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iPod video teardown reveals Broadcom video chip

post #1 of 16
Thread Starter 
Analyst for an investment bank recently performed a teardown on Apple's new video iPod player, revealing its various component manufacturers and estimating the company's profit margins.

Earlier this week Jefferies and Company dissected a 30GB iPod video and found its board layout to be similar to the iPod nano, with essentially all of the same silicon suppliers securing the design wins. Along with its teardown, the firm estimated the cost of each component to Apple.

Landing two of the biggest design wins are PortalPlayer and Broadcom, Jefferies said. The video iPod features an $8 audio decoder chip from PortalPlayer, a company which continues to secure Apple's iPod business. Meanwhile, Apple has reportedly tapped Broadcom for the $10 video decoder chip responsible for the iPods video playback capabilities.

Interestingly enough, a report from April of this year suggested Apple had contracted the use of Alphamosaic's next generation VC02 chip for a device with video, image, and music features. The British-run Alphamosaic employees about 60 and was acquired by Broadcom for about $125M last September.

Also inside the iPod, Jefferies found a $65 Toshiba 30GB 1.8-inch hard drive; $1.75 256Mbit Samsung SDRAM chip; $3.75 Wolfson Microelectronics audio codec; $1.60 Linear USB power manager/Li-Ion battery charger; $0.75 National step down switching regulator; $1.00 Philips DC/DC converter; $1.30 Silicon Storage Technology 8Mbit parallel flash; $2.50 Philips power management unit; and a $0.85 Cypress PSoC mixed signal controller touch pad.

Combined with a $2.50 touch pad, $4.50 Li-ion battery, $15.00 LCD screen, and $25.00 of other materials, the firm estimates Apple's bill of materials for the video iPod to total $143.50. Before manufacturing, advertising, freight and other charges, this represents a 52% gross margin based on the 30GB iPod's $299 suggested retail price.

"We continue to recommend investors buy shares of Broadcom ahead of its earnings report on Oct. 20 as we expect it to beat and guide up, with this iPod win representing incremental revenue to Q3 and Q4," the firm said.

Prior to its release, Jefferies made accurate predictions on the video iPod and was the first firm to confirm that the players were in production in the Far East.

(Photo Credit: Jefferies & Co., Inc.)
post #2 of 16
Wow, the cost of just the bare parts is half the device's list price, and they didn't even try to estimate the assembly cost!

But still, the costs are in line with the estimates we've seen with previous models.
post #3 of 16
Well, you also have to factor in research and development, sales, electricity and other overhead. They need that extra 53% to pay the bills and probably only get 5% profit.
post #4 of 16
Quote:
Originally posted by bdkennedy1
Well, you also have to factor in research and development, sales, electricity and other overhead. They need that extra 53% to pay the bills and probably only get 5% profit.

Expect margins of 30% or more. One of the great things about a really high volume item like the iPod is R&D eats into your margins a lot less. Manufacturing and logistics would add up though. That's CE though and I'm not going to begrudge Apple for doing the same as everyone else.
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post #5 of 16
OMG! Apple is making money on these things? OH THE HORROR!

Whats next, you gunna tell me that Apple is a company that exists to make shareholders a profit?
AND: how does the author know what Apple pays for the parts; is that kind of volume discount info redily availible?
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post #6 of 16
I think Apple actually gets the parts even cheaper than the prices listed here; I believe the research here is just a guestimate, and the actual numbers are far lower (Apple has a way of bargaining, especially since it is now the number one digital music player provider).

While 50% profit seems excessive, the company averages this amount or more and has to pay for all the other things that go in to marketing and selling the product.
post #7 of 16
The chip support 640x480 - Now why cant we have that???
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post #8 of 16
I want to be a financial analyst. Its sounds as cool as being an arstechnical writer and surely pays more.
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post #9 of 16
Quote:
Originally posted by T'hain Esh Kelch
The chip support 640x480 - Now why cant we have that???

If that's true then Apple better get moving on higher-res videos!
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post #10 of 16
Quote:
Originally posted by T'hain Esh Kelch
The chip support 640x480 - Now why cant we have that???

Are you going to carry around an iPod with a 640X480 screen. It would have to be twice the size.
post #11 of 16
Quote:
Originally posted by bdkennedy1
Are you going to carry around an iPod with a 640X480 screen. It would have to be twice the size.

Even Palms and the PSP don't have anything that's close to VGA resolution. A 2.5" VGA screen would have very tiny dots. While I'd appreciate finer resoltion, it's probably not a density that is affordable.
post #12 of 16
It would be great to have the current screen in the iPod and better output to Television. But I guess the chip can´t scale down on the fly...
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post #13 of 16
Quote:
Originally posted by Anders
It would be great to have the current screen in the iPod and better output to Television. But I guess the chip can´t scale down on the fly...

The unit is rated to play 480x480 video files.
post #14 of 16
Quote:
Originally posted by JeffDM
The unit is rated to play 480x480 video files.

Which isn´t a useful resolution for most content.
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post #15 of 16
It doesn't matter if the profit margin is 99%. Apple didn't steal chips or force you to buy their iPods.
post #16 of 16
Quote:
Originally posted by Anders
Which isn´t a useful resolution for most content.

Actually, it is pretty useful. It is possible to encode a 4:3 image even though the actual data behind it is square, the pixels would be treated in a similar way as anamorphic, the video player stretches the image. I've seen 480x480 video taken from a couple MythTV setups and it shows up properly as a 4:3 image. It cuts down on the data necessary, in part because the source video generally isn't that high on the horizontal resolution anyway.
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