iPod Touch Components likely to be in Future of the iPod line - iSuppli Tear Down

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 Eric Mah, DIGITIMES                                                                                              [Wednesday 19 December 2007]

On the outside, Apple's iPod touch looks a lot like its iPhone. On the inside, there's a strong resemblance too, but a dissection conducted by iSuppli's Teardown Analysis service reveals the touch sports a distinct design and unique advancements compared to the iPhone.

The 8GB version of the iPod touch carries a bill of materials (BOM) cost of US$149.18, according to iSuppli, based on pricing in October. The BOM has decreased somewhat since October due to declines in pricing for memory semiconductors and other components in the iPod touch, with the cost falling to the US$147 level during the intervening period. When adding the iPod touch's direct-conversion cost of US$5.86 – consisting of manufacturing, assembly and test expenses – to the US$149.18 BOM, the total cost is US$155.04.

The 8GB version of the iPod touch sells for US$299. Apple's iPods traditionally have been sold at retail pricing that is about twice the level of their hardware BOM and manufacturing costs, based on iSuppli's extensive teardown analysis of devices in the product line. The iPod touch is no exception, with its price nearly double its materials and manufacturing cost, at 92.9% higher.

iSuppli's estimate of the iPod touch's costs is strictly limited to expenses for components and other materials and manufacturing. The estimate does not include costs for software, intellectual property, accessories and packaging. The BOM figure also does not include research and development costs, because such data cannot be derived from a teardown and component analysis.

An iPhone minus the phone?

Functionally, the Apple iPod touch is an iPhone minus several features, including cell-phone capability, Bluetooth and certain software elements. Otherwise, the core features of the iPhone user experience are all present in the iPod touch, including orientation sensing, web surfing via Wi-Fi and the product's signature feature: a 3.5-inch diagonal touch screen with multi-touch sensing.

These advanced features place the iPod touch right at the top of Apple's iPod line.

"The iPod touch likely represents the future of the high end of the iPod line," said Andrew Rassweiler, teardown services manager and principal analyst for iSuppli. "Click wheel-interface and hard-disk drive (HDD)-based versions of the iPod are expected to wane in favor of touch screen and flash-memory-equipped models like the iPod touch. But despite its functional and physical outward resemblance to the iPhone, and the fact that its internals borrow heavily from the iPhone, the iPod touch is no iPhone clone, and has its own unique design."

Family resemblance

Rassweiler estimated the iPod touch and iPhone designs have a 90% commonality in terms of components.
For example, the key integrated circuit (IC) at the core of both the iPod touch and iPhone is Samsung Electronics's video/applications processor, a chip based on an ARM microprocessor core and employing stacked on-package memory. Costing US$13.19 based on iSuppli's October estimate, the Samsung processor accounts for 8.5% of the iPod touch's total cost.

Another common part between the two products is a power-management IC from NXP Semiconductors, costing US$2.61 and accounting for 1.7% of the iPod touch's cost in October.

Design departure

However, the iPod touch's design differs from the iPhone in that it is uniquely optimized to meet its form-factor and cost requirements.

To cut space usage, the iPod touch makes use of some advanced packaging for its components not seen in the iPhone, including 0201 diodes and passive components in 01005 enclosures on the touch's WLAN module.

"This is the first time iSuppli has seen these components in a product we've torn down," Rassweiler said. "Apple products always seem to push the envelope in terms of space savings, and therefore we often first see the newest, most-compact components in Apple products."

The iPod touch design also pushes the envelope in terms of memory density. The high-end version of the product includes 16GB of NAND flash memory, more than any product in the Apple iPod line. In contrast, the high-end iPhone offers only 8GBs of NAND flash.

Another notable difference is in the printed circuit board (PCB) design. The iPod touch employs a single PCB as opposed to the iPhone's modular two-PCB design.

Other differences between the touch and the iPhone include a new set of components to support the iPod touch's wireless LAN (WLAN) functions and the location of the touch screen circuitry on the main PCB-rather than on the touch screen module.

Production outlook

Based on the history of the various Apple iPod products, iSuppli has assumed a total lifetime of one year for the first-generation iPod touch. iSuppli estimates that if Apple follows its historic product pattern, it will manufacture about 8.5 million first-generation iPod touches during the approximately one-year period from the third quarter of 2007 through the beginning of the third quarter of 2008. At that time, iSuppli expects the first-generation touch will be replaced by a new product in the third quarter of 2008.

However, this forecast could be impacted if Apple chooses to replace the iPod touch sooner to coincide with the introduction of a new model of the iPhone. Furthermore, if the product lifetime extends to two years, production could increase to as much as 20 million units.

The arrival of the flash-memory-based touch will have major implications for the rest of Apple's iPod line, iSuppli believes. "The touch, along with the nano, may drive Apple's HDD-based iPods close to extinction in the near future," said Chris Crotty, senior analyst, consumer electronics, for iSuppli. "While not a dollar-for-byte match for HDDs, flash now offers sufficient capacity that many consumers are willing to trade off storage for advanced displays and features."

*Costs as of October, 2007. Component costs erode rapidly over time.
Source: iSuppli, compiled by Digitimes, December 2007

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