SAN FRANCISCO — A "teardown" analysis of Apple Computer Inc.'s new video iPod found very few hardware changes from the previous device, leading Wedbush Morgan Securities, which conducted the teardown, to conclude that the new video iPod is a "short-term, stop-gap device intended to buy Apple more time until it is ready to launch its true iPod Video later this year or early next year."
As expected, the new video iPod contains a media processor chip from PortalPlayer Inc. PortalPlayer famously lost the socket for next-generation iPod Nanos to competitor Samsung Electronics Co. Ltd. But Wedbush analyst Craig Berger has said all along that PortalPlayer would likely retain the slot
in the video iPod.
But the impact of hanging on to the video iPod business is not enough to save the day for PortalPlayer, Wedbush concluded. The firm notes that PortalPlayer would need to sell 23 million media processor units to break even in 2007, a daunting prospect.
"PortalPlayer will be far from profitability once its revenues fully reflect the Nano socket loss, even if the firm maintains the video iPod socket throughout 2007," the report said.
Broadcom Corp. has also kept its video processor slot in the new video iPod, according to the teardown. American Technology Research Inc. Satya Chillara said in a July report that Broadcom would lose the slot to Nvida Corp. when Apple introduces the next-generation video iPod with four-inch displays in 2007.
"We do see both the PortalPlayer MP3 processor and the Broadcom video processor chip inside this device, consistent with our prior expectations that this device would remain a discreet two-chip solution for the time being," said the Wedbush report.
Wedbush noted that the high-end 60-gigabyte (GB) drive on the video iPod was replaced with a larger 80-GB drive in new generation. But, the report concluded, the core components of the device are unchanged from the launch of the first video iPod 11 months ago.
"Given the lack of hardware changes, we believe Apple is still working on launching its 'true' video iPod late this year or early next year," the report said. "In the forthcoming 'true' video iPod PortalPlayer and Broadcom could maintain their supplier status, or recent speculation that Nvidia (or Samsung) will be the processor supplier could prove true."
Meanwhile, in addition to PortalPlayer and Broadcom, Cypress, Wolfson, Linear, National, NXP and Silicon Storage all maintained their sockets in the new video iPod.
PortalPlayer provided the dual-core ARM audio and applications processor (part #PP5021C-TDF) for the MP3 player, while Broadcom supplied the video processor (#BCM2722-MB1KFBG), according to the report.
Wolfson supplied the audio driver (WM8758BG), SST supplied the NOR boot flash part (#39WF800A), Cypress supplied the scroll wheel controller (CY8C214), National supplied the switching regulator (L34910B), and NXP supplied two power management chips (T1211 and PCF50607).
Qimonda is supplying the 256-Mbit SDRAM part (HYE18L256), while Toshiba is continuing to supply the hard disk drive (MK3008GAL) and MK8008GAL) for the unit.
Factoring in continued hard drive price declines, Wedbush estimates that Apple is achieving gross margins of 45 to 50 percent on the new video iPods, the report said. The total bill-of-materials for the 30- and 80-GB versions are $130.90 and $180.90, respectively. The retail cost of the MP3 players is $249 and $349, respectively.
A recent Wedbush teardown analysis on Apple's new iPod Nano found three Apple-marked chips of unknown origin and no PortalPlayer chip.
Both the new Nanos and video iPods were unveiled Tuesday (Sept. 12) at an Apple event here.
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