New iPad costs more to produce

Editor: Helan　　 Update Time :2012/03/21 15:22

The new iPad, equipped with 32GB of NAND flash memory and 4G LTE wireless capability, carries a bill of materials (BOM) of US$364.35, according to a teardown analysis by IHS iSuppli. When the US$10.75 manufacturing costs are added in, the cost to produce the new iPad rises to US$375.10. The BOM of the 16GB 4G LTE version amounts to US$347.55, and the 64GB version is estimated at US$397.95.

The US$364.35 BOM represents 50% of the US$729.00 retail price of the 32GB LTE version of the new iPad

The very lowest-end version of the new iPad, with 16GB memory and no LTE, carries a combined BOM and manufacturing cost of US$316. The highest-end model, with 64GB memory and integrated LTE, has a total BOM and manufacturing expense of US$408.70, the teardown revealed.

The new iPad is more expensive to produce than the iPad 2 at the time of product launch, even though the retail price points are the same, IHS indicated. The 32GB LTE model's BOM is nearly 9% higher than an iPad 2 equipped with 32GB and 3G wireless, which carried a cost of approximately US$335 at the time of product launch. Major factors driving up the BOM include the addition of the high-resolution Retina display, LTE wireless and a larger-capacity battery.

Among all component suppliers, Samsung Electronics continues its reign as the big winner in the individual iPad analyzed by IHS, the research firm said. Samsung supplied both the display and the applications processor. The new iPad's Retina display represents the most expensive single component in the tablet, at US$87, while the applications processor costs an estimated US$23. Combined, this gives Samsung a 30.2% share of the 32GB LTE version of the new iPad's bill of materials, the largest for any supplier.

In the individual new iPad analyzed, the NAND flash was supplied by Toshiba. However, Samsung also is a source of NAND for the new iPad. In a 32GB LTE iPad where Samsung is also the supplier of the NAND, Samsung's share of the BOM rises by US$33.60 to a total of US$143.60, amounting to 39.4% of the total BOM. However, Toshiba, Hynix Semiconductor and others also are all NAND suppliers to Apple, and each will claim a portion of those revenues.

IHS believes that the battery cells are supplied by Samsung. If this turns out to be the case, Samsung will account for nearly 50% of the new iPad's BOM.

"The Retina display represents the centerpiece of the new iPad and is the most obvious enhancement in features compared to previous-generation models," said Andrew Rassweiler, senior principal analyst, teardown services, at IHS. "The first two generations of the iPad employed the same type of display - a screen with resolution of 1,024 by 768 pixels. For the third-generation new iPad, Apple has taken a significant step up in display capabilities and expense, at four times the resolution and 53% more cost."

The new iPad's Retina display has a resolution of 2,048 by 1,536 pixels. It costs US$87, compared to US$57 for the screen used in the iPad 2. The US$87 cost accounts for 24% of the BOM of the new iPad with 32GB NAND and LTE, making the Retina display the most expensive single component in the tablet.

As IHS announced in a previous release, the firm believes Apple likely has qualified three sources for the display in the new iPad: Samsung, LG Display and Sharp. However, it is likely that all the volume shipments of the new iPad display are currently coming from Samsung. In line with this view, the individual new iPad torn down by IHS includes a Samsung-sourced Retina display.

The touch screen for the new iPad costs an estimated US$40, or 10.9% of the total BOM. As in the iPad 2, the main suppliers in this area are still TPK, Wintek and Chi Mei.

The wireless section costs US$41.50 and accounts for 11.4% of the BOM. Because this section provides support for the LTE capabilities of the new iPad, it is significantly more expensive than the US$25.60 wireless section of the iPad 2, which supported the 3G air standard. The big winner in this section is Qualcomm, whose MDM9600 baseband processor provides the core LTE functionality. IHS believes that the wireless section is the same for both AT&T and Verizon versions of the new iPad, although that hasn't been confirmed yet.

The A5X applications processor costs US$23, and represents 6.3% of the total BOM. Samsung manufactures the A5X for Apple. However, for this device, Samsung serves as a foundry partner to Apple, and not as an independent semiconductor supplier. Apple is the designer and owner of the intellectual property of the A5X, and Samsung manufactures the part on a contract basis. This means that Samsung likely commands a lower margin on the device that it would otherwise.

"The NAND flash memory is one of the key profit-generating components for Apple in the new iPad line, as it has been in previous iPads and in the iPhone family," Rassweiler noted. "Apple makes far and away more money in selling consumers NAND flash than NAND flash manufacturers make selling it to Apple. And the more flash in the iPad, the higher the profit margin there is for Apple."

For example, the retail price of the 32GB LTE-enabled new iPad is US$100 higher than the 16GB model. However, Apple's BOM for the 32GB version is only US$16.80 more compared to the 16GB model.

The new iPad camera module design and cost is the same as in the iPhone 4 camera module. The two camera modules cost a combined US$12.35, representing 3.4% of the BOM.

The battery delivers a major upgrade from the previous model. The lithium polymer battery in the new iPad supports 42.5 watt hours, up about 75% from 25 watt hours in the iPad 2, IHS indicated. However, because of price decreases during the past year, the new battery costs only 40% more than the old one, at US$32.00, compared to US$22.75 for the one in the iPad 2.