iSuppli estimates new iPod nano BOM at $43.73

EL SEGUDO, USA: Apple Inc.’s new sixth-generation iPod nano proves the old adage that less is more by delivering a compelling user experience in a product exhibiting remarkable economy in terms of its size, feature set and Bill-of-Materials (BOM), according to iSuppli Corp.

The 8GByte version of the latest iPod carries an estimated BOM of $43.73, iSuppli’s teardown analysis of the product has revealed. This gives the sixth generation product the second-lowest BOM of all members of the iPod line.

Based on iSuppli teardowns of the low-end versions of all six iPod generations, only the fourth generation product had a less expensive BOM at the time of its introduction, at $40.80.

“Instead of piling on features, as so many brands do with their latest products, Apple with the sixth-generation iPod has maintained or even removed some attributes in order to fit the form factor and function desired,” said Andrew Rassweiler, director and principal analyst and teardown services manager, for iSuppli. “This has enabled Apple to offer the smallest iPod including a touch screen, while keeping component costs to a strict budget.”

For example, the latest nano omits the camera found in the previous-generation product. Furthermore, the low-end model still uses just 8Gbyte of NAND flash memory for music storage—the same as the fifth-generation nano. In fact, because NAND flash pricing essentially stopped eroding during 2008, and even went up, Apple’s policy of doubling of NAND Flash memory content seen from 2005 to 2008 has essentially stalled from 2008 to 2010.

With the move to a touch screen interface, the sixth-generation nano also eschews the click wheel used in previous models, instead implementing an advanced, intuitive interface in a product with a near-wristwatch form factor of just 1.48 by 1.61 by 0.35 inches.

Apple’s judicious decisions regarding which features to use and which to withhold also helped endow the sixth-generation nano sufficient battery life to play up to 24 hours of music when fully charged.

nano makes more than nano profits
When manufacturing costs of $1.37 are added to the BOM, the new nano carries a combined material and production cost of $45.10. This adds up to about 30 percent of its retail price.

Since the third generation of the nano line, the average cost to retail price ratio has been 33 percent, or roughly one third of the retail price. However, with its lower BOM cost, the new iPod should command a higher margin than the previous member of the line.

The figure presents a summary of iSuppli’s preliminary BOM and manufacturing cost estimate for the 4Gbyte version of the sixth-generation iPod nano, broken down by subsystem. Please note that iSuppli’s teardown assessment accounts only for hardware and manufacturing costs, and does not take into consideration other expenses such as software, licensing and royalties.Source: iSuppli, USA.

Memories of Toshiba and Samsung
The most expensive subsection of the new nano is the memory system, featuring 8Gbytes of NAND flash from Toshiba and 512Mbits of mobile Double Data Rate (DDR) DRAM from Samsung. At a cost of $14.40, this section represents roughly 33 percent of the total BOM cost of the new nano. While Toshiba and Samsung were the suppliers in the specific nano torn down by iSuppli, Apple may employ other suppliers of these commodity memory parts.

Next most expensive is the display/touch screen module, priced at $11.50, or about 26 percent of the total BOM.

Third on the cost list is the applications/core processor system, featuring a Samsung-manufactured chip, at a cost of $4.95, or 11.3 percent of the BOM. The processor is a shrunken version of the device used in the previous-generation of nano, using a more advanced 45 nanometer semiconductor manufacturing technology.

Touch screen touch down for Cypress
Fourth most pricey is the user interface section, priced at $3.49, or 8 percent of the total BOM.

One noteworthy piece of this subsystem is the touch screen controller chip, supplied by Cypress. Previous Cypress touch controllers in the nano line provided capacitive click wheel support, although iSuppli’s teardown team has seen the Cypress part in Palm’s Pre and Pixi smart phones in the touch screen controller/support role.

This represents a win for Cypress, given that Apple employs other suppliers—Broadcom Corp. and Texas Instruments Inc.—for the controllers in the company’s other touch screen-based products: the iPod Touch, iPhone and iPad.

Cirrus also supplies the audio codec; Cirrus essentially owns this slot right now in Apple mobile devices.

Another notable win in the user interface section is the Microelectromechanical System (MEMS) accelerometer from STMicroelectronics. This part, which sports the smallest form factor of any accelerometer yet seen in an iSuppli teardown at just 2 by 2 millimeters, supports the nano’s pedometer function.

Source: iSuppli, USA.