Apple iPad Air 2 teardown shows minimal increase in BoM costs

October 30, 2014 // By Graham Prophet
Industry analyst IHS has carried out a teardown of the Apple iPad Air2, and presented its own estimates of what it costs Apple to provision and assemble the product. With a design and feature set only incrementally different from the original iPad Air, the new iPad Air 2 carries a nearly identical hardware cost as its predecessor, IHS concludes.

The 16-gigabyte (GB) Wi-Fi-only version of the Apple iPad Air 2 sports a bill of materials (BOM) of $270, based on a preliminary estimate. When the $5 manufacturing cost is added, the cost rises to $275.

This compares to the $269 BOM for the 16 GB version of the original Apple iPad Air, based on a finalised estimate from IHS in November 2013.

Although the profit margin appears to be the same for Apple at the low end of the iPad Air 2 line, the product produces lower gross margins for Apple at the high end with 64 GB and 128 GB worth of NAND flash. This is because the 64 GB and 128 GB models of iPad Air 2 are selling at the same price point as the original iPad Air 32 GB and 64 GB models. The additional cost of memory trims the estimated margins slightly.

“The Air 2 delivers a series of refinements compared to the original Air but features nothing earthshaking,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “With largely identical display specifications and minor improvements in most other areas, Apple continues to offer evolutionary upgrades to the iPad lineup. It's interesting to note that by offering the consumer a 128 GB model for the same price as last year’s 64 GB iPad Air, Apple actually has taken down our estimated margins a bit on both the 64 GB and 128 GB models. The increased memory configurations to 64 GB and 128 GB are some of the key upgrades here.”

The table presents IHS’ preliminary BOM and manufacturing cost estimate of the iPad Air 2, based on a physical teardown of the tablet. Note – says the analysts – that the teardown assessment is preliminary in nature, accounts only for hardware and manufacturing costs, and does not include other expenses such as software, licensing, royalties or other expenditures.

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