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iPad mini teardown reveals $188 cost in parts

updated 06:21 am EST, Mon November 5, 2012

IHS iSuppli teardown, gross margins up to 56 percent on iPad mini

A new iPad mini teardown analysis by IHS iSuppli shows that Apple is making up to a 43 percent gross margin on each 16GB Wi-Fi iPad miniit sells, reports AllThingsD. The BOM (bill of materials) shows that the components in a 16GB iPad mini with Wi-Fi costs Apple at least $188 in costs. Additionally, Apple only pays an additional $15.50 parts for the 32GB model and $46.50 for the 64GB model providing Apple with a gross margin of 52 percent and 56 percent respectively for those models.

IHS Suppli also found that LG Display and AU Optronics supply the display components for the iPad mini, with these components presenting the largest single portion of the iPad mini's cost at around $80, or 43 percent of the cost of the $188 BOM. The display uses a new touch technology called GF2, which leads to a thinner display. However, as it is still cutting-edge technology, yield rates are said to be low and have forced the cost of the components up.

As was already known, Samsung continues to supply the A5 processor to Apple, which is manufactured in Samsung's new state of the art Austin, Texas plant. However, where Samsung also used to supply much of the memory componentary, Apple is now sourcing components from elsewhere. Flash memory is coming from Hynix Semiconductor, while the financially embattled Japanese firm Elpida is supplying the system RAM for the device at around $15 per chip.

While Apple is entitled to derive profit from the iPad mini, it is nontheless surprising just how much the company continues to (over) charge for the 32GB and 64GB models. Apple has been known to set and maintain prices for each iPad in its lineup as it seeks to preserve its operating margins. However, while the cost of flash memory has been dropping substantially over the past 12 months, it has yet to pass any of these savings on to customers.

By Electronista Staff
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  1. msuper69

    Professional Poster

    Joined: 01-16-00

    The real cost of any device is the amount of resources invested in design, testing and manufacturing.
    Since the average consumer doesn't have to do any of this, the final price of the product seems reasonable to me.

  1. cfenby

    Fresh-Faced Recruit

    Joined: 11-05-12

    As msuper69 rightly points out, no product is worth just the sum of the parts, In fact, it may be less than half the total cost. Only an idiot or someone being disingenuous would base an analysis on the parts cost alone. The engineering, for example, could add several hundred million to the overall cost, or about $30-50 per unit, depending. Original research, industrial design and quality engineering and manufacturing are also far, far different from essentially copying what your competitor does and simply changing a few things and using cheaper parts from who knows where. Apple and Foxconn workers also often earn more than those making/creating other brands, as they're top talent or under far more scrutiny - add another 10% for that. Distribution, shipping and marketing costs would also add another 15-20%, as Apple actually creates marketing desire by selling concepts through billions in advertising and display. Remember the original Microsoft tablet computer? Exactly. And they're supposed to be the business geniuses. No reputable automotive commentator would ever base the value of a car on the parts alone. Engineering, research, marketing and benefit costs are all standard business metrics. "(Over) charge"? Hardly. Apple is #1 on Cinsumer Reports for good reason but there's a whole team out there trying to knock them down, and for a reason. After all, if your competitor shows you up as inferior and has a ten year lead in innovation - what would you do?

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