Firm offers teardown analysis of all three new nano models
Analysts for Wedbush Morgan Securities estimate that Apple's gross margins could be as high as 50 percent on its new line of aluminum anodized iPod nano digital music players.
Craig Berger, an analyst at the firm, recently told clients he believes Apple is set to see stronger gross margins with its new iPod nano this holiday season than it did last holiday season because of the large price decline in NAND flash memory this year.
"One year ago, the high-end Nano (still at the $249 price point) contained about $150 worth of NAND flash versus the high-end device of $92 today," he wrote. "That savings of $58 is driving an additional 23-points of gross margin [which is] good news for Apple versus its high-end Nano one year ago."
In his analysis, Berger points out that Apple is attempting to keep more secrets this time around with three suspiciously 'Apple'-marked chips inside the players.
"There were no 'Apple' marked chips in the first-generation Nano," he wrote. "We suspect one of these chips is the Samsung ARM processor (part #337S3291 8701), the socket formerly supplied by PortalPlayer. [...] We do not see the Wolfson audio driver chip or the Philips power management chip that was in the first-generation Nano, though Apple could have re-marked either of those chips." Indeed, a subsequent teardown by iSuppli confirms the three chips as belonging to Samsung, Wolfson and Philips, respectively.
Those changes aside, Berger said there are several chips that are either the same or similar to those employed in the first generation iPod nano, including Samsung?s 256MB SDRAM (K4M56163PG), Linear Tech?s USB power manager/battery charger, National Semi?s step down DC-DC switching regular (JM62SE), SST?s program flash memory (SST89WT800A) and Cypress? click wheel interface controller (CY8C21434LKXI). He also noted that Hynix is co-supplying flash memory for the players alongside Samsung.
Based on his analysis, Berger estimates Apple's bill-of-martials (BOM) cost to be $74.90 for the 2GB model, $97.90 for the 4GB model and $143.90 for the 8GB model. Without factoring other costs such as development, manufacturing, freight, and marketing, the analyst said his BOM totals imply gross margins of 49.7 percent, 50.8 percent and 42.2 percent, respectively.
Berger also recently dissected Apple's updated fifth-generation video iPod players.
Craig Berger, an analyst at the firm, recently told clients he believes Apple is set to see stronger gross margins with its new iPod nano this holiday season than it did last holiday season because of the large price decline in NAND flash memory this year.
"One year ago, the high-end Nano (still at the $249 price point) contained about $150 worth of NAND flash versus the high-end device of $92 today," he wrote. "That savings of $58 is driving an additional 23-points of gross margin [which is] good news for Apple versus its high-end Nano one year ago."
In his analysis, Berger points out that Apple is attempting to keep more secrets this time around with three suspiciously 'Apple'-marked chips inside the players.
"There were no 'Apple' marked chips in the first-generation Nano," he wrote. "We suspect one of these chips is the Samsung ARM processor (part #337S3291 8701), the socket formerly supplied by PortalPlayer. [...] We do not see the Wolfson audio driver chip or the Philips power management chip that was in the first-generation Nano, though Apple could have re-marked either of those chips." Indeed, a subsequent teardown by iSuppli confirms the three chips as belonging to Samsung, Wolfson and Philips, respectively.
Those changes aside, Berger said there are several chips that are either the same or similar to those employed in the first generation iPod nano, including Samsung?s 256MB SDRAM (K4M56163PG), Linear Tech?s USB power manager/battery charger, National Semi?s step down DC-DC switching regular (JM62SE), SST?s program flash memory (SST89WT800A) and Cypress? click wheel interface controller (CY8C21434LKXI). He also noted that Hynix is co-supplying flash memory for the players alongside Samsung.
Based on his analysis, Berger estimates Apple's bill-of-martials (BOM) cost to be $74.90 for the 2GB model, $97.90 for the 4GB model and $143.90 for the 8GB model. Without factoring other costs such as development, manufacturing, freight, and marketing, the analyst said his BOM totals imply gross margins of 49.7 percent, 50.8 percent and 42.2 percent, respectively.
Berger also recently dissected Apple's updated fifth-generation video iPod players.
Comments
I still believe that Apple is holding margins high to give them more stratigec options. People are still buying the things now, so there is not reason to drop prices. If a compeditors puture product actually comes in with serious competition, Apple can drop prices instantly to undercut and steal the press. They are in a good position!
Yes, and right now the only potential competitor is ZUNE, which is priced even higher.
Yes, and right now the only potential competitor is ZUNE, which is priced even higher.
Careful, don't underestimate the fact that Bill Gates can be a sneaky bastard. He's got the money to blow on getting into the market (see xbox), don't be surprised if he sells a seriously underpriced product with exclusive functionality to a microsoft download site. Imagine if Zune were a hundred bucks cheaper than a comparable iPod, how many people would buy one (especially new users who don't already have an iPod). Microsoft could take the same approach as the video game industry, losing money on the hardware, and making it back on the software (in this case WMA files). They've got the cash to do so, and maybe their management is up for the risk...
