September 22, 2005 – Apple’s new iPod nano music player includes some “surprising” choices in its semiconductor components, and its heavy use of NAND flash will “radically change the market dynamics of both thememory market and the MP3 player,” according to iSuppli Corp.

Analyzing the guts of the iPod nano through a “teardown analysis,” the analyst firm found that Apple chose PortalPlayer Inc.’s 5021C system-on-chip, “likely an Apple-specific deriative,” for audio processing instead of SigmaTel’s MP3 audio processing chip used in the flash-based iPod shuffle, or even PortalPlayer’s newer 5024 chip. For the iPod’s “click wheel” navigational control element, Apple went with a proprietary technology based on Cypress Semiconductor Corp.’s CY8C21434 programmable system-on-chip device with its CapSense technology, to convert signals relating finger position into digital-control functions. Previous iPods utilized Synaptics Inc.’s technology for the click wheel functionality.

iSuppli also analyzed the iPod nano’s flash memory component, determining that it’s actually a pair of separate NAND flash parts from Samsung Electronics Co. Ltd., each 1Gbit-by-8 configuration — and likely offered at a substantial discount, surmised iSuppli, since Apple is projected to consume up to 40% of Samsung’s NAND flash outtput in 2H05. That also will mean less NAND flash available for competitors with flash memory -based MP3 players, driving up memory prices.

In all, iSuppli calculated a $90.18 total bill of materials cost for the 2GB iPod nano (77% of that cost is in the circuitry), which retails for about $499.