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

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.

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.

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