Teardown reveals iPad mini yields 43% gross margin for Apple

Posted:
in General Discussion edited January 2014
In a teardown of Apple's new iPad mini over the weekend, IHS iSuppli analysts found the base 16GB Wi-Fi only model to cost about $188 to build, meaning the device could yield a gross profit margin of 43 percent, depending on variable factors like shipping costs.

By factoring Apple's $188 bill of materials, or BOM, and manufacturing costs against the low-end 16GB Wi-Fi version's $329 price tag, it can be concluded that the unit is netting the company 43 percent margins on the high end.

iPad mini Teardown
Source: IHS iSuppli via AllThingsD


The teardown, as reported by AllThingsD, also found the 32GB and 64GB iterations to cost Apple an additional $15.50 and $46.50 in storage, respectively, bringing profit margins for those models up to 52 percent and 56 percent.

The flash memory found in the test unit was determined to be from South Korean chipmaker Hynix, while Japan's Elpida provided the system memory. These components were previously purchased from Samsung, however Apple appears to be diversifying its supply chain to include smaller manufacturers, a move most recently seen in the iPhone 5.

Besides the configurable memory options, the firm found the mini's 7.9-inch display and corresponding components to cost around $80, representing about 43 percent of the total BOM. It was previously reported that the panels being sourced from LG Display and AU Optronics are using GF2 technology, which raised per unit costs due to manufacturing challenges. IHS analyst Andrew Rassweiler said the price should come down as production of the thin screens normalizes.

Rassweller noted the usual lineup of chips seen in other iOS devices made their way into the mini, including Cirrus Logic audio silicon, STMