iPad Air teardown: How fewer LEDs, iPhone components helped Apple slash costs

iPad Air teardown: How fewer LEDs, iPhone components helped Apple slash costs

Summary: iPad Air costs less to make than third-generation Apple tablet thanks to a number of components it shares with the iPhone 5s and 5c, according to IHS.

TOPICS: Tablets, Apple, Hardware, iPad

While the thinner display in the new iPad Air has pushed up manufacturing costs, Apple has managed to make savings elsewhere, keeping the tablet cheaper to make than previous models, according to a new teardown.

The iPad Air, thinner and lighter than the previous iPad, also carries a lower bill of materials according to calculations by analyst IHS released on Tuesday.

The 16GB iPad Air with cellular connectivity costs $304 in components alone, according to the analyst — six percent less than the $325 price tag on the equivalent third-generation iPad. Add in the estimated $6 cost of manufacturing the device, and the total hits $310. IHS said for the 16GB wi-fi only model, costs of components and manufacturing reaches $274.

However, the IHS analysis doesn't take into account other costs such as software, licensing or royalties, meaning Apple will be footing a notably larger bill.  

"While the iPad Air slims down in size, the profit margins are getting fatter," Andrew Rassweiler, senior director of cost benchmarking services at IHS, said in a statement.

While the thinner display and touchscreen are more expensive than the third-generation iPad, Apple has found savings thanks to price erosion in other areas, Rassweiler said, as well as using many of the same components and suppliers that are used in the iPhone 5s and 5c.

The iPad Air uses the same Apple-designed, Samsung-manufactured A7 processor found in the iPhone 5s, and also uses the same memory to support the A7 processor as the 5s, employing 1GB of low-power Double Data Rate 3 (LPDDR3) DRAM.

IHS said the profitability of the iPad Air "rises dramatically" as memory capacity increases: the 32GB model costs Apple only $8.40 more to produce but has a retail price that's $100 higher.

The iPad Air, with components annotated. Image: IHS

The analyst firm said the iPad Air's thinner form factor is partly thanks to reductions in the thickness of the display and touchscreen subsystems.

The Air's display is 1.8mm thick and the touchscreen uses a cyclo olephin polymer film sensor rather than the thicker (and cheaper) glass sensor previously used. As a result, the Air's display carries a cost of $90, compared to $87 for the third-generation iPad. The touchscreen module is estimated at $43, compared to $37.50 for the third-generation iPad.

IHS also noted that Apple has reduced the capacity of the battery in the iPad Air compared to the previous iPad. Battery capacity in the iPad Air is 32.9Wh, down 23 percent from 42.5Wh in the third-generation model.

The drop is probably down to lower power consumption in the display backlight, according to IHS. The iPad Air uses only 36 LEDs to illuminate the liquid-crystal display, down from 84 in the earlier-generation iPad. Fewer LEDs results in lower electricity demand, allowing the cut in battery power.

Further reading

Topics: Tablets, Apple, Hardware, iPad

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  • Gouging

    "the 32GB model costs Apple only $8.40 more to produce but has a retail price that's $100 higher". That's just evil. Certainly taking advantage of people that dont know any better, just like selling an iPad 2 to some sucker.
    Sean Foley
    • There's nothing evil about it

      Because no one is forcing you to buy it. Let me tell you what is evil: using the power of government to make your health insurance policy illegal, then threatening you with fines if you don't buy a more expensive policy through a web site that doesn't work. Get back to me when you get your priorities on what is truly evil straightened out.
      • Health Insurance is irrelevant

        to this discussion - and to us Brits who have the National Health Service to fall back on. My hernia repair was quick and easy and done on the date I chose with no subsequent problems. Yes, National Health can and does work.
    • Economics 101

      Why would any corporation price something as it relates to cost? They will always price it as it relates to the value the consumer places on it. (Hopefully the value is greater than the cost, right?) Apparently, the value of 16GB to a lot of consumers is $100. Why would Apple (or any corporation for that matter) charge anything less?

      Of course, lower-end consumers won't place the same value on it, but that's not Apple's market.
      • This reminds me of how the Russian Lada cars were priced

        The prices of sedan, hatchback and station wagon types were (not sure in that order): $5000, $5500, $6000. Not related in any way to direct costs -- but more to perceived value. Oh, and you could have A/C for another $500.
    • You do realize that, say, copiers/MFPs may cost times as different and yet

      ... sum of their components stays almost the same?

