What's inside the video iPod

For those wondering just what is it that makes the video iPod tick, Wall Street firm Jefferies & Co. has published a report that tears open one of the gadgets and documents its innards.

The report, issued Wednesday, notes the similarities between the design of the circuit board in the iPod Nano and that of the new video iPod. The firm puts the total materials cost of Apple's 30GB player at $143.50, giving Apple a 52 percent gross margin on the $299 device.

On the chip side, Jefferies notes that longtime chip supplier PortalPlayer remains in there with its system-on-a-chip , but their is also a video decoder chip from Broadcom. Other products spotted insider are the 30GB hard drive from Toshiba, a memory chip from Samsung, and a power management chip from Phillips.

The presence of the Broadcom chip, Jefferies said "should begin to put fear into" PortalPlayer's and its investors, the report says, noting that Broadcom is likely to add an ARM core to its chip, which could render the PortalPlayer chip unneeded.

The brokerage said it expects strong earnings and an upbeat forecast from PortalPlayer when it reports earnings later Monday. However, the company expects the company will face "stiff competition" from Broadcom and SigmaTel next year, with the pressure potentially also hurting the prices chipmakers can charge for their wares.