New iPod Nanos Cheaper Than Ever to Make

Sep 21st, 2006 | By | Category: iPods & Portable Media Players

Apple iPod nanoA dissection of Apple’s new iPod nano MP3 player conducted by iSuppli reveals that the company’s new design is cheaper than ever to produce, despite increased capacity.

“Due to design changes and component price declines, iSuppli estimates that Apple has reduced the Bill-Of-Materials (BOM) cost for the new $199 retail-priced 4Gbyte nano to $72.24, less than the $89.97 that was estimated for a first-generation 2Gbyte nano upon release,” said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

iSuppli analysts say this represents a cost-effective way for Apple to remain competitive pending the release of more innovative products.

“At a minimum, Apple needed this minor product refresh to support the launch of iTunes movie downloads and to prepare for the introduction of Microsoft Corp.’s competing Zune player. But the latest iPod falls very short of being a true video-centric player needed by consumers who want to watch movies, and not just short-form video,” said Chris Crotty, senior analyst, consumer electronics, for iSuppli.

iSuppli also conducted an analysis of the new video-enabled, hard-drive-based iPod and concluded that the hard-drive equipped iPod had no design or supplier changes compared to the previous video-enabled, hard-drive-based model, except for a brighter display.

Crotty noted that the third-quarter timing of the launch will keep the market guessing, since Apple still could launch additional new iPods before the holiday season. Apple also could hold its new introductions until the release of its previewed iTV device, which will enable playback of iTunes video content on televisions through a wireless link.

iSuppli says Apple’s delay in adding video to its flash-memory-based based players and its launching of a new design for its flagship iPod suggest that the company is shifting its focus from portable MP3 players to the living room.

Such a shift also could signal Apple‚Äôs confidence in its leadership position within the MP3 player market. As iSuppli’s nano teardown reveals, Apple undoubtedly is continuing to use that position effectively to manage suppliers to develop products that deliver both high consumer value and enviable margins.

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