September 7, 2005 5:35 PM PDT

Apple's iPod costs likely went up--in a flash

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The two new music players introduced by Apple Computer on Wednesday are smaller than the existing iPod Minis--and they probably cost more to make, too.

By using flash memory rather than mini hard drives in the iPod Nano music players, Apple likely increased its own component costs, said analysts.

Right now, 1GB of flash memory in the volume market costs about $45, according to both Semico and iSuppli. Thus, the 2GB iPod Nano, which sells for $199, contains around $90 worth of flash, while the $249 4GB version has about $180 worth of flash, said Semico's Jim Handy.

"They might have been able to get something for $40, but that's still $160 worth of memory," he said.

By contrast, mini hard drives with the same amount of storage costs about half as much, said iSupply's Nam Hyung Kim. Typically, hard drives provide more storage for less money than flash. Flash, however, provides better performance and takes up less room.

Some experts have predicted that the rapidly declining prices of flash, combined with its ever-increasing densities, will allow it to replace hard drives in many applications. Others, however, have noted that hard drives decline in price just as fast and add capacity often at even a faster rate. Also, major manufacturers of both flash and hard drives often lose money.

Apple likely got a substantial discount from its flash supplier, which Kim and others say is Samsung. Still, the price for flash is likely higher. Samsung's margins for flash in the second quarter came to around 45 percent, Kim said. Thus, Samsung would have to sell the memory at a loss or close to break even to give Apple a price that would be equal to a price for hard drive storage.

Nonetheless, Kim said that Samsung, or any flash memory maker, would have strong motivations to give a customer like Apple large discounts. An oversupply of flash memory currently exists; thus, a contract with a customer that will consume quite a bit of factory output insulates a manufacturer. The 45 percent margins also give Samsung lots of wiggle room.

"Samsung can also probably raise prices" in the future because its competitors can't provide the same volumes, Kim speculated. "Apple will probably never go back to hard disk drives."

29 comments

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Most INNOVATIVE & Profitable Companies on Earth
Samsung and Apple realize a good thing when they see it, that is
why they are partners on LCDs & Flash RAM. When this article said
that we have probably seen the beginning of more Flash RAM in
Apples lineup, you are going to see it next appear in the
PowerBooks as a faster hard drive, improving the already quicks OS
X boot times further. RAM HDs are but a few years away. And
hopefully by about this time we might see Windows boot on a
notebook in under a minute too.
Posted by educateme (101 comments )
Reply Link Flag
Free Advice
If you actually seriously do want to boot a Windows laptop in under a minute then use hibernate. In my travelling days I used to reboot my Win2K laptop once every six months "just in case" but I would hibernate it at least three times a day without any trouble at all.

DISCLAIMER

That said computer was rarely on the internet so it did not recieve many patches. Even so, I still have that computer now (Compaq 1200 Cel 600, garbage I know) and I have not formatted it since 2000. Not by choice though as the CDROM died three years ago....
Posted by Andrew J Glina (1673 comments )
Link Flag
RAM Drives
RAM Drives are already here...they're just wicked expensive. Most of the promising work is in quantum technologies that can store heaps of data (on the order of 50 GB) in ares smaller than the size of a little-finger nail. One innovator and researcher of such technology is AtomChip Corporation (<a class="jive-link-external" href="http://atomchip.com/" target="_newWindow">http://atomchip.com/</a>). They have a model that is 256GB and shaped to fit into CF slots. And it is all non-volitile RAM. Read/write speeds are wicked fast, and cost/GB ratio is incredibly low (much cheaper than Flash), but it's so small that it's only logical to buy a ton of memory, and therefore it is expensive. And since it is true RAM, it can be used as system RAM as well as long-term storage. Booting would be instantaneous. I think this is incredible technology, and I'd love to invest if it were publicly traded.
Posted by CNerd2025 (98 comments )
Link Flag
Yes, cost might have gone up but...
Yes, the iPod cost seems like it must have gone up, but you have to factor in how much less flash based iPods break. Hard drives have moving parts which clearly are more. Apple is saving lots of $$$ by going flash based when it comes to repairs / replacements.

&lt;&lt; Marco &gt;&gt;
Posted by MarcoMorelli (1 comment )
Reply Link Flag
True
Furthermore, they will be saving money with lower capacity batteries and there will be no need for the buffer memory.
Posted by Andrew J Glina (1673 comments )
Link Flag
The Cost Has Gone Up, It's So Expensive
Yknow its funny, after every apple product launch, these same
words are uttered, but somehow these products end up hits in the
marketplace. What you geniuses seem to have forgotten is that the
market dictates failure/success not the ramblings of some tech
"journalist". It doesnt have a radio, or a voice recorder, were early
ipod complaints, and look at how the market reacted to lacking a
FM radio and voice recorder, people that bought competing players
sure showed Apple.
Posted by biggstuu (281 comments )
Reply Link Flag
You know,
sometimes, it just is what it is. Why can't people just accept the
fact that sometimes an Mp3 player is just an Mp3 player, and
just an Mp3 player, seems to be what the public wants. iPod's
share of the market would seem to indicate this.

Why does it always have to have more, better, cooler gadgetry
than the next guy just to be accepted as "as good".

