synapsid_on_SI

Analyzing Apple's iPod Business

I think it's important to consider the huge decrease in the price of NAND flash memory (virtually 1/4th of that one year ago or even lower). There is a lot of room for Apple to dramatically lower prices of flash-based iPods while still maintaining decent profit margins.

At the same time, the flash memory supply situation has reduced Apple's cost advantage for flash-based MP3 players. A few years ago when flash-based iPods were introduced, flash memory was in short supply and expensive and Apple's ability to secure supply contracts for flash memory at favourable prices meant that it was difficult for competitors to offer products significantly below Apple's ASP with the same capacity. However, in the current environment flash memory is so cheap that competitors can easily offer bigger capacity at lower prices. So Apple is relying more on brand name and other technology differentation to maintain iPod sales.