iPad Air 2 costs Apple $270 to make, thinness due to battery and display

With its latest iPad variant, Apple has kept a lid on costs and slimmed down its tablet. Here's how.

Image: James Martin/CNET

A teardown of the 16GB wi-fi version of the iPad Air 2 finds its materials costs have stayed level with its predecessor, while its new-found slimness is down to a smaller, less powerful battery and a thinner display.

With a depth of 6.1mm, the iPad Air 2 is Apple's thinnest device yet. While its other hardware specs may not be a major step up on the first iPad Air, there are still noteworthy refinements, such as the addition of an A8X processor, a motion co-processor, and Touch ID fingerprint reader.

Despite these additions, analysts at IHS estimate the 16GB wi-fi-only edition's materials costs around $270 plus $5 for manufacturing. That's the same estimate IHS gave for the first iPad Air.

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The retail price of the 16GB wi-fi iPad Air 2 in the US is $499, which steps up to $599 for the 64GB and $699 for the 128GB. European prices can be found here

In IHS's assessment, Apple is taking a minor hit to its margins by releasing the two larger memory options with the same retail prices as the first generation 32GB and 64GB models.

"With largely identical display specifications and minor improvements in most other areas, Apple continues to offer evolutionary upgrades to the iPad lineup. It’s interesting to note that by offering the consumer a 128GB model for the same price as last year's 64GB iPad Air, Apple actually has taken down our estimated margins a bit on both the 64GB and 128GB models. The increased memory configurations to 64GB and 128GB are some of the key upgrades here," said Andrew Rassweiler, senior director of cost benchmarking services for IHS.

The estimated cost of NAND Flash for the current models is $6.75 for the 16GB edition, $27 for the 64GB, and $54 for the 128GB.

On the other hand, Apple faces lower costs for its 9.7-inch display and touchscreen, which have remained identical across the two generations but are now cheaper to buy. The display cost has fallen from $90 a year ago to $77 while the cost of touch screens has fallen from $43 to $38.

One of the standout features of the new iPad Air is its 6.1mm depth and to achieve that thinness, IHS notes that Apple has reduced the battery size and capacity, while maintaining the same 10 hour life span. The iPad Air 2 has a 27.6 watt/hour capacity battery, down 16 percent from the 32.9 watt/hour battery in the first Air.

The thinness of the device is also helped by a smaller battery back and thinner display, IHS notes.

One significant upgrade to the Air 2 is the processor A8X processor, which comes with the M8 motion coprocessor. Here, Apple the price has risen from $17 for the A7X and M7 coprocessor to $22 for the new combination.

An additional significant costs is the addition of the Touch ID fingerprint sensor. The is not exact estimate for the its cost, but IHS says it is a significant component of the $22 in sensors it spends on the iPad Air 2.

Read more on the iPad Air 2