As Apple Computer Inc., the world’s top MP3 player maker, has unveiled its latest low-priced iPod, local contenders are feeling the pressure more than ever.
On the release of the new iPod, called the Nano, on Wednesday most domestic MP3 makers responded, “We have no measure to cope with the giant’s superiority in terms of competitiveness in both efficiency and price.”
Four-gigabyte nanos will be priced at $249 and two-gigabyte nanos will retail for $199 each. The prices are much cheaper compared with other products equivalent in size and efficiency.
“The price is much lower than any other products in the local market,” said a manager of a domestic maker. “The merit of such a low price is so overwhelming to neutralize any other merits of contender goods.”
Thus, local contenders will struggle to survive in the cut-throat pricing battle, coping with the increasing dominance of industry leader Apple’s new iPod.
However, “Due to the release of the cheap Nano, local rivals are unlikely to have opportunities to reverse Apple’s dominant market share,” said analysts.
The industrial consolidation will threaten local rivals such as Reigncom, maker of the nifty iRiver players that have won good reviews, and fellow South Korean firm MPIO Ltd. unable to withstand the pressure, suffering plummeting sales and razor-thin margins.
“The competition will continue to be severe in 2006 with the tough pricing environment, but next year, we expect some non-viable companies in Korea to be forced out of the market,” said Reigncom’s Yang.
However, the price competitiveness of the Nano stems mostly from its recent deal with Samsung. The new iPod relies on NAND-type flash memory, replacing the hard drive-based iPod Mini. In the deal, Samsung, the world’s largest supplier for flash-memory chips, offered 40% of its NAND-type flash-memory manufacturing capacity at a deep discount. The discount rate is under wraps, but is speculated as about 50% by analysts.
The deal between the two giants has been an open secret in chip industry circles for several months. Experts analyzing the rumor around the deal believe the main reason for Samsung to woo Apple is to transform the iPod lineup from hard drive-based to flash-based. If this is true, Samsung can take advantage of the line-up change because it will not be easy for Apple to return later to hard drive-based.
Apple also may enjoy technical advantages by converting its iPod line to a flash-based system, according to Kim Nam-hyung, analyst with iSuppli. NAND-type flash memory makes the iPod as thin as a pencil, one-third the size of the predecessor, and more energy-efficient with a 14-hour rechargeable battery.
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