Apple iPad Breakdown Reveals Sub-$300 Cost - HotHardware
Apple iPad Breakdown Reveals Sub-$300 Cost

Apple iPad Breakdown Reveals Sub-$300 Cost

The iPad is certainly the hottest device to physically ship in 2010 so far, and of course, it has people asking lots of questions. Lots and lots of questions. But one question that doesn't get asked much by the average consumer is how much it costs Apple to build an iPad, but that's why iSuppli is around. This research company is famous for breaking down bills of materials in order to come up with a raw material total for any given product, and the company has been hard at work breaking down the individual parts list in order to create a total cost for the first-ever Apple tablet.

Apple was fairly pleased with being able to offer the iPad at $499, and by and large, many seem to agree that $499 is a fair starting point. According to iSuppli, the iPad has over 40% of its bill of materials dedicated to the display, touch panel and other UI components. Those user interface parts alone add up to $109.50, and the grand total in terms of cost for the Wi-Fi only, 16GB model came to $259.60. That's a bit higher than the company's original estimate, but they didn't expect to see such high costs for the battery, UI chips and power management ICs.



That may seem like a joke, or worse, it may seem that Apple is ripping people off left and right. But let's consider this: Apple acquired an entire company (P.A. Semi) in order to use their expertise in building the custom 1GHz A4 that powers the iPad. Apple has also spent tons of money advertising the iPad, and the R&D costs alone over the past few years have to rate in the hundreds of millions. So before you jump on Apple for overcharging you, it's probably smart to look at a more holistic cost view rather than a strict BOM breakdown.

Still, with BOM prices landing at under $300, it gives us hope that the $199 tablet isn't too far off. Of course, NVIDIA's Tegra 2 chipset won't be super affordable by OEMs nor consumers, but with competition comes scale, and with scale comes price lowering. And with price lowering, comes consumer smiles.


User-Interface-Focused iPad Changes the Game in Electronic Design, iSuppli Teardown Reveals

El Segundo, Calif., April 7, 2010—With more than 40 percent of its Bill of Materials (BOM) dedicated to the display, touch screen and other user interface components, Apple Inc.’s iPad represents a radical departure in electronic design compared to conventional products, according to a teardown conducted by iSuppli Corp.

The combined costs of user-interface-related components in the iPad amounts to $109.50, representing 43.7 percent of total BOM of the 16Gbyte, non-3G version of the iPad torn down by iSuppli.

“While the iPad has the potential to change the game in the computing, wireless and consumer worlds, it already has changed the game of how many electronic products are—and will be– designed,” said Andrew Rassweiler, director and principal analyst and teardown services manager for iSuppli. “The iPad’s design represents a new paradigm in terms of electronics cost structure and electronic content. Conventional notebook PCs are ‘motherboard-centric,’ with all the other functions in the system—such as the display, the keyboard and audio—peripheral to the central microprocessor and the main Printed Circuit Board (PCB) at the core. With the iPad, this is reversed. Everything is human-machine-interface-centric, with the PCB and Integrated Circuits (ICs) all there to facilitate the display of content as well as user inputs.”

Based on its physical teardown, iSuppli estimates the BOM of the low-end 16Gbyte, non-3G iPad at $250.60. When manufacturing expenses are added, the cost rises to $259.60.

This cost is higher than iSuppli’s virtual teardown estimate issued in February of a $219.35 BOM and $229.35 manufacturing cost. Cost for the display, the battery, the user interface chips and the power management Integrated Circuits (ICs) all exceeded iSuppli’s initial estimates, driving up the total BOM.

The attached table presents the BOM and manufacturing cost summary of iSuppli’s physical teardown of the iPad.

Please note that the teardown costs account only for hardware and manufacturing and do not include other expenses such as software, royalties and licensing fees.

Display of extravagance

The single most expensive component in the iPad is the display, priced at $65 and representing 25.9 percent of the product’s BOM. The display is a 9.7-inch diagonal, 262,000-color TFT-LCD with a resolution of 1024 by 768 pixels. It employs In-Plane Switching (IPS) technology, which supports a wider viewing angle and better picture quality in terms of presentation of color than a conventional LCD.

“The display represents a customized implementation of an IPS panel, driving up its cost relative to a more commoditized netbook panel,” Rassweiler said.

In the specific iPad torn down by iSuppli, the IPS TFT-LCD was supplied by LG Display. However, iSuppli believes Apple has qualified two other suppliers for the display, with more possible in the future.

The next most expensive component is the touch screen assembly at a cost of $30, or 12 percent of the BOM. The touch screen assembly is 9.7-inches in the diagonal dimension and uses capacitive technology. The supplier of the assembly is Wintek.

Battery gets charged up

Coming in at third in terms of expense is the NAND-type flash memory, at a cost of $29.50 for the low-end 16Gbyte iPad. The NAND in the iPad dissected by iSuppli was supplied by Samsung Electronics Co. Ltd., but Apple likely also is employing other sources of these commodity parts.

The fourth most expensive component is the battery, at $21, representing 8.4 percent of the total BOM. The 3.75-volt battery is a lithium polymer battery pack that employs value-added modular design that combines two cells into a single pack that is more easily replaceable than two individual cells wired in. In the iPad torn down by iSuppli, the battery cells were supplied by Amperex Technology and the pack provided by Dynapack. We had not expected to see the battery cells kitted as a pack, so such a design element clearly suggests these batteries are meant to be replaced at some point.

Design winners

Other notable components and suppliers in the iPad include:

·          The microprocessor, combining an A4 processor core and a Graphics Processing Unit (GPU), designed by P.A. Semi—which was acquired by Apple in 2008—and manufactured by Samsung and carrying an estimated cost of $19.50.
·          The Wireless Local Area Network (WLAN), Bluetooth (BT) and Frequency Modulation (FM) module featuring chips supplied by Broadcom Corp. and costing $8.05.
·          The touch screen microcontroller from Broadcom, at $2.30.
·          A power management chip from Dialog Semiconductor, at $2.10.              
·          A touch screen driver semiconductor from Texas Instruments, at $1.80.
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Apple sold 500000 ipad @ 500 and apple make 200 extra on each ipad so thats mean apple made 125 million dollars dam genius i am

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And of course design, programming, assembly, shipping, and marketing cost nothing - so Apple shouldn't try to make that money back or charge anything more than parts cost.

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Can I have a valid news story with a side order of spam please. I would also like to ask if my spam can be written by someone who does not speak English natively please!

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Well there's always an initial cost to making a product and Apple wouldn't be the first company to have a custom CPU, so essentially there's still an Apple tax. :P  At least it's not as bad on the iPad compared to say, their macbooks

Yes, you can have a side order of SPAM.  :)

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I agree with 3vi1... Did they include the cost of the software in it, the time spent, employee salaries? bills paid during this period of time... :).

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rapid1 is spot on as usual =D

I don't feel like this article gives the total cost spreadsheet justice. There is something being withheld. 

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More or less something interesting to do. They did this for the iPod as well.

I think the more interesting thing to take away from this is that the components themselves don't cost much and this allows Apple to put more money elsewhere like marketing and what not. Marketing is one of those factors that you know how much money you are putting into it, but you don't know exactly what the rewards are from marketing alone. But it is a huge factor giving value to a product. And I'm not just talking about commercials and online ads. It goes all they way down to the little stuff like the box the product sits in.

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What ever happened to that old saying "If You Build it...They Will Come.."

Seems like today everyone believes that you must cut production as much as possible. Or at the least outsource it so you have little overhead.

Then all you have to do Is Market everything like crazy to push people into buying things. What ever happened to give your neighbors a job and they will all support the product.

Instead they replaced that with your neighbor is Jobs and he wants you to buy this product!

This is why I haven't supported Apple since the Macintosh. They have just been overpriced plastic that will be obsolete in two years filling landfills. Yet, the Environmentalists support that because it has a clean design?

I am sure most of us have learned a long time ago that if you buy something on the day it comes out you are bound to get burned.

They could have respected their customers enough to put the insides of the Iphone in there to begin with if they were going to try and justify that price.

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animatortom:

What ever happened to that old saying "If You Build it...They Will Come.."

Seems like today everyone believes that you must cut production as much as possible. Or at the least outsource it so you have little overhead.

Then all you have to do Is Market everything like crazy to push people into buying things. What ever happened to give your neighbors a job and they will all support the product.

Instead they replaced that with your neighbor is Jobs and he wants you to buy this product!

This is why I haven't supported Apple since the Macintosh. They have just been overpriced plastic that will be obsolete in two years filling landfills. Yet, the Environmentalists support that because it has a clean design?

I am sure most of us have learned a long time ago that if you buy something on the day it comes out you are bound to get burned.

They could have respected their customers enough to put the insides of the Iphone in there to begin with if they were going to try and justify that price.

 

Not sure where you are going with this and if my reply is correct. Maybe because I didn't have enough sleep... lol

 

I think that saying is just a bit outdated. With so many companies and so many products, it is hard to EASILY differentiate them. Not many people have the time nor want to spend the time reading reviews and browsing tech articles/websites. This is where marketing comes in. Marketing helps share a product with the world and advertises why it is supposed to be so great.

Advertising is expensive though. Adding an increased budget for marketing/advertising to your current costs and that is a lot of money. So where can a company cut back and create a competitive advantage? Cut costs and outsource/off-shore part of the company activities. The company that they hire is specialized and usually has economies of scale. Most likely cheap labor as well. When costs get cut, companies can charge a lower price. Apple would probably have to charge more if they did the manufacturing in the US. Where else is the money going to come from to cover for everything?

 

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This is a cool lens. I love using Squidoo to find iPad gadgets and apps. I was one of the lucky few to get my hands on an iPad last week and I must say, so far so good. It's an incredible piece of technology and I think it will change the way we read, watch movies, listen to music and more. I just want to find more apps and sites related to iPad, which seem to be hard to trace online. I found a great index of ipad websites on www.squidoo.com/ipad_tablet that lists the best apps, accessories and blogs. Any other ideas?

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