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Thursday, October 20, 2005, 04:40 pm PT (07:40 pm ET)

iPod video teardown reveals Broadcom video chip

Analyst for an investment bank recently performed a teardown on Apple's new video iPod player, revealing its various component manufacturers and estimating the company's profit margins.

Earlier this week Jefferies and Company dissected a 30GB iPod video and found its board layout to be similar to the iPod nano, with essentially all of the same silicon suppliers securing the design wins. Along with its teardown, the firm estimated the cost of each component to Apple.

Landing two of the biggest design wins are PortalPlayer and Broadcom, Jefferies said. The video iPod features an $8 audio decoder chip from PortalPlayer, a company which continues to secure Apple's iPod business. Meanwhile, Apple has reportedly tapped Broadcom for the $10 video decoder chip responsible for the iPods video playback capabilities.

Interestingly enough, a report from April of this year suggested Apple had contracted the use of Alphamosaic's next generation VC02 chip for a device with video, image, and music features. The British-run Alphamosaic employees about 60 and was acquired by Broadcom for about $125M last September.

Also inside the iPod, Jefferies found a $65 Toshiba 30GB 1.8-inch hard drive; $1.75 256Mbit Samsung SDRAM chip; $3.75 Wolfson Microelectronics audio codec; $1.60 Linear USB power manager/Li-Ion battery charger; $0.75 National step down switching regulator; $1.00 Philips DC/DC converter; $1.30 Silicon Storage Technology 8Mbit parallel flash; $2.50 Philips power management unit; and a $0.85 Cypress PSoC mixed signal controller touch pad.

Combined with a $2.50 touch pad, $4.50 Li-ion battery, $15.00 LCD screen, and $25.00 of other materials, the firm estimates Apple's bill of materials for the video iPod to total $143.50. Before manufacturing, advertising, freight and other charges, this represents a 52% gross margin based on the 30GB iPod's $299 suggested retail price.

"We continue to recommend investors buy shares of Broadcom ahead of its earnings report on Oct. 20 as we expect it to beat and guide up, with this iPod win representing incremental revenue to Q3 and Q4," the firm said.

Prior to its release, Jefferies made accurate predictions on the video iPod and was the first firm to confirm that the players were in production in the Far East.

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(Photo Credit: Jefferies & Co., Inc.)