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Supply issues estimated to drive cost of Apple's iPad 2 touchscreen up to $127

post #1 of 24
Thread Starter 
Components for the touch display on the new iPad 2 are estimated to cost Apple $127 for each device, an increase of more than $30 from the first-generation iPad.

iSuppli has revealed its regular bill of materials estimates for Apple products with the launch of the new iPad 2. As reported by DigiTimes, the most expensive component is estimated to be the $127 touchscreen, which comes in at a projected price markedly higher than the company's $95 estimate for the first-generation iPad.

"The reason for the increase comes in large part from manufacturing challenges that the touch screen makers have been experiencing since beginning high production," the report reads. "Production yields, though they have been improving, has been very low throughout 2010, and drove prices to be much higher than initially expected."

Other factors that are said to have caused the increase in component costs include the use of more expensive glue to improve efficiency and performance in the bonding of the touch display. In addition, the new iPad 2 has a thinner glass cover believed to be Gorilla glass, and a "more detailed inspection process requiring additional equipment for optical and panel examination."

The new A5 processor in the iPad 2 is also estimated to cost 75 percent more than the A4 processor found in the first-generation iPad. The A5 currently costs a presumed $14 per unit, though iSuppli said those costs would "erode quickly" as Apple ramps production and likely includes the new chip in its fifth-generation iPhone.

In all, the 32GB GSM iPad 2 is estimated to have a bill of materials cost of $326.60, while the CDMA version is pegged at $323.25. For comparison, iSuppli estimated the Motorola Xoom, with equivalent 3G radio and 32GB of memory, to have a total bill of materials cost of $359.92.

iSuppli's bill of materials estimates are significantly higher than the conclusions reached by UBM TechInsights. That company's research pegged the total bill of materials for the iPad 2 at $270 for the 32GB 3G-capable model.

Last July, Apple executives called out companies that estimate component costs for its products. Apple Chief Financial Officer Peter Oppenheimer advised that investors should not "put a lot of credence in these third-party reports," noting that some cost categories and components "never seem to make it into the reports."
post #2 of 24
it's nice to have BOM cost breakdowns from two different sources, if only to demonstrate that these estimates are all a load of rubbish and the only people who know the iPad's BOM cost work at Apple.

On the screen front, if iSuppli is right about yield issues for the current screen, this doesn't bode well for an iPad-sized retina display
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post #3 of 24
Are these price estimates for components bought on the open market or are they estimates of what prices apple is actually paying?
post #4 of 24
wow, i could save a lot of money buy building my own iPad, rather than buying it from Apple.

these cost estimates are useless. no one knows what kind of deal these companies are getting on components.
post #5 of 24
I'm pretty sure Apple, especially Steve Jobs , won't allow this.
post #6 of 24
Quote:
Originally Posted by kilimanjaro View Post

I'm pretty sure Apple, especially Steve Jobs , won't allow this.

Won't allow what?
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post #7 of 24
I heared, there are display issues with the iPad 2 ( yellowish spots or so). Did any of you guys observe something like that, or is this just a couple of unlucky guys who happend to get a monday product?
post #8 of 24
Here's my rumor, and I think that I'm more on the money than many of the insane and ridiculous rumors that float around, with most of them turning out to be pure baloney.

There will be no retina in the iPad3. There will also be no iPad 3 in the fall, but that goes without saying. That's all.
post #9 of 24
Quote:
Originally Posted by OllieWallieWhiskers View Post

wow, i could save a lot of money buy building my own iPad, rather than buying it from Apple.

these cost estimates are useless. no one knows what kind of deal these companies are getting on components.

Exactly. Besides, these never consider marketing, R&D, employee salaries, etc. Interesting to think about, but otherwise useless.
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post #10 of 24
Quote:
Originally Posted by Rabbit_Coach View Post

I heared, there are display issues with the iPad 2 ( yellowish spots or so). Did any of you guys observe something like that, or is this just a couple of unlucky guys who happend to get a monday product?

Really? You wanna derail this thread to talk about that? I think there are probably enough threads discussing it already. Perhaps you ought to start here: http://forums.appleinsider.com/search.php
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post #11 of 24
Quote:
Originally Posted by Blastdoor View Post

Are these price estimates for components bought on the open market or are they estimates of what prices apple is actually paying?

I assume that all of the companies will boast that they have superior acumen in knowing Apple's real costs and that they aren't naive enough to use spot market component pricing.

Quote:
Originally Posted by Rabbit_Coach View Post

I heared, there are display issues with the iPad 2 ( yellowish spots or so). Did any of you guys observe something like that, or is this just a couple of unlucky guys who happend to get a monday product?

Heared, eh?

Well, the tech media is reporting that these yellow spots are caused by a chemical used in the manufacturing process; normally this substance dissipates before the finished item ends up in the market, but due to the short lead time, there are units that haven't fully completed this process. The same phenomenon was noted in many of the initial iPhone 4 units.

Nice tangent.

Please stay on topic. Thank you.
post #12 of 24
Quote:
Originally Posted by cvaldes1831 View Post

Heared, eh?

Well, he meant to say 'DONE heared'. As in "I done heared possums makes good eatin'".
post #13 of 24
Dammit, now I want possum.
post #14 of 24
Quote:
Originally Posted by Mister Snitch View Post

Well, he meant to say 'DONE heared'. As in "I done heared possums makes good eatin'".

loydb: Dammit, now I want possum.


HaHa! You guys are killing me

If these numbers are anywhere close to true, then Apple is selling these for an excellent price. Volumes are everything, I guess. I seem to recall that when I worked for a manufacturer, years ago, which produced products on the order of 50,000 per year, that they needed to get 3x the parts cost in order to make a profit (considering all the overhead costs).

I wonder if the Xoom is sold at a loss?
post #15 of 24
[QUOTE=Other factors that are said to have caused the increase in component costs include the use of more expensive glue to improve efficiency and performance in the bonding of the touch display. In addition, the new iPad 2 has a thinner glass cover believed to be Gorilla glass, and a "more detailed inspection process requiring additional equipment for optical and panel examination."[/QUOTE]

I fail to find any reference to sites stating the glass as gorilla glass. Any confirmation of that?
post #16 of 24
Quote:
Originally Posted by Apple ][ View Post

Here's my rumor, and I think that I'm more on the money than many of the insane and ridiculous rumors that float around, with most of them turning out to be pure baloney.

There will be no retina in the iPad3. There will also be no iPad 3 in the fall, but that goes without saying. That's all.

The iPad retina display is hardly insane, it's probably in test. The idea that they up their game to two releases a year, for one year, is not insane either.

On the report, if Apple has low margins then so does everyone else. Lower.
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post #17 of 24
Quote:
Originally Posted by Mr. H View Post

it's nice to have BOM cost breakdowns from two different sources, if only to demonstrate that these estimates are all a load of rubbish and the only people who know the iPad's BOM cost work at Apple.

On the screen front, if iSuppli is right about yield issues for the current screen, this doesn't bode well for an iPad-sized retina display

The key word here is estimate. These estimates by the iSuppli, etc. are useful to the investor as a guide to the economics. However, anyone with any sense takes them as only estimates. They are particularly useful in comparing different products since errors they make are likely to be made across products. The interesting thing here is that both iSuppli and UBM estimate the Xoom to have higher build costs.

Since we never get real costs from Apple, (strategic information) then we must rely on the educated estimates. Of course will never know the savings that Apple gets by its large buys, investment of billions in key component development and production, etc. The best we can do is estimate from their financial reports.
post #18 of 24
Quote:
Originally Posted by asdasd View Post

The iPad retina display is hardly insane, it's probably in test. The idea that they up their game to two releases a year, for one year, is not insane either.

On the report, if Apple has low margins then so does everyone else. Lower.

Actually, its very unrealistic at this point, which is proven by the iPad 2 not having a retina display.

Youre talking about a low power GPU used in smartphones pushing 3,145,728 pixels when a 21.5 iMac only pushing 2,073,600 pixels and the 27 iMac pushing 3,686,400 pixels yet having considerably more powerful dedicated GPUs.

But thats just the GPU, its not accounting for the ability to mass produce the display (which has been and still seems like the one component holding back even more iPad sales) and the additional power needs (which simply isnt an issue with an iMac since its constantly plugged in).
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post #19 of 24
Quote:
Originally Posted by Mr. H View Post

Won't allow what?

Won't allow high priced components/parts to become an obstacle to build a fine device.
post #20 of 24
Interestingly - the fact that the glass is thinner. this should reduce the weight significantly and this seems to have been added to the battery. Is there any report on the battery weight compared to iPad-1?
post #21 of 24
Quote:
Originally Posted by willmtaylor View Post

Exactly. Besides, these never consider marketing, R&D, employee salaries, etc. Interesting to think about, but otherwise useless.

Not useless. You are perfectly correct in you list of items not covered. However if you take the cost of components and add the cost of assembly (that charged by the company that does so, not actual labor cost) then you have the actual cost of building the product. If you subtract this from the selling price you get Gross Margin (I believe that sometimes advertising and/or shipping is included though I think Apple does not). This is a very important data point for investors.

Most of the items you mention are to some extent fixed (at least over the course of a given time period). They are not dependent on the number of products sold. Therefore, their cost per item will go down id you sell more than anticipated. The cost of production, however, is more or less fixed per unit (assuming components or labor do not significantly change during the period).

After all the other business expenses are accounted for and allocated to the individual products, you get the NET margin. The total of that being net profit for the time period.

So these estimate actually do help the investor get some kind of idea as to the factors in the model. Gross margins are a huge issue, as Apple maintains its extraordinary profitability by its ability to maintain exceedingly high margins by industry standards. (It can do this because the products it builds are of such high quality.)
post #22 of 24
Quote:
Originally Posted by Mister Snitch View Post

Well, he meant to say 'DONE heared'. As in "I done heared possums makes good eatin'".

perhaps "opossum"

my wife went down "thar" stairs to feed me dog, and a opossum tried to attack her, the dog done get it out thar quick, don't like no opossums, ugly like my na-bors momma

they do like to sneak in and eat dog food. "them grinners" are a nu-sance yall



just funnin' with ya
famous opossum quote
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post #23 of 24
Quote:
Originally Posted by willmtaylor View Post

Exactly. Besides, these never consider marketing, R&D, employee salaries, etc. Interesting to think about, but otherwise useless.

I suppose that's why it's called a "bill of materials" rather than a "list of total costs and expenses" or some such.
post #24 of 24
Given that Apple has outright confirmed they are using their cash to secure supplies of components, presumably displays and flash at the very least, and there has been speculation they are even paying for retooling etc in order to get the best prices, some of these prices have to be taken with a grain of salt. Did Apple's prices on displays go up? Maybe, maybe not. They may well have bought all the displays they are going to need for the whole year already.

One of the things I wish iFixit had included in their teardown was the weights of things. At least with the iPad 1 they included the weight of the battery, this time they didn't even include that. Seems like the weight of the aluminum frame, the battery and the display assembly would be useful in trying to speculate about the future. How much weight would they save by going to carbon fiber (as recently rumored for the iPad 2)? No idea.
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AppleInsider › Forums › Mobile › iPad › Supply issues estimated to drive cost of Apple's iPad 2 touchscreen up to $127