One thing I note (though I do see it come up once in a while) is that Apple prices 249, 299, etc... They don't add the .99 cents. Subtle, but nice.
Actually Gizmodo says the final Zune price is USD 229.99. Which is quite a bit cheaper then the equivalent iPod, not that that has mattered before.
One thing I note (though I do see it come up once in a while) is that Apple prices 249, 299, etc... They don't add the .99 cents. Subtle, but nice.
Wow, if Microsoft does price the Zune at $229.99, then it might get a bigger slice of the mp3 market. Granted, I believe it will cannabalize mp3 makers that have partnered with Microsoft in the past. Time will tell if they start cutting into iPod sales.
Actually Gizmodo says the final Zune price is USD 229.99. Which is quite a bit cheaper then the equivalent iPod, not that that has mattered before.
The reasoning seems weird though. They were going to undercut the $299 price by $10, but now they are going to undercut the $249 price by $20? I'm not going along with that one yet, I'd like to see some other sites confirm that one. If the numbers were $279 and $239 or $289 and $239 respectively, then that would make more sense.
If that price is accurate, if it's not a horrible product and they market it properly, it might have a fair amount of traction. Still, there were some blunders already, supposedly in some French speaking areas, Zune sounds like the slang word for genitals.
The reasoning seems weird though. They were going to undercut the $299 price by $10, but now they are going to undercut the $249 price by $20? I'm not going along with that one yet, I'd like to see some other sites confirm that one. If the numbers were $279 and $239 or $289 and $239 respectively, then that would make more sense.
If that price is accurate, if it's not a horrible product and they market it properly, it might have some traction.
I agree, its unconfirmed and I don't quite believe it.
This whole article strikes me as frivolous as they haven't included key components - like the aluminium case - that are integral to the unit. A proper comparison would require a lot more analysis of a far greater number of points than this article goes into.
But then, I could be wrong. It's been known to happen. Sometimes.
Forgive me, but shouldn't a complete Bill of Materials include the actual aluminium case the guts go into? I accept that it's not going to include the box that the units are packed in, but if you're looking to do a proper analysis of JUST the iPod Nano itself and no included accessories (like headphones, dock adaptor, USB cord, Printed Brochure, cord end covers etc, etc, - which, by the way, should be done for a complete price to market breakdown... and should also include shipping costs, packaging costs, port handling costs, to distribution centre transport costs and final delivery costs (and then you'd look at the cost to sell each unit in the store itself which has a whole lot of other breakdowns)) you would surely need to include the case!
This whole article strikes me as frivolous as they haven't included key components - like the aluminium case - that are integral to the unit. A proper comparison would require a lot more analysis of a far greater number of points than this article goes into.
Quite true, and unfortunately, most people completely miss that. They see the estimated cost, glance at the list without even examining it, and think they are just getting ripped off.
The BOM teardowns basically never include anything that's not "parts" for the main product. I'm not sure why they are important, but for some reason, analysts like doing BOM listings like that. I don't understand why the shell or even the bare circuit board isn't in there though.
Careful, don't underestimate the fact that Bill Gates can be a sneaky bastard. He's got the money to blow on getting into the market (see xbox), don't be surprised if he sells a seriously underpriced product with exclusive functionality to a microsoft download site. Imagine if Zune were a hundred bucks cheaper than a comparable iPod, how many people would buy one (especially new users who don't already have an iPod). Microsoft could take the same approach as the video game industry, losing money on the hardware, and making it back on the software (in this case WMA files). They've got the cash to do so, and maybe their management is up for the risk...
MS isn't making remotely enough money back on software to offset the money they've lost on hardware. The XBox division is still billions of dollars in the red.
Assume that Microsoft take a loss of $100 per unit sold and they sell 1 million units - that's a loss of $100,000,000.00...! Even assuming that they take a loss of $50 per unit, it's still a loss of $50,000,000.00 - and that's only on selling 1 million units!
Of course, they could always back-load the sales process and charge extra for the songs themselves but they'd still have to remain relatively competitive with Apple on that score also.
No, the only way this is going to work for Microsoft (and I'm assuming that the actual player is of equal quality to the Apple units - which we all know isn't going to be the case) is if they do something to tie-in a content provider, something a little creative like allowing users of iTunes to replace their iTunes library - every song the user has ever bought - for free. That would give less of a barrier to entry for user uptake of the Zune player but I still don't think even that radical a move would be enough.
Microsoft are going to have to provide free library replacement, lower cost per song download AND a lower hardware unit cost. And that's just to be competitive.
Again, all this is just my opinion. I could be wrong - it does happen!
MS isn't making remotely enough money back on software to offset the money they've lost on hardware. The XBox division is still billions of dollars in the red.
