Last Thursday, pictures of an iPad teardown from iFixit went up, and they certainly did help us see what Apple put inside their new iPad. Now, an iSuppli teardown just took place, but with a completely different goal; to see how much money it took to build the iPad.
A similar iPad 2 teardown last year showed that it cost Apple about $200 to make one iPad 2, meaning 60% of its price was profit. Because the new iPad retails for the exact same price, iSuppli expected to find about the same profit margin, but the results were quite surprising. The base model costs $316 to manufacture, resulting in a profit margin of just 37%, while the hi-end model, the 64GB model with 4G, costs $409 to manufacture, a 51% profit margin. What caused this huge increase in manufacturing price?
Many factors led to this increase, but the pie chart to the left illustrates the largest contributors. As you can see, the retina display was the biggest factor. Apple chose to multiply the pixelation by 4, and this made the price of the display jump from $57 in the iPad 2 to $87 in the new iPad. This $30 price jump doesn't even tell the whole tale, because a bigger battery and faster processor had to accompany the retina, otherwise the iPad's specs would take quite a hit. The A5X cost Apple $23, as opposed to the $14 A5 chip in the iPad 2. And the 70% bigger battery, which was needed to keep a 10 hour battery life despite the retina display, cost $32, up from the iPad 2's $25 battery. Finally, the 5MP rear camera on the new iPad costs $12.35, compared to just $4 for the iPad 2's 0.7 MP camera.
Considering that the iPad's manufacturing cost is significantly higher than that of the iPad 2, it surprises me that Apple didn't choose to raise the price to $550 or $600, especially when their profit margin is on the computers they sell is quite large. Yet, at the same time, it makes sense; the main reason why the iPad is by far the best tablet in its class is its price. And, for now, it still has that advantage.
