According to iGen.fr (via MacRumors), Apple (AAPL +2.08%) is finally planning to give the iPod Touch a much-needed makeover. The company is expected to launch its sixth-generation iPod Touch on either Monday, July 14, or Tuesday, July 15.
Will this be a game changer for Apple's declining iPod business, or is it totally irrelevant? Let's take a closer look.
What will this updated iPod come with?
The iGen.fr report indicates that the new iPods will come in new colors and feature internal upgrades. The key upgrade cited is a move away from the antiquated Apple A5 processor inside of the 2012 iPod Touch to a 64-bit A-series processor. The two likely candidates for the chip inside of the next-generation iPod Touch are the A7 chip, which made its debut with the iPhone 5s in 2013, and the A8 chip that powers the iPhone 6 and iPhone 6 Plus.
Given that the iPod Touch is a relatively low-cost device, and given that the A7 is probably cheaper to manufacture because it's built on a more mature 28-nanometer manufacturing technology, I'd say that a next-generation iPod Touch is likely to pack an A7 chip. Commensurate with the processor upgrade, I expect that Apple will upgrade the system memory from 512MB of DDR2 in the fifth-generation iPod Touch to 1GB of LPDDR3 in the sixth-generation iPod Touch.
Finally, as the A7 processor includes a more advanced image signal processor -- which is responsible for the "intelligence" of a smartphone camera; read more here -- I believe that this upcoming iPod will include additional camera features and functionality.
A much-needed upgrade; but will it move the needle?
Although the market for iPods has shrunken dramatically as the iPhone -- and smartphones in general -- have become ubiquitous, I believe that there's still a market for such devices. Note that Apple's iPod sales have cratered for quite a while now, and the revenue is so low that Apple no longer breaks it out as a separate line item in its earnings reports.
That said, a new iPod Touch could lead to a reasonable spike in demand as existing iPod Touch customers, many of whom may be eager to upgrade at this point, choose to upgrade to the newer device.
As far as Apple's overall financial performance goes, the iPod is pretty insignificant at this point, and even a potential "surge" in demand from an upgraded device is unlikely to directly move the needle for the company. However, it doesn't seem like the incremental costs to develop an iPod Touch are all that high, and the component bill of materials is likely quite low, as Apple builds these out of relatively old components.
Additionally, because the iPod Touch's life cycle seems to be very long at this point -- it'll have been nearly three years in between iPod Touch updates, assuming a July launch -- Apple has longer to generate a return on the development costs of the device. Also, component costs should be flat to down.
Even if Apple isn't making much money directly from iPod sales, the iPod Touch is widely viewed as a "gateway device" into the Apple/iOS ecosystems. The popular idea here is that somebody who buys an iPod Touch today might be an iPhone/Mac/iPad buyer tomorrow.