Careful, don't underestimate the fact that Bill Gates can be a sneaky bastard. He's got the money to blow on getting into the market (see xbox), don't be surprised if he sells a seriously underpriced product with exclusive functionality to a microsoft download site. Imagine if Zune were a hundred bucks cheaper than a comparable iPod, how many people would buy one (especially new users who don't already have an iPod). Microsoft could take the same approach as the video game industry, losing money on the hardware, and making it back on the software (in this case WMA files). They've got the cash to do so, and maybe their management is up for the risk...
yeah i actually think MS should do the opposite: they should sell the zune at a comfortable profit and overcharge for it, setting its price at $400 or higher. they can work on giving zune the brand image of quality. apple has proven that when it comes to music, people will pay up. selling a DAP when you compete on price has been the mistake everyone else has made. MS needs to build brand loyalty, and you can do that by setting a high bar
i bet you MS stockholders would agree. nobody wants MS to keep selling hardware at a loss (cept those of us who want them to go out of business). they cant keep subsidizing their money losing businesses forever. there's no long term value in a company like that. how low can their stock go, how low can their morale sink?
We ARE talking about Microsoft here! They're not going out of business anytime soon - not with how they charge for their CALs (Client Access License) for things like server OS's and their CRM and other core enterprise goodies!
yeah i actually think MS should do the opposite: they should sell the zune at a comfortable profit and overcharge for it, setting its price at $400 or higher. they can work on giving zune the brand image of quality. apple has proven that when it comes to music, people will pay up. selling a DAP when you compete on price has been the mistake everyone else has made. MS needs to build brand loyalty, and you can do that by setting a high bar
i bet you MS stockholders would agree. nobody wants MS to keep selling hardware at a loss (cept those of us who want them to go out of business). they cant keep subsidizing their money losing businesses forever. there's no long term value in a company like that. how low can their stock go, how low can their morale sink?
without these hi def photos i wouldve never known its a bad thing the throw the batteries into fires. And to think...all this time ive always wondered what that popping noise was...
Do not throw iPod into fire.
Do not bite iPod.
Do not stick iPod in... well, anywhere, organic or inorganic.
Do not eat iPod.
Do not swallow iPod.
Do not throw iPod into fire.
Do not bite iPod.
Do not stick iPod in... well, anywhere, organic or inorganic.
Do not eat iPod.
Do not swallow iPod.
Discontinue use of iPod if any of the following occurs:
-Itching
-Vertigo
-Dizziness
-Tingling in extremities
-Loss of balance or coordination
-Slurred speech
-Temporary blindness
-Profuse sweating
-Heart palpitations
If iPod begins to smoke, get away immediately. Seek shelter and cover head.
iPod may stick to certain types of skin.
Do not taunt iPod.
Quite right!
Assume that Microsoft take a loss of $100 per unit sold and they sell 1 million units - that's a loss of $100,000,000.00...! Even assuming that they take a loss of $50 per unit, it's still a loss of $50,000,000.00 - and that's only on selling 1 million units!
Uh.. at $230, there probably wouldn't be a loss.
As we can see from Apple's profit margins, M$, even without the same economy of scale, could probably sell it at a lower price and still make a profit.
Even if they do take a loss, it's not going to be $50, that'd just be nuts.
if they do something to tie-in a content provider, something a little creative like allowing users of iTunes to replace their iTunes library - every song the user has ever bought - for free. That would give less of a barrier to entry for user uptake of the Zune player but I still don't think even that radical a move would be enough.
Oh that'd be funny. Apple's not going to give out their receipts, so the Zune would have to tap into itunes on the client machine to find out how much music people bought... I think it'd be just a few days until people made M$ think that they'd purchased every song on iTMS by hacking the itunes library.
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Back to the article, The breakdown also didn't include the price of labor.
Uh.. at $230, there probably wouldn't be a loss.
As we can see from Apple's profit margins, M$, even without the same economy of scale, could probably sell it at a lower price and still make a profit.
Even if they do take a loss, it's not going to be $50, that'd just be nuts.
Oh that'd be funny. Apple's not going to give out their receipts, so the Zune would have to tap into itunes on the client machine to find out how much music people bought... I think it'd be just a few days until people made M$ think that they'd purchased every song on iTMS by hacking the itunes library.
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Back to the article, The breakdown also didn't include the price of labor.
There's other costs other than the bill of materials.
(edit: oh, I see you acknowledge that. still, you'd be surprised at how quickly those other costs add up. typically, the wholesale price needs to be at least twice the raw parts charge to pull a profit)
Microsoft could take the same approach as the video game industry, losing money on the hardware, and making it back on the software (in this case WMA files). They've got the cash to do so, and maybe their management is up for the risk...
True, MS does have the money... However, as iTunes has proven, there is very little money to be made in selling the content. The money is made from the hardware (iPod.) iTunes does little more than break even, while every other digital music service is losing money.. If MS thinks they are gonna take a loss on hardware only to offset the cost by selling WMA files, they are sadly mistaken.