      There is nothing evil about it, no one forces anyone.
    • No memory card slot means they've got you by the short and curlies

      I wouldn't buy a phone or tablet without a memory card slot. Now we know why Apple doesn't fit one - because then everyone would buy the cheapest iPad and upgrade using sensibly priced memory cards. A simple approach but, to my mind, bordering on criminality.
      • Re: I wouldn't buy a phone or tablet without a memory card slot

        Then you can buy Apple phones and tablets with confidence. You can use both SD cards and USB storage with them. ;-)

        You might also want to look up the definition of "criminal" in a dictionary.
    • People seem to ignore other costs

      Such as storage size dependent "media tax" in some countries such as France (but not only there).
      The costs to sell a 32GB iPad vs 16GB iPad is not just the $8.40 component difference.
  • Gouging

    "the 32GB model costs Apple only $8.40 more to produce but has a retail price that's $100 higher". That's just evil. Certainly taking advantage of people that dont know any better, just like selling an iPad 2 to some sucker.
    Sean Foley
    • How much does a cup of coffee cost Starbucks to make?

      I'm sure the markup is much higher, as it is in many other industries.

      How much does it cost Microsoft to make one copy of Office (almost nothing), which sells for hundreds of dollars?

      Are they all evil as well?

      If you don't like the price, don't buy it.
      • Well said

        @yoshipod I completely agree with your statement.

        Even if I found the 128 GB model expensive, it was what I wanted, so I bought it. I don't feel that I'm ripped off. If I did, I would have opted for a lower priced version or a different make. Simple.
        • evil, or capitalism ?

          When I buy an iPad Air (very soon, I hope) I shall also look for the 128 GB cellular model as my first choice ; but maybe take the 64 GB instead or the 32 GB because of a limited budget. But frankly I would prefer Apple to allow us to add memory to a 16 GB basic machine when we need to add it. But of course Apple would make much less money with this kind of tablets. Cheaper machines are not for Apple market. Let's be happy with the important productive software offered with their last tablets.They also sell design and beauty to millions of "happy fews" who believe they are part of a superior culture far above the hoi polloi. It's capitalism in it's purest variety : maximizing the income while getting manufacturing costs as low as possible (in China, or Vietnam, like all the others). Let's just be conscious of the facts : every other manufacturers are looking for the same results, only with a different marketing policy and a different (generally inferior) design.
          • If you consider the 128GB iPad Air

            Then you obviously did not blink on the price. :)
            If so, you should *not* look for a smaller storage option, because with every $100 you save, you lose twice the storage.

            Therefore, if you did not blink at the price, the 128GB iPad is the right for you.
        • It's pretty obvious why the flash memory cost riles people

          It's because the profit margin on this tiny but crucial part of the hardware is several times greater than the markup on the rest of the hardware, combined with the fact that Apple *could* very easily enable people to supply their own flash storage (by including an SD slot).

          I don't have a problem with them not providing a memory card slot, and I don't have a problem with them making a good profit, but I do have a problem with them effectively charging grossly unreasonable prices for flash memory. a 90% profit margin is INSANE. Google are currently charging an additional £40 for a 16GB jump in storage on the Nexus 5, which is bad enough, but still only 60% of the mark-up Apple charge for the same amount.

          If people are happy to pay the high prices then good for them, I'm not going to judge their assessment of what a product is worth to them, but for me it just rankles too much, because I don't believe Apple deserves to make as much profit as it does, particularly on flash memory modules.
      • Exactly.

        People act as if a company making a profit is a bad thing. If you want the company to be around for the long term to support your product, you should be thankful they're not slicing their margins razor thin. I have no problem paying a little extra to guarantee they're there when my device breaks down the road.

        I think it's hilarious that so many owners of other devices are so annoyed at Apple for keeping their prices high enough to make a good profit. Why do those owners care so much about devices they didn't even buy? The only reason I can think of is "device envy," or they wouldn't desperately want prices they can afford on the Apple products.

        Really, it doesn't matter what it costs Apple to make it. It's what it's worth to me that matters. These devices are worth the premium to me. For folks who don't like the prices, just buy something cheaper and hope the company stays in business. Or *gasp* you could save your money a little longer. There are plenty of choices out there.
        • for me its not "device envy"

          I don't hate Apple for what they charge and I don't envy their devices.

          I just will not pay what they want when I can get something that does what I need for far less. There is nothing that an iPad can do that my Galaxy Note can't do, and I like the note more for other reasons (SD card etc.). I will never recommend Apple products to anyone I know unless they are already heavily invested in the Apple world - it just isn't cost effective.
          • wow

            I thought I wrote that at first.
        • Backing the warranty

          I used to own a repair shop. When people asked why my price was higher than someone else's I pointed out that all major repairs were guaranteed for 3 years. If I didn't charge enough to be in business three years from now their warranty had no value. It is a good argument for people that don't know, and don't want to know, how to fix a car. Apple is a good argument for people that are willing to pay to avoid having to educate themselves. Not a negative comment, there are only so many hours in the day and people make different choices.
          • Re: and people make different choices.

            Like, instead of spending their time to learn how to repair some appliance, spend that time for productive work instead and *earn* money. Then spend part of that money to pay someone repair their appliance for them and pocket the rest of the money.

            Everyone happy. You, with more money in your hand and those whom you paid to do some work, because they earned something too.

            At the end, it all boils down to how well your time is paid.