Sometimes you just want some meat and potatoes, leave the
frosting to someone else.
Posted by corelogik (680 comments )
Reply Link Flag
if it WAS just an mp3 player
there wouldn't be so many accessories, there wouldn't be games, contacts info storage, color screen, photo viewer, album art, and now video
Posted by ackmondual (199 comments )
Link Flag
Nice but still too much money
It looks sleak, the black in particular looks really cool, but in my view it's still too much money for something that won't play movie files.

I realise that's not its purpose, and I also realise that the storage is what makes the cost so high.

Other people probably have different needs, but for me, I only listen to about 2 or 3 CDs worth of music a day - sometimes the same ones for a few days in a row, so a $100 mp3 player is more than enough.

Still it looks bloody sexy and if I had the kind of disposable income that let me spend $200-$250 on an mp3 player I'd get one..
Posted by ajbright (447 comments )
Reply Link Flag
I don't want to be your insurance agent.
Moving around while paying visual attention to some media is a great way to drop something, bump into something, set the stove on fire, break a leg trying to get away from the flames and you might miss "who'd done it" anyway.

A small (like &lt;2.5") screen for video output is doing your brain a disservice.
Posted by CharlesRovira (97 comments )
Link Flag
No user replaceable batteries ...
Once again, they made it without replaceable batteries. It makes the product a 'good for 2 year' throw away gadget.
if AAA batteries are too thick, then a new standard size for thiner (likely to be flat) batteries should be developped.

I won't buy it for this reason.
Posted by My-Self (242 comments )
Reply Link Flag
AA batteries cost money too
Do you realize how much money you will spend on batteries within a year. And after two years of owning an iPod, you can have the battery replaced, and it will still be cheaper then having it be a AA battery device. Man, you people annoy me with your replaceable battery issues.

If your iPod dies to early, you didn't treat it properly. Same thing goes for laptop batteries or camcorder batteries, you have to drain them out of power ever once in a while, not keeping them 100% charged all the time.
Posted by (43 comments )
Link Flag
Battery Issue
I have a 10gig second generation iPod. I listen to it nearly everyday, charge it once/twice a week, and I still have a capacity of 7 hours per charge on it. Oh, it is over three years old. Batteries are batteries. I would rather have a NiMH battery than AAA's anyday. I plan on replacing the battery by myself when I need to for under $30. I expect the HD to die first anyway.
Posted by jypeterson (181 comments )
Link Flag
User replaceable NiMH or NiCD would be cheaper
But i'd still prefer the convenience of built in li-ion rechargeables
Posted by ackmondual (199 comments )
Link Flag
What about iPod mini when it was introduced?
I'd be interested in a comparison of the cost/retail ratio for the
ipod nano to the ipod mini when the latter was introduced. My
guess is the ratio was very similar to that of the current nano.
Posted by (1 comment )
Reply Link Flag
AA batteries cost money too
Do you realize how much money you will spend on batteries within a year. And after two years of owning an iPod, you can have the battery replaced, and it will still be cheaper then having it be a AA battery device. Man, you people annoy me with your replaceable battery issues.

If your iPod dies to early, you didn't treat it properly. Same thing goes for laptop batteries or camcorder batteries, you have to drain them out of power ever once in a while, not keeping them 100% charged all the time.
Posted by (43 comments )
Reply Link Flag
They make RECHARGABLE AA Batteries
They make rechargable AA batteries. That makes the battery cost pretty cheap.
Posted by lingsun (482 comments )
Link Flag
I love this but it REALLY doesn't belong
Why is a website dedicated to computing wasting space covering a digital equvalent to the Sony Walkman?

Its a consumer device. Get over it...
Posted by CharlesRovira (97 comments )
Reply Link Flag
You don't belong
If you believe MP3 Players, iPod, iTunes, digital music, and Apple, has nothing to do with computing.
Posted by nmcphers (261 comments )
Link Flag
Oh, but it does!
A small, processor based device that incorporates flash memory, dosen't belong? Especially considering the fact that people have gotten Linux to run on previous iPods, I think the device, although targeted at the consumer market, is, by definition, a computer.

Besides, this article falls under the "Personal Tech" category, so it doesn't have to be about computers, networks, or otherwise anyhow.
Posted by ddesy (4336 comments )
Link Flag
This is a "Tech News" web site.
See that banner up there?
Posted by open-mind (1027 comments )
Link Flag
You must be joking
Even ignoring the 70%+ market share that the iPod is supposed to have in the US, it also is tied to the iTunes website. If this isn't tech news, then what is?
Posted by Andrew J Glina (1673 comments )
Link Flag
Apple is also a religion for some
I agree, it's just an mp3 player. But Apple is a religion for some people. You just can't express anything remotely critical or some people freak out.
Posted by lingsun (482 comments )
Link Flag
The screen is too small on the nano.
I have a full sized iPod and I can see the screen quite well when it sits on my desk at work. I couldn't hardly read the screen on the mini. I think the screen on the nano is just going to be too small unless it's in my hand.
Posted by lingsun (482 comments )
Reply Link Flag
Just don't buy a nano then.
You have a full size iPod and like the size of the screen, so why do
you complain about screen the nano? It's not like they replaced the
full size iPod with the nano. What did you expected?
Posted by (31 comments )
Link Flag
 

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