Technology

Inside iPod Touch


The Touch will probably set the standard for iPod iterations to come, and our teardown reveals it's more than just an iPhone you can't make calls on

At first glance, Apple's iPod Touch looks almost exactly like its sibling the iPhone. It sports the same distinctive touch screen, plays movies and music in much the same way, and can also use wireless Internet connections for surfing the Web. All it really lacks is the ability to call another person.

But according to a teardown analysis conducted by market-research firm iSuppli, the Touch isn't just a stripped-down iPhone, but rather it has some unique design traits of its own. ISuppli pegs Apple's (AAPL) total cost of components on the 8GB version of the Touch at $147, or about 49% of the $299 retail price on the device. This would follow the pattern of other devices in Apple's iPod family that generally carry material costs that amount to about half, give or take a few percentage points, of the retail price.

No Phone-Related Chips, More Memory

While it has the same core features as the iPhone (except, of course, those that require a phone), the Touch, unveiled on Sept. 5, likely represents the road map that Apple will follow on future iPods, says iSuppli's Andrew Rassweiler. "We expect the click-wheel versions of the iPod to wane in favor of touch-screen-based models," he says. The iPod Classic may turn out to be the last iPod to use a hard drive (BusinessWeek.com, 10/10/07). Future versions are more likely to run exclusively on flash memory.

Dropping the phone functions meant dropping all the related chips, giving Apple designers a chance to make the device thinner than the iPhone. It also left more room for memory. The upper end of the iPod Touch line is the 16GB version that sells for $399. In the 8GB version taken apart by iSuppli, Toshiba (TOSBF) supplied about $32 worth of flash memory chips. Other companies known to supply Apple with flash chips for use in the iPod and iPhone include Samsung, Hynix Semiconductor, and Micron Technology (MU).

Chipmaker Samsung appears to have consolidated its hold on the entire iPod line, supplying the main video-audio chip for the Touch that is used in the iPod Classic and iPod Nano (BusinessWeek.com, 9/18/07). The chip goes for a little more than $13. Samsung also supplied about $12 worth of memory.

Screen Costs

Other chip suppliers include Broadcom (BRCM), which supplied a controller chip for the touch screen, and STMicroelectronics (STM), which supplied motion sensor chips that allow the device to reorient pictures and videos when it's moved from the vertical to the horizontal position. Texas Instruments (TXN) supplied a video driver chip.

Since the Touch sports the same multitouch-enabled screen as the iPhone, costs associated with the screen account for nearly $44 of the device's material cost, iSuppli estimates. While Epson, Toshiba Matsushita Display Technology, and Sharp Electronics all supply the liquid-crystal display, the touch-sensitive portions of the display come from Germany's Balda, Taiwan's Wintex, and Optrex, a unit of Asahi Glass.

Given prior history, the iPod Touch will probably stay on the market in its current form for about a year, only to be upgraded sometime in the third quarter of 2008. During that year, Rassweiler expects, Apple will sell about 8.5 million units. In terms of sales popularity, that would put the Touch about midway in Apple's family. The iPod Nano is the most popular model, expected to sell nearly 28 million units in 2008, while the Classic will sell about 3.5 million units, according to iSuppli forecasts.

Hesseldahl is a reporter for BusinessWeek.com.

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