Component Makers Who Won Placement In The New iPod Nano

by: Eric Savitz

Craig Berger, the semiconductor analyst at Wedbush Morgan, pried open one of the new iPod Nano’s and did a “teardown,” taking inventory of what he found inside. Berger was acting largely in the role of an analyst who follows PortalPlayer (NASDAQ:PLAY); he notes that there does not appear to be a PortalPlayer chip insider the Nano, “consistent with management’s ‘produt transition setback’ announcement from last spring.” But there are ramifications in his analysis for a variety of other chip companies.

Berger also notes that there are three chips in the case stamped “Apple,” rather than the actual manufacturer. (Apple doesn’t make its own chips, of course.) He notes that there were no such chips in the first generation Nano. Berger thinks one of the chips is a Samsung ARM processor (marked as part #337S3291 8701) in a socket which PortalPlayer once filled. Another chip (part # 338s0310) he thinks “could be the audio driver and code, which he notes is “a socket formerly supplied by Wolfson Micro.” He says whether Wolfson is still supplying that part is unknown. And he says the functionality of the third Apple-stamped chip (338s0261) is unknown; he says it is on the back of the printed circuit board near the flash memory. Berger says his best guess is that it is the power management unit. On the other other hand, he also says it is possible that both the power management and audio codec functions have been built into the ARM chip.

Berger notes that Cypress (NASDAQ:CY), Linear (NASDAQ:LLTC), National Semi (NSM), Silicon Storage Tech (SSTI) and Samsung all maintained their sockets in the new Nano. He says the Nano he ripped open had flash memory from Hynix, but that Samsung is also likely providing flash. “We do not see the Wolfson audio driver chip or the Philipspower management chip that was in the first-generation Nano, though Apple could have re-marked either of those chips,” he adds.

Berger says he thinks Apple’s gross margin on the new Nanos could be “as high as 50%” given the “substantial price declines” in NAND flash memory prices this year, with much higher margins this holiday season than last year. He notes that one year ago, the high-end Nano (still at $249) had $150 worth of NAND, compard to $92 today. He notes that the $58 savings is 23 points of gross margin.

As for PortalPlayer, he maintains his Hold rating.