Market research company IHS iSuppli conducted a teardown of the Apple iPad 2 to see how it compares to the original iPad (see the figure). Apparently Apple has held the price down nicely. The latest iPad 2 bill of materials (BOM) for the 32-Gbyte memory version with GSM/HSPA cellular is $326.60, compared to $320 for the same version of the original iPad—not bad given the increase in features (e.g., cameras) and challenging new slim design. The BOM for the 32-Gbyte version using Verizon’s CDMA cellular is $323.25.
The high-ticket item in this product is the most visible—the touchscreen made by LG. It is priced at $127. These relatively low-yield screens are a bear to make and require more than the usual amount of inspection.
The next most expensive item is the battery at $25, which has increased in price primarily to accommodate the new thinner design. A good battery and exceptional power management are essential to a mobile product like this. The cost is worth it.
As for a processor, Apple used its new A5, an upgrade over the ARM-based Apple designed A4. It runs at 1 Gbit/s and is made by Samsung’s Foundry. The cost of the processor is way up to $14 but should go down as volume increases. The iPad also uses Samsung’s flash memory.
As for the wireless components, they are essentially the same as in the first iPad. The wireless chipset for GSM/HSPA is by Intel via its acquisition of Infineon’s wireless products. The CDMA version uses Qualcomm’s chipset. The Wi-Fi/Bluetooth wireless chip is by Broadcom.
Adding in the manufacturing costs, the total iPad 2 cost comes to $336.60 for the GSM/HSPA version and $333.25 for the CDMA version. With volumes of about 500,000 in the March 11-13 weekend launch, the predictions are for as many as 6 million iPad 2 sales in the first quarter. With that volume, prices will probably come down. There’s no doubt that AT&T and Verizon are subsidizing the iPad 2 to keep the overall consumer pricing in line with our thinner downturn wallets and the forthcoming competition pricing.
Incidentally, UBM Techinsights, another research firm that conducts teardowns, came up with a different BOM cost for the iPad 2 as reported in The Wall Street Journal. UBM Techinsights put the price at $270 versus IHS iSuppli’s $326.60. The $56+ difference seems to be mainly in the display and processor costs. The company also priced the display at $50 versus $127 and the A5 at $25 versus $14.
There are obviously some other differences, but the information provided was insufficient to do a real apples-to-apples comparison. Just keep in mind that these teardowns include some estimates that depend to a great extent on projected volumes and other factors.