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Inside the Third Gen iPod Nano

Posted by Zonk on from the peek-under-the-hood dept.

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."

21 of 230 comments (clear)

  1. Wait... by hax0r_this · · Score: 4, Funny

    You mean an Apple product is overpriced?

    1. Re:Wait... by p0tat03 · · Score: 5, Insightful

      You mean that the total cost of building a product is just the sum of its components, excluding research/development, manufacturing costs, shipping costs, and marketing costs? Shocking!

  2. Call me back... by Poltras · · Score: 5, Insightful

    When you have a better analysis of what it costs to develop the software, the amortized cost of engineering and other non-hardware costs (marketing, managing, distribution, etc) so that we can see a margin. Those numbers (58.84$) are totally irrelevant and only serve to misinform. Sure, you could buy the pieces that price, but for what it's worth...

    --
    Of Code And Men
    1. Re:Call me back... by ivan256 · · Score: 4, Interesting

      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.

    2. Re:Call me back... by Jeff+DeMaagd · · Score: 4, Insightful

      The firmware is significantly different from previous generations. It looks to me that they more than doubled the complexity of the firmware relative to the previous nano.

      I don't think that this $59 is the marginal cost even, because the iSuppli numbers don't even include packaging, shipping, average warranty expense, retail mark-up and so on. In the past, they didn't even include the cost of the ear buds.

    3. Re:Call me back... by catbutt · · Score: 4, Insightful

      Their numbers are even less relevant than you'd think.
      They are only irrelevant if you don't know how to read them.

      Companies hire iSupply to help them calculate how much a competitor's products cost, and if iSupply didn't know what they were doing, they'd be out of business by now.

      It's not their fault that dumb readers make naive conclusions.
    4. Re:Call me back... by lazyforker · · Score: 5, Insightful

      The fact that companies hire iSupply doesn't mean that iSupply know what they're doing. Haven't you ever worked in a company that hired "Consultants" that don't know their asses from their elbows?

  3. News Flash! by EggyToast · · Score: 4, Funny

    Companies create and sell products in order to make money!

    It is neat to see that the Nano has the same guts as the "classic" now, though.

  4. Worthless Numbers by Guanine · · Score: 5, Informative

    Many of the numbers iSuppli comes up with are pretty much made up. Regardless, most news organizations assume that the entire difference between retail of the device and the iSuppli number is "pure profit," etc. - this is utter nonsense. Previous iSuppli numbers have been shot down by reason, I hope to see the same thing in this instance.

  5. Yeah, but the price dropped too... by nweaver · · Score: 5, Informative

    Yeah, the v3 Nano is cheaper to build. Its also cheaper to buy, with a 4 GB unit now $150 and $200 for the 8 GB, as opposed to 2 GB for $150, 4 GB for $200, and 8 GB for $250.

    --
    Test your net with Netalyzr
  6. maybe by User+956 · · Score: 5, Insightful

    You mean an Apple product is overpriced?

    That's one way to look at it, in the context of the whole marketplace. Another way to look at it is that they've priced it according to the amount people have told them they're willing to pay. So if it were cheaper, it would be underpriced for that particular offering from Apple.

    --
    The theory of relativity doesn't work right in Arkansas.
    1. Re:maybe by hmbcarol · · Score: 5, Insightful

      Nothing which has been purchased can be overpriced, at least not in that transaction. The buyer weighs the money in one hand and the product in the other. They decided that they wanted the product more than the money. The seller has done the same calculus and arrived at the opposite conclusion. They would rather have the money more than the product.

      Both parties believe they received the "better" bargain or they would not have traded. Of course a wise seller will offer a product at a price they feel will be the most profitable overall to sell at, balancing margin versus volume.

      Nothing has an "intrinsic" value; only the value the seller and potential buyers would assign it. It will vary by person, time, and circumstance. Two people, one recently well fed at a nice restaurant and the other tired from working all day and skipping lunch would value a street venders hot-dog very differently.

    2. Re:maybe by TheRaven64 · · Score: 4, Interesting

      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.

      --
      I am TheRaven on Soylent News
  7. Profit margins are irrelevant by Overd0g · · Score: 5, Insightful

    except for Apple ownership. Each person needs to decide if the retail price represents a good value to them personally. If it doesn't, don't buy it. It doesn't matter if it costs Apple 1 cent to manufacture the product. Thus is the nature of freedom. They can ask whatever they want, and you can pay it or not. FYI, the same thing applies to your salary.

  8. Uninformed guess: by jstockdale · · Score: 5, Funny

    R&D: $10 000 000

    Marketing: $25 000 000

    Logistics: $5 000 000

    Steve's Salary: $1 ...

    Bringing a new iPod to market: $40 000 000+

    Having your CEO cost less than your annual paperclip budget: priceless

    Most things money can by; and if you have enough of it: you probably buy Apple.

    --
    **AA: a bunch of mindless jerks who'll be the first against the wall when the revolution comes
  9. Re:Gross margin borders on gouging by catbutt · · Score: 5, Funny

    Of course it does. It is just like someone overcharging for plywood and batteries as the hurricane bears down. People need these iPods, and they need them now, and competitive products are not available. Apple execs should be put in jail for this immoral behavior.

  10. Summary changed quotes to make them false by klossner · · Score: 5, Informative
    The comments about how parts pricing != cost to build are all correct. TFA got this right, but then the Slashdot summary changed their wording to make it wrong.

    Business Week:

    After taking apart the nano, iSuppli estimates that all the parts inside cost Apple $58.85 for the $149 model ... Slashdot:

    BusinessWeek reports that a teardown analysis by iSuppli finds that it costs Apple only $58.85 to build the 4-gig iPod nano Business Week reported nothing of the sort.
  11. I have one. by ryanisflyboy · · Score: 4, Informative

    I purchased a 3rd gen Nano for my wife. She is very pleased with it. She even manages to watch some of her favorite TV shoes on it. It might be slightly wide - but it is very thin. Our only complaint is the dozens of bugs. However, these all appear to be software based so hopefully most of the annoying ones get fixed soon. How hard is it to code something like coverflow? Please forgive me if I'm wrong - but that feature is by far the most buggy. I also can't say too many nice things about iTunes. Is apple trying to make it suck on purpose? That's what it seems like to me.

    Including it's shortcomings we are happy with it overall. Being able to personalize the player by engraving the back actually was a selling point. It takes a dumb electronic device and turns it in to a sentimental keepsake.

    1. Re:I have one. by graffix_jones · · Score: 4, Interesting

      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 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.
  12. Shock! Horror! MS Office costs 10c! by EmbeddedJanitor · · Score: 5, Insightful
    It only costs 10c to make a CD that MS sells for hundreds!

    Like parent says, when you buy any electronic gizzmo you're not just paying for the parts. You're paying R&D costs, distribution costs, profit for share holders and the stores etc.

    It is quite common for electronic products to sell for apperox 5x the cost of the raw components.

    --
    Engineering is the art of compromise.
  13. Re:Nonsense. by radl33t · · Score: 4, Insightful

    Now, I also noticed that you didn't provide any examples of a 'situation that contradicts it'.

    Apparently GPs vocabulary was not the only thing that escaped you. GP gave two important reasons as to why the GGP's claim was nonsense. The economic transactions as you an I know them are not the same as those idealized in economic fantasy land (described by GGP). This is because the fantasy land assumption set is invalid in the real world. Namely 1) The actors are not rational 2) The actors do not possess complete and accurate information. If you extend this to rigid extremes then every 'situation' contradicts the axioms of fantasy land because you will never have perfect information. Ahh the blending of Heisenberg... As for GP's language. I do not think it was overly erudite.