Apple's iPod Touch: The Real "Teardown" Story

iPod Touch
iPod Touch

I love "teardown" stories. Not the kind that builds a story subject up, then tears it down, but the lab guys who rip apart new devices, study component serial numbers and tell me what's in the guts of the product. Today's version comes courtesy of the wizards at iSuppli,and the center of attention is Apple's iPod Touch.

The teardown shows that the 8 gig version costs Apple about $155 to build. If accurate, that shows a dramatic profit margin for Apple on each sold since they retail for $300. According to the report: “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.

That might be true, even though the Touch and iPhone share 90 percent of the same characteristics, as far as components go. The key chip inside both comes from Samsung. That one microprocessor runs $13.19 based on iSuppli’s October estimate, or 8.5% of the iPod Touch’s total cost.

The two devices also share a power-management chip from NXP Semiconductors Netherlands B.V. That technology costs $2.61 each, accounting for 1.7 percent of the iPod Touch’s cost in October. Prices on that chip have since fallen, but only slightly.

iSuppli has also discovered something unusual: "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.

The Touch is also a flash memory wonderland, including 16 gigs of NAND flash memory, more than any product in the Apple iPod line. In contrast, the high-end iPhone offers only 8 Gbytes of NAND flash, and most expect that to change when new iPhones are released in 2008.

iSuppli expects Apple to manufacture about 8.5 million first-generation iPod Touches saying, "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."

That could change, the firm says, if Apple releases a new Touch when it releases the next generation iPhone. Or manufacturing could balloon to 20 million units of Apple extends this version of the Touch by a year.

Either way, call it the iPod Touch or the Midas Touch. Apple has a major winner on its hands, and so have the companies supplying the parts inside.

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