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Apple’s iPad Mini Costs $198 to Build

The low-end model of Apple’s new iPad mini with Wi-Fi only and 16 gigabytes of NAND flash memory costs Apple $198 to manufacture, according to researcher IHS.

The low-end iPad mini has a bill of materials (BOM) of $188 and a manufacturing cost of $10 per unit, as shown in a recent “teardown” analysis of the device by IHS.

The cost assessment includes hardware and manufacturing costs, but not software, licensing, royalties, or other expenditures.

Based on the ratio of cost to retail price, 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. The iPad mini has a retail price of $329.

“With the iPad mini, Apple is sticking to the premium-brand strategy it has always used for its media tablet and smartphone products,” said Andrew Rassweiler, senior principal analyst, teardown services, for IHS. Apple’s strategy is to offer “differentiated hardware that justifies higher price tags” than comparable products, he said. The strategy is different from Amazon’s 7-inch Kindle Fire HD and Google’s Nexus 7 tablets, which cost $199 and are “low-margin or no-margin giveaways,” according to Rassweiler.

The defining feature of the iPad mini is its 7.9-inch display, larger than comparable 7.0-inch tablets, whose displays are nearly 1-inch smaller, IHS reported. The iPad mini is equipped with a GF2 multi-touch touchscreen technology, which allows the touchscreen module to be thinner than competing tablets.

The initial cost of the display and touchscreen module is estimated at $80, representing 43 percent of the total BOM for the low-end iPad mini.

The main display suppliers for the iPad Mini are likely to be LG Display of South Korea and AU Optronics (AUO) of Taiwan, the researcher reported. LG Display has been supplying panels for the entire iPad line since the launch of the first iPad.

With the high price of the display module, Apple needed to reduce expenses in other sections of the iPad mini. The most notable example of cost cutting is the A5 processor manufactured with a 32-nanometer process technology, The A5 processor costs just $13, accounting for only 4 percent of the total BOM. This compares to $16.50 for the Texas Instruments Inc. OMAP processor used in Amazon’s Kindle Fire HD, according to IHS.

Despite legal battles between Samsung and Apple, Samsung supplies the processor. The A5 is based on Apple’s own design and Samsung serves as the part’s foundry manufacturer.

Other suppliers to the iPad mini are:

  • SK Hynix and Elpida, which respectively supply the NAND flash and DRAM, collectively estimated to cost $15.50
  • Dynapack, the maker of the $13.50 battery
  • STMicroelectronics, which sells the gyroscope used in the user interface and sensor combo module.