With each passing year Apple adds new features and hardware to its line of iPhones and iPads. The cost for the latest Apple devices, however, has managed to remain relatively stable due to better manufacturing processes, as well as Apple’s incredible influence over its component manufacturers. A breakdown of the iPhone 5S back in September found that one of the smartphones could be made for around $199 – just $2 more than the estimated cost of last year’s iPhone 5S smartphone.
Today, market research firm IHS presented its cost analysis for the iPad Air, which was finally released last week. The firm’s teardown of the tablet reveals that, even with its new 64-bit A7 CPU, the iPad Air is less expensive for Apple to manufacture than last year’s third-generation version of the iPad tablet.
IHS estimates that the components in the 16GB version of the iPad Air costa approximately $304. This represents a significant reduction in cost from iPad 3 components, which were estimated to cost $325 at its launch last year. Adding $6 in manufacturing costs, the total cost to produce a new iPad air is estimated at $310.
With the tablet selling for $499, the cost reductions mean a higher margin on each iPad Air sold. Even better for Apple, adding 16GB more storage to the device is estimated to cost Apple only $8.40, meaning the $100 markup on the 32GB version of the iPad Air is almost entirely profit.
“While the iPad Air slims down in size, the profit margins are getting fatter,” said Andrew Rassweiler, senior director for cost benchmarking services at IHS. “Although the Air’s new, ultrathin display and touch screen are more expensive than for the third-generation iPad, Apple has held the line on cost by taking advantage of price erosion in other areas. Furthermore, the iPad Air leverages the same components and suppliers that are used in the iPhone 5s and 5c as much as possible.”