materials inside the new $199 retail version cost about $72. The only part that increased in price is the device's enclosure. The new aluminum casing adds $2 to the cost of manufacturing, about double the price of the previous version's plastic case.
Switch Hitter
A noteworthy change for the new Nano line is in its core chip supplier, iSuppli noted, bringing Apple and Samsung together.
Samsung announced last April that it would be supplying a chip for forthcoming iPods, and although details of the partnership were not disclosed, some analysts speculated that Samsung would give Apple a better price on flash memory for its players.
Apple does get flash memory from other companies like Toshiba and Hynix Semiconductor, but Samsung is now the top supplier for the iPod line.
Apple has done a formidable job of creating a market for flash memory, and sells more of it to consumers than anyone else, according to Forrester Research analyst Ted Schadler. "That means they get great pricing on memory as well as on displays and audio components," he said.
Market Driver
With lower prices may come more iPod owners, Schadler added, if Apple translates its manufacturing savings into retail savings. "Cheaper prices opens doors to new, repeat, and impulse buyers, so this will definitely increase Apple's sales," he said.
The Nano is currently Apple's most popular player, said JupiterResearch analyst Michael Gartenberg. The revamp of its features and case will likely continue to make it successful with consumers, especially its 8GB version, the highest capacity of any flash player on the market.
"Price is important, but people have been attracted to the platform for the technology as well, and the form factor," he said.
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