iPad Mini Carries $188 Manufacturing Cost: IHS

The iPad Mini's touch-screen is the most expensive component of the tablet, but Apple is saving money by using the A5 processor, a teardown analysis finds.

Now that Apple’s long-awaited iPad Mini tablet is out in the market, analysts are eagerly putting the screws to the device with teardown analyses revealing the inner components of the device, as well as the cost. A Nov. 5 report from research firm IHS iSuppli found that the base model of the iPad Mini with WiFi only and 16 gigabytes of NAND flash memory carries a bill of materials of $188. Based on the preliminary IHS assessment, the iPad Mini is slightly more profitable on a percentage basis than the comparably equipped version of the New iPad when it was released in March 2012.

When the $10 manufacturing expense is added in, the total cost to manufacture the iPad Mini rises to $198. IHS noted the teardown only represents hardware and manufacturing costs and does not include additional expenses such as software, licensing, royalties or other expenditures. The individual iPad Mini dissected by IHS included only a WiFi connection, with no 4G Long Term Evolution (LTE) wireless hardware included. Based on the preliminary teardown analysis, the addition of the 4G LTE module hardware would cost approximately $34.

“With the iPad Mini, Apple is sticking to the premium-brand strategy it has always used for its media tablet and smartphone products,” Andrew Rassweiler, IHS senior principal analyst for teardown services, said in a statement. “Apple’s strategy entails offering differentiated hardware that justifies higher price tags than comparable products. This differs markedly from Amazon’s 7-inch Kindle Fire HD and Google’s Nexus 7 tablets, both of which are essentially low-margin or no-margin giveaways at a $199 retail price. Apple makes healthy margins on its hardware, while Amazon and Google employ different strategies with their 7-inch tablets.”

The initial cost of the display and touch-screen module is preliminarily estimated at $80, representing a hefty 43 percent of the total BOM for the low-end iPad Mini. The iPad Mini employs GF2 multi-touch touch-screen technology, which allows the touch-screen module to be thinner than competing tablets, but GF2 technology also makes manufacturing more challenging during initial production by reducing manufacturing yields and drives up pricing for the touch-screen module.

Due to the high price of the screen, Apple needed to reduce expenses in other sections of the iPad Mini, turning to the processor—an A5 chip manufactured with a 32-nanometer process technology. The A5 used in the Mini is a part that has been used in two other Apple products and costs just $13, accounting for only 4 percent of the total bill of materials, or BOM, according to the teardown analysis. This compares to $16.50 for the Texas Instruments OMAP processor used in Amazon’s Kindle Fire HD.

“The use of the A5 is a great example of Apple leveraging a common component in as many devices as possible in order to increase purchasing volumes and keep costs to a minimum,” Rassweiler said.