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Monday, August 08, 2005, 10:00 am PT (01:00 pm ET)

5th-generation iPods to sport Apple scroll-wheel

When Apple Computer introduces new versions of its original iPod digital music player later this year, expect them to sport more home-grown components such as an Apple-branded scroll-wheel.

Since forming a division of the company to focus specifically on iPods, sources say that iPod engineers have increased their efforts not only on broadening the line of digital music players, but also on reducing component outsourcing to maintain tighter control of the company's intellectual property.

On the surface, today's iPods appear to be a simple and tightly packaged product of Apple's California design studios. But inside, the players rely on a wide array of components developed by third parties. These include drives from Toshiba, controller chips from PortalPlayer, navigational controls designed by Synaptics, and LCD displays from either Sharp or Samsung.

In working to develop some of its own component solutions — rather than continue to license them from others — Apple hopes to gain more control over the iPod and shave costs at the same time. These costs saving measures are likely to be reflected in slightly higher margins for Apple and lower iPod costs for the end consumer.

The iPod's navigational controls will be one of the first components to see such changes, sources have told AppleInsider. By October, Apple is expected to abandon Synaptics as its supplier of iPod scroll-wheels for its white iPods in favor of an in-house solution.

For Synaptics, Apple's move to develop its own iPod scroll-wheel will mark one of the final chapters in its long-standing relationship with the iPod and Mac maker. Earlier this year Apple dropped Synaptics as its supplier of trackpads for both its PowerBook and iBook line of Mac laptops. Apple now uses its own trackpad solution dubbed the Scrolling TrackPad.

Recent comments from Synaptics have offered corroborating evidence of an Apple switch towards an in-house scroll-wheel solution. Despite an expected seasonal surge in iPod demand, Synaptics during its recent financial conference call said it expects revenues to decline 9 to 10 percent during its September quarter and by as much as 22 percent in the December quarter.

Shaw Wu, an analyst for American Technology Research who covers both Apple and Synaptics, also believes Synaptics is vulnerable to imminent technology shifts by Apple.

"While this may come as a surprise due to a seasonal ramp in iPod demand and new cell phone wins, our proprietary checks with industry and channel sources indicate that Synaptics continues to be at risk as Apple moves to an internally developed [scroll-wheel] solution using CY PSOC controllers," the analyst said in a recent research note. Wu estimates that Apple has been a 35 to 40 percent customer for Synaptics.

In related news, reliable sources say fifth-generation iPods could also see major advancements in battery technology. Specifically, Apple is said to be developing an iPod that supports user-replaceable batteries, which the company would market in the price range of $49 to $69. Such a move would also help lower iPod prices and present Apple with an opportunity to generate additional higher-margin battery sales.

Likewise, Apple is reportedly experimenting with several new iPod battery technologies, which have emerged from third parties and promise both extended life-spans and longer runtimes. However, AppleInsider has been unable to confirm with 100 percent certainty that either of the aforementioned battery advancements will make it into the fifth-generation players.

Apple, which has been criticized for the shortcomings of its internal iPod battery solutions, recently reduced the cost of its iPod Battery Replacement Program from $99 to $59.