A teardown analysis of a 4GB second-generation iPod nano reveals a US$72.24 bill of materials (BOM) cost, less than the $89.97 cost for a first-generation 2Gb iPod nano, according to a report issued by iSuppli on Wednesday. In a press release, the research firm noted surprise that the new Samsung system-on-chip, which replaced the previous one from PortalPlayer, lacked video capability.

The development "is somewhat surprising, given that Apple rivals, most notably SanDisk Corp., are moving quickly to add video capability to flash-memory-based players," iSuppli said. "That lack of video support also may partly explain why the new hard-disk-drive based iPod continues to utilize the same combination of PortalPlayer and Broadcom Corp. chips."

Chris Crotty, a senior analyst with iSuppli, noted: "At a minimum, Apple needed this minor product refresh to support the launch of iTunes movie downloads and to prepare for the introduction of Microsoft Corp.'s competing Zune player. But the latest iPod falls very short of being a true video-centric player needed by consumers who want to watch movies, and not just short-form video."

Mr. Crotty said that Apple could still have new iPods up its sleeve and ready for launch before the holiday season, or perhaps in time for the release of the upcoming device codenamed "iTV." iSuppli observed: "Apple's delay in adding video to its flash-memory-based based players and its launching of a new design for its flagship iPod suggest that the company is shifting its focus from portable MP3 players to the living room. Such a shift also could signal Apple's confidence in its leadership position within the MP3 player market."

The company added: "As iSuppli's nano teardown reveals, Apple undoubtedly is continuing to use that position effectively to manage suppliers to develop products that deliver both high consumer value and enviable margins."