In spite of its lack of a Retina display and costing over $100 more compared to rival tablets such as Google (GOOG)’s Nexus 7 and Amazon (AMZN)’s Kindle Fire HD, Apple (AAPL) has defended the price tag for its iPad Mini, claiming the company’s profit margins on the gadget are lower than on any of its other products. And according to a new teardown conducted by IHS, formerly iSuppli, that seems to be the case.
By factoring Apple’s bill of materials [BOM] and manufacturing costs, IHS, as reported by AllThingsD, concluded that the base 16GB Wi-Fi-only iPad Mini model, which sells for a starting retail price of $329, costs only $188 to produce. That means the device is netting Apple $141 on each 16GB iPad Mini sold. The company’s profits climb even higher with the 32GB and 64GB, which sell for $429 and $529, respectively, as they cost an additional $90 and $162 to build, IHS found.
In addition to the cost of materials, the teardown also revealed the identities of some of the device’s key suppliers. Samsung continued its role as the manufacturer of Apple’s A5 processor — the same processor as found in the iPhone 4S and the iPad 2 — despite the companies’ bitter relationship. LG Display and AU Optronics supplied the 7.9-inch touch-sensitive display and corresponding components, which cost about $80. That represents around 43% of the total cost of the iPad Mini’s total BOM – a high percentage to be sure, and one that has increased due to the fact there is currently a shortage of supply in the 7.9-inch screen market.
IHS analyst and head of the company’s teardown team Andrew Rassweiler said the price should come down as production of the thin screens normalizes.
It’s important to remember that while Apple is undoubtedly making a good profit on each iPad Mini sold, it doesn’t mean the device is yielding a profit margin of 43%. IHS’ teardown, besides the company’s bill of materials, doesn’t take variable factors like shipping costs, marketing and research and development into account, so Apple isn’t exactly making $141 on each 16GB iPad Mini sold.
The iPad Mini, the first expansion of Apple’s iPad line since the product launched in early 2010, went on sale Friday morning worldwide, and many stores have already sold out of the tablet.