In our opinion the iPhone 5s and the newly released iPad Air are both innovative new devices for a number of reasons. We've elaborated on these reasons elsewhere, but on top of the innovation Apple also needs to be commended for continuing to manage its bill of materials (BOM) for its new devices. Our recent analysis of IHS's iPhone 5s teardown demonstrated that Apple not only managed to build a much better iPhone 5s, but it managed to do so at much better BOM cost points.
When we first encountered the iPad Air it was clear to us that Apple had managed to push the innovation envelope again, but we honestly did not think it had done so by lowering the BOM for it. Well color us surprised. IHS's newest teardown, of the iPad Air, clearly underscores that Apple has managed to do exactly this…again. In fact, the new iPad Air costs less for Apple to produce than its first retina display tablet, the iPad 3, did when Apple launched back in early 2012. This is the core reason Apple has phased out both the iPad 3 and 4th gen iPads. Lower BOMs translate to better margins, and it is good to see that Apple has been able to deliver the iPad Air at a BOM point that accomplishes this.
The new 16 GB iPad Air with cellular connectivity has, according to IHS's Teardown Analysis Service, a BOM of $304. That is a non-trivial 6 percent BOM reduction over the $325 BOM for a similarly equipped iPad3, based on IHS's final pricing estimate for the iPad 3 when it was released.
Once an estimated six dollar manufacturing cost is factored in, it brings the total BOM for the iPad Air to $310. Further, eliminating the cellular radio from the mix brings the BOM for the lowest cost iPad Air down to $274 - or $42 less than a similarly equipped iPad 3. The chart below provides estimated details for the iPad Air's components. IHS notes that these numbers are preliminary, but historically we can assume they are extremely close to reality. As always, other expenses that include software, licensing, royalties or other expenditures are not included here.
This all adds up to higher profit margins, of course. And as is also usual, Apple really drives profitability for itself whenever users step up beyond 16 GB. Each doubling of memory adds $100 in user cost - so $499 for the basic 16 GB iPad Air, $599 for the 32 GB version and $599 for the 64 GB version. What will it cost Apple? That $100 additional cost to the buyer for the 32 GB model only costs Apple $8.40 more to produce than the 16 GB model. We'll leave you to do the math for the 64 GB model. These are truly profit machines.
iPad Air's Ultra-Sleek Design Costs More
The iPad Air is significantly thinner than its predecessors primarily because of its display and touch components. To drive this new thinness Apple had to use pricier components here. The iPad Air’s sleek display carries a cost of $90, compared to $87 for the third-generation model and the touch-screen module is estimated by IHS to cost $43.00, compared to $37.50 for the third-generation iPad. Together that adds up to a non-trivial $8.50 to deliver on a dramatically improved thickness profile.
The Air’s display is 1.8 millimeters (mm) thick, compared to about 2.23 mm for the older-generation iPad - a substantial .43 mm reduction. The touch screen is also thinner due to Apple's use of a cyclo olephin polymer (COP) film sensor. It is a good deal more expensive than the iPad 3's relatively thick glass sensor.
The iPad Air is also thinner because the battery is now thinner. The new battery capacity is subsequently less at 32.9 watt hours (Wh) down from 42.5Wh in the third-generation model - a 23 percent reduction. Never the less, the iPad Air delivers the same 10+ hours of non-stop use that its predecessors deliver. Why? Again we need to turn to the display and the display backlight, which requires less power to operate. The iPad Air only uses 36 LEDs to illuminate the liquid-crystal display (LCD), down from a much, much higher 84 LEDs in the earlier-generation iPad. That is a greater than 100 percent reduction, and that many fewer LEDs result in substantially lower electricity demand. The result is a smaller battery and an even thinner profile.
The iPad Air and the iPhone 5s use a number of common components. The most obvious here is the 64-bit A7 microprocessor. The Air also uses the same memory to support the A7 processor as the 5s, employing 1GB of low-power Double Data Rate 3 (LPDDR3) DRAM. Interestingly, Samsung and LG both utilize 2 GB of DRAM, a distinct difference from Apple, yet the combination of the A7 and LPDDR3 DRAM deliver lightning fast results that Apple's competitors cannot yet deliver on. Considering that Apple has driven down the overall costs of both the iPad Air and iPhone 5s while delivering third party-confirmed processor speeds that beat out its competitors is quite an achievement.
There are parts here we won't detail, but it is worth noting that Apple has standardized on Qualcomm's MDM9615, WTR1605L and PM8018 chipsets for core baseband and RF transceiver functions across all of its flagship devices, as well as the iPhone 5c.
In contrast to the processor and baseband segments however, IHS notes that the RF/power amplifier (PA) modules in the iPad Air are different from the iPhone 5s. The RF/PA section in the iPad Air supports the 4G Long Term Evolution bands for all U.S. carriers with a single-model iPad. This is not the case for the iPhone 5s. IHS suspects that this is most likely due to space constraints in the smaller smartphone form factor - the RF/PA subsystem in the iPad Air is laid out on 40 percent more surface area in the printed circuit board than the comparable function in the iPhone 5s.
Uncommon for Apple in any case…the iPad Air brings a significant change as it now not only provides two microphones but unlike all other previous iPads and iPhones, the ones in the iPad Air are now digital mics. With the exception of the old iPad 2 (which used a digital microelectromechanical system microphone from Analog Devices) Apple has exclusively used analog microphones in all of its devices. Those analog mics had been sourced from Knowles and AAC but the new digital mics in the iPad Air come from STMicroelectronics. Why 2 mics? HIS believes the second works as a noise cancellation device.
iFixit's Teardown - iPad Air Battery Really Tough to Replace
The folks at iFixit usually deliver the first teardown amongst those that do so. Unlike IHS, which focuses on BOM issues primarily, iFixit takes devices apart in order to figure out how easy or hard it will be to repair them (iFixit, get it?). As iFixit usually does with new devices, it has provided a detailed iPad Air teardown, complete with a collection of images that show the step by step processes involved, its collection of tear down gadgets, and of course detailed pithy commentary. The most difficult thing apparently is battery removal (and replacement - why else would one remove one?). Here is what the iFixit team says:
During the process of removal the batteries ended up warped - a slightly dangerous scenario. Shown below is the final disassembled iPad Air. Look hard enough and you can see the warp in the batteries.
The bottom line for the iPad Air? Super sleek, with a BOM low enough to create nice margins for Apple. And an abysmal "Repairability Score" from iFixit of 2 (on a scale of one to 10, 10 being the easiest to repair). Such is the price of fame.
To access the full report and to view a detailed video of IHS's iPad Air teardown please be sure to visit the IHS website.
TechZone360 Senior Editor
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