iRiver player makes waves

Contrary to popular belief, the Apple iPod is only one of many digital-audio products, though Apple's success prompted the manufacturer influx that established today's broad market. One of the many competing machines is the H320, iRiver's hard-disk-drive-based digital-audio player with a color display.

In November 2000-before the iPod, before iTunes, before anything that we identify with Apple and digital music-iRiver, a pioneer of the digital audio age, introduced SlimX, the world's first portable multicodec MP3 player. The company launched a flash-based digital audio players in 2002, released a hard-disk-drive (HDD)-based player in 2003 and, in 2004, became one of the first major manufacturers to enter the portable entertainment player market with an HDD-based machine, the H320.

Today, iRiver maintains a diversified digital-audio product portfolio. It offers flash-based ultraportable players with capacities that range from 128 Mbytes to 1 Gbyte, HDD-based audio jukebox players that start at 5 Gbytes and multimedia players that can hold between 5 and 40 Gbytes of information.

Product analysis
The iRiver H320 measures 2.4 x 4 inches, with a depth of 0.9 inch and weight of 6.9 ounces. It has a 2-inch TFT full-color display that lets the user browse JPG and BMP images to customize the unit. The player also supports USB-on-the-Go, thus enabling it to connect to other USB units without the need for a computer.

With 20 Gbytes, the H320 can hold up to 600 hours of songs, and its rechargeable battery lasts up to 16 hours. The player's other features include enhanced 3-D sound, fast USB 2.0 file transfers, a built-in FM tuner, integrated voice recorder and simple navigation. It complies fully with Microsoft OS Windows Media Player 10 and plays MP3s, WMA, WAV and OGG formats. In addition, the user can record, encode and store MP3s or uncompressed WAV files on the unit, which can also be used as a standard hard drive to store and transfer files of any type.

The unit comes with iRiver earphones, a carrying case, an installation software CD, an ac adapter, USB 2.0 cable, line in/out cable, a printed user manual and a one-year warranty.

Production cost analysis
Many people are aware of the lower manufacturing costs that result when IT and consumer electronics products are outsourced, but how much should it cost manufacturers to stay competitive in today's digital audio market?

To answer that question, we examined the iRiver H320 at a product volume of 1 million units under the premise that the model was produced in China. To do that, Current Analysis Labs estimated the purchase costs of commodity components, manufacturing costs of fabricated components and location labor rates.

The result was a production cost of $134.99 per unit. The cost of electronics components made up most of the total at $132.94, or more than 99 percent of the total product manufacturing cost.

At the product's release, the suggested price was $329. Assuming the company produces 1 million units of the machine in China, iRiver's estimated profit for each unit would be at $195 (before accounting for tariffs and other taxes).

Market analysis
iRiver announced the H320 along with the H340 ($429) as part of its H300 series of audio jukebox players in September 2004. About a month later, Apple, the undisputed leader in the digital-audio player market, introduced color LCD iPod photos in 40- and 60-Gbyte capacities at respective manufacturer's suggested retail prices of $499 and $599. At the time, digital audio players with photo-viewing capability were relegated to a niche market by high price points.

Apple has since merged its iPod audio and iPod photo lines, making color LCDs and photo-viewing capabilities standard in HDD-based iPods. Apple's current color iPod lineup includes a 20- and a 60-Gbyte iPod, as well as a 20-Gbyte iPod U2 special edition. Competing manufacturers are following Apple's lead and launching HDD-based digital players with standard color LCDs.

To remain competitive, iRiver reduced the price of its color LCD players, the H320 and the H340, to $299 and $399, respectively.

Shawny Chen (schen@currentanalysis.com), digital audio analyst at Current Analysis Labs (San Diego)