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Apple iPad costs as little as $229.35 to manufacture

Posted on Thursday, February 11 2010 @ 18:49:05 CET by

Research firm iSuppli has performed a cost analysis of Apple's iPad and found that the manufacturing cost of these devices ranges from $229.35 to $346.15. The cost of development, software, and licensing isn't included in these estimates, but they do indicate that Apple has a pretty large profit margin on the iPad series. One of the biggest money makers is the iPad 64GB with 3G, this $829 device is sold for almost 2.5x more than what its hardware is worth.

Here's iSuppli's press release:

The mid-range, 3G-wireless version of Apple Inc.’s upcoming iPad is expected to carry a combined Bill of Materials (BOM) and manufacturing cost of $287.15, making it the most profitable member of the iPad product line on a percentage basis, according to a virtual teardown generated in part by leveraging iSuppli Corp.’s Mobile Handset Cost Model tool.

The mid-priced version of the iPad equipped with 32Gbytes of NAND flash memory and 3G wireless capability will contain $275.95 worth of components and other materials, iSuppli estimates. This version of the device will cost $11.20 to manufacture.

The table below presents the results of iSuppli’s cost estimate for all six versions of the iPad. Please note these cost estimates account only for hardware and manufacturing costs and do not include other expenses such as software, royalties and licensing fees.

Apple iPad Cost Analysis
“At a BOM and manufacturing cost of $287.15, and a retail price of $729, the 32Gbyte/3G version is expected to generate the highest profit of any member of the iPad line on a percentage basis,” said Dr. Jagdish Rebello, senior director and principal analyst for iSuppli. “The 32Gbyte versions of the iPad cost only $29.50 more to produce than the 16Gbyte versions, but their retail pricing is $100 higher. This shows that Apple believes the highest-volume opportunity for the iPad resides in the mid range of the product line.”

The 32Gbytes of NAND flash in the mid-range iPad costs an estimated $59, compared to $29.50 for the 16Gbtyes in the low-end version, accounting for the cost differential.

Touch and Feel
At a combined cost of $80 for all models, the iPad’s display and touch-screen interface represents the most expensive segment of the system, accounting for 29 percent of the BOM of the mid-range 3G model, according to Vinita Jakhanwal, principal analyst for iSuppli.

The display employs In-Plane Switching (IPS) technology which supports a wider viewing angle and better picture quality in terms of presentation of color than conventional LCDs. While the iPad’s display probably is sourced from three suppliers, LG Display and Innolux are the two most likely suppliers of the iPad’s IPS LCD, Jakhanwal said.

The touch-screen controller chip likely is supplied by Texas Instruments Inc., iSuppli believes.

Precious Memory
The NAND flash memory is expected to be the second most expensive item in the iPad’s BOM, regardless of the model. In the mid-range 3G model, the 32Gbytes of NAND accounts for 21.4 percent of the total BOM.

Based on previous iSuppli teardowns of Apple iPhone and iPod products, likely suppliers for the NAND flash are Samsung Electronics Co. Ltd. and Toshiba Corp.

PA Inside
The applications processor and DRAM are expected to carry a combined cost of $28.90, representing 10.5 percent of the mid-range 3G model’s total BOM, making them the third most expensive line item in the mid-range iPad.

The A4 processor in the iPad is expected to carry a $17 cost. iSuppli believes the processor integrates an ARM RISC architecture microprocessor and a graphics processing unit. The part likely was designed by low-power processor specialist PA Semi, a fabless semiconductor company Apple acquired in 2008. However, the device most likely will be manufactured by Samsung.

For memory support for the A4, the iPad is expected to include 512Mbytes of DRAM, costing $11.90. Apple in the past has sourced DRAM from a wide variety of suppliers in its other products, and is likely to do so with the iPad. However, iSuppli believes that Hynix Semiconductor Inc. is one of the DRAM suppliers for the iPad.

Wireless Expense
For the 3G-enabled versions of the iPad, the cost of the wireless subsystem—comprising the baseband IC, the radio frequency components, the power amplifier and other parts—is estimated at $24.50, equal to 8.5 percent of the BOM of the mid-range version.

iSuppli believes the wireless chipset in the iPad likely is supplied by Infineon, the same as the iPhone 3G S.

Supply Side
Other notable components in the iPad include:

* The user interface components—including an accelerometer, compass, audio codec and other components—are estimated at $10.20.
* The wireless LAN, Bluetooth and FM functionality is likely supported by a Broadcom Corp. device also seen in the iPod Touch and the Google Nexus One. This Broadcom device probably is integrated into a module supplied by Murata, but there remains a possibility that Texas Instruments could supply this chip. iSuppli estimates the cost of this device at $8.05.
* In line with previous Apple products, the GPS chip in the iPad probably is supplied by Infineon. iSuppli estimates the cost of the chip at $2.60.



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