iPad Air Teardown Reveals Fatter Margins

Apple’s launch of its new iPad Air on 22 October was labelled as a “tremendous advancement” and an “entirely new mobile computing experience”.

Apple also celebrated its 1-pound weight, all-day battery and desktop-class A7 processor. What it left out of its statement, however, were boasts of having created the most advanced iPad yet, for less than the cost of its previous model.

Fatter Margins

The 16GB Apple iPad Air with cellular and Wi-Fi connectivity has a bill of materials (BOM) of $304 (£189), according to a teardown by IHS iSuppli. The figure represents a 6 percent savings over the $325 (£202) BOM the firm found the equivalent third-generation iPad to have.

(The BOM doesn’t include manufacturing costs – $6/£3.73 – and other expenses to Apple, such as software, licenses, royalties and research and development.)

For the lowest-end iPad Air (16GB of NAND, sans cellular), the BOM plus manufacturing is $274 (£170) – $42 (£26) less than the equivalent third-gen iPad.

“While the iPad Air slims down in size, the profit margins are getting fatter,” Andrew Rassweiler, IHS senior director of cost benchmarking services said in a 5 November statement.

A good degree of the new iPad’s slimming down comes, thanks to its 1.8mm-thick display (versus the 2.23mm display on the earlier model), but as with all good things, it comes at price. IHS estimates that the new displays come at a cost of $90 (£56), and that its touch-screen module is $43/£27 (versus $87/£54 and $37.50/£23, respectively, of the earlier iPad).

Component Sharing

“Although the Air’s new, ultrathin display and touch-screen are more expensive than for the third-generation iPad, Apple has held the line on cost by taking advantage of price erosion in other areas,” said Rassweiler. Apple has also, he said, used the same components and suppliers as for the iPhone 5S and 5C “as much as possible.”

For example, the iPad Air uses the Apple-designed, Samsung-made A7 processor that’s in the iPhone 5S, though “with some variations,” according to IHS.

The A7 in the Air, made to work harder than its iPhone counterpart, given the difference in display sizes, has a metal top that acts as a heat sink. Additionally, the power management chips from Dialog Semiconductor that support both processors are different. (IHS says it plans to further examine the two.)

Other frugal moves were the use of the same memory to support the A7 in the iPad Air as is used in the 5S, and the same suite of Qualcomm-supplied chips.

As for additional differences between the iPad models, IHS found the iPad Air to have a battery capacity down 23 percent over that of the third-gen iPad – a feat likely made possible by the lower power consumption in the Air’s display backlight.

Apple also amped up the microphone technology in the iPad Air. The technology is digital this time, instead of analogue, and there’s more of it.

“In another major departure, Apple is employing two microphones in the Air, as opposed to one in the previous models,” wrote IHS in its report. “The second microphone likely performs noise cancellation.”

IHS adds that Apple’s price points also shift dramatically between models. While the 32GB iPad Air has a BOM just $8.40 (£5.22) more than the 16GB model, it retails for a full $100 (£62) more.

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Originally published on eWeek.