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Apple's Margins on iPod Nano at 50% [UPDATE]

Thursday, September 22nd, 2005 at 9:15 AM - by

Apple Computer's gross margins on the iPod nano come in at about 50%, according to market research firm iSuppli. In a report obtained by The Mac Observer, iSuppli broke down the costs by disassembling a nano, and looking at component and manufacturing costs. The firm said that 50% gross margins are in line with the rest of the iPod product line.

According to the report, a two gigabyte nano has some US$90.18 in parts, and costs $8 to assemble. This includes $54 dollars for the 2GB of flash memory itself. iSuppli said that the same memory would cost other manufacturers $90, but Apple got a steep discount from Samsung by agreeing to buy 40% of the company flash inventory.

This gives Apple a competitive edge over other digital media device makers, allowing the company to price its products lower than those companies. This serves the dual purpose of boosting Apple's market share and putting enormous pressure on companies trying to keep up.

For those interested in the business side of the iPod, iSuppli also found that the chip controlling the click wheel in the nano was produced by Cypress Semiconductor. Synaptics supplied the click wheel technology in earlier iPods, but Apple switched to a click wheel of its own design.

The company did so because of price, as the chip manufactured by Cypress for Apple costs $.45, as opposed to $1 for the Synaptics product.

The last notable nugget is that PortalPlayer is supplying the audio chip for the nano. PortalPlayer supplies the audio chips for Apple's hard drive-based iPods, but for the flash memory-powered iPod shuffle, Apple turned to Sigmatel, who supplies chips for much of the flash memory digital media device market.

[Update: This article has been updated with additional information obtained in the iSuppli report. - Editor]


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