Inside the Third Gen iPod Nano

ahess247 writes "When the leaked photos of the 3rd-gen iPod nano first hit the Web it quickly took the nickname 'little fatty,' but fat could be better used to describe Apple's profits on the project. BusinessWeek reports that a teardown analysis by iSuppli finds that it costs Apple only $58.85 to build the 4-gig iPod nano, and $82.85 for the 8GB version. The analysis also reveals some of Apple's suppliers, about which it is usually very tight-lipped. Synaptics is back as the supplier of the click-wheel technology, beating out Cypress Semiconductor which had it previously. Also of note: The same Samsung CPU chip that powers the video and audio in the nano is being used in the iPod Classic as well."

Who cares?

[vrmlguy]

The price of a product only relates to the price of its components to the degree that the maker avoids taking a loss. I keep having to explain this to people. Adding a $50,000 extension to your house doesn't increase its value by $50,000; in some cases it could actually decrease the value. iPods are just jewelry (why else would there be a special U2 edition?), and the last time I checked the mark-ups on jewelry is way higher than any margnis that Apple would dream of.

Gross margin borders on gouging

[Anonymous Coward]

That's a large gross margin by any metric since the thing sells for almost 3 times as much as it costs to make, assuming the numerbs are correct.

Re:Call me back...

[ivan256]

iSuppli is actually generally pretty bad at figuring out what the pieces cost too if any of the parts are even the least bit exotic. It also doesn't include packaging costs (We're probably talking whole percentage points in the costs for packaging), and assembly, which isn't trivially cheap on tiny devices as it may be for larger electronics. Their numbers are even less relevant than you'd think.

Re:maybe

[TheRaven64]

I was really surprised when they didn't bump the capacity of the iPod Nano. Some of their competitors are already making 16GB devices in a similar form factor to the Nano. If I'd been in their position, I'd have jumped to 24GB, making it an ideal replacement for a 3G iPod (same features, smaller form factor, no moving parts). Adding video support seems a bit misguided; the Nano seems to be aimed more at the market segment that don't care about video (smallest screen of any iPod, not enough storage space to be useful as video player plugged into a dock). These number just confuse me more. It seems like they could have added two more 8GB RAM chips and still been making a decent profit, so I wonder why they didn't.

Re:Call me back...

[ceoyoyo]

I love it when people do those sorts of "analysis." They like to do them for digital cameras too. Guess a value for this, guess a value for that, add it all up and get this tiny little number then scream at how much they're being ripped off.

I guess if they think it's true they should go into business building whatever it is for a fraction of the cost. Funny how none of them ever do.

Re:Manufacturing Costs

[Eli Gottlieb]

Admittedly, very few people have heard of the Trekstor Vibez [amazon.com], which really deserves to at least become the geek's DAP of choice. It mounts as a USB mass-storage device; supports MP3, Ogg Vorbis, Ogg FLAC, FLAC, and WMA (with DRM); comes with a small cable for the headphone jack that lets you pipe your DAP music into any stereo with audio-in; and comes with firmware built from that of the Rio Karma.

But the company is German and doesn't market in the USA, so nobody gives a damn.

Re:Call me back...

[ceoyoyo]

No, the iSupply article seemed pretty reasonable. What was unreasonable was the article submitter's summary.

Some people seem to have that problem. I remember a discussion about the price of a Canon camera. Someone decided to do a little amateur analysis and asked for help. A manufacturing expert and a logistics manager happened to be reading the same forum and replied that his estimates were pretty far off the mark and his methodology was wrong. Naturally he got indignant instead of listening to two people with experience in the field.

Re:Wait...

[alienw]

Not to mention, Apple's margins are actually quite slim there. I used to work for a company that made telecom equipment. They were a very low-cost supplier; even then, their bill of materials on any given product rarely exceeded 20% of the price. After all, they aren't selling a bag of parts. They are selling a product that costs real money to design, assemble, program, sell, support, and service. Profit only comes after all that.

Re:I have one.

[graffix_jones]

How hard is it to code something like coverflow?

This is a little tidbit of info, that I thought some of you might find interesting. Coverflow was originally coded [arstechnica.com] by a chap with the username of 'Catfish' over at the Ars Technica Macintoshian Achaia forums, as a little project to play around with OpenGL. It was basically a standalone application that allowed you to browse your music collection with visual album covers, and would then launch iTunes and play that album (no individual song choices back then). People loved it, because once again it felt like you were thumbing through your stacks of CD's (or Vinyl). Development was brisk at times, and at times it seemed like nothing was happening, but the concept was awesome.

Then 'Catfish' just up and disappeared for a couple of months, and when iTunes with 'Coverflow' integration was released, he returned amid astonished guffaws from the rest of us.

Not only did Apple love the concept, they bought the name to it as well.

With the amount of Coverflow integration going into Apple's products, I really hope that he was well compensated for his little learning experience.

That's all I got.

Re:Nonsense.

[darthflo]

Some ideas about what factors might support a 'situation that contradicts it':

• Buyer doesn't know about Alternatives. (I hear Apple's quite dominant in the U.S. and of course interested in not letting people know about better, cheaper alternatives)
• Buyer suffers from Apple-Lock-In (i.e. has iTunes, has purchased (some|lots|all of his) music thru the iTMS and (being Joe Sixpack) doesn't know how to set his files free (remember, we're not talking about geeks here!))
• Group pressure (as far as I know, iPods are particularly popular with kids and teenagers (geeky 20-35 demographic may buy quality rather than marketing, large parts of the non-geeky demographic currently sticking with car radios and stationary devices but slowly adopting mp3 players), groups known to have a lot of group pressure
• Brand attachment (I'd only count this as half a factor because the fanboys may see the high price as a supportive action towards a company they're attached to (just like buying Windows licenses if you love MSFT))