After Hours

New iPod nano (aka 'little fatty') brings in fat margins


According to Business Week, the latest iPod nano, nicknamed "little fatty," is raking in some pretty hefty profits.

A teardown analysis of the component costs by market research firm iSuppli indicates that these latest nanos boast the widest margins yet, despite the addition of a video screen.

Excerpt from the article:

After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 model with 4 gigabytes of storage capacity, and $82.85 for the 8GB version priced at $199.

That puts it at more than $13 cheaper per unit compared with the 4 GB nano a year ago, or more than $31 cheaper than the original 2 GB nano. Obviously, iSuppli's estimate does not include the cost of software development, packaging, assembly, distribution, and all the other intangible costs.

According to iSuppli analyst Chris Crotty, some of the price reductions were achieved by playing various suppliers against one another. He says:

For instance, with the latest nanos, Synaptics has returned as the supplier of the technology behind the distinctive click-wheel control. Synaptics had supplied the original click-wheel circuitry on the first iPods, but was then supplanted by Cypress Semiconductor.

Similarly, NXP Semiconductors supplied the power management component on prior iPod nanos. But this time, the former chip unit of Royal Philips Electronics has been replaced by Germany's Dialog Semiconductor...

Some analysts caution that there are other less-tangible costs to consider in guessing the overall cost of the nano, such as reserves to cover warranties on defective units.

Still, the lower component costs for the nano should certainly help where the bottom line is concerned.

About

Paul Mah is a writer and blogger who lives in Singapore, where he has worked for a number of years in various capacities within the IT industry. Paul enjoys tinkering with tech gadgets, smartphones, and networking devices.

1 comments
techrepublic
techrepublic

Generally the new model of anything techy comes in at the previous model release price with a whole gang of new features. We all know it more than likely cost less to build it, but we expect it to be better. Bigger capacity, faster, brighter, tougher, etc. and it has a new warranty. A general rule of thumb appears to be that the parts are half the cost, whether you get your engine overhauled, the washing machine fixed, a business card designed or whatever. For all the millions sold, these iPods have not yet reached saturation. Parents are getting hand-me-downs from kids, not many cars yet have one installed, not every photographer touts around their portfolio or family album on one - there's still a lot of space left to sell them. They must be at a good price point to a) suit the purchaser, and b) allow Apple to continue to innovate with new models. It's definitely an art to research, design, build, market, sell, support and make money on a new technology item. "Magical" as Bill Gates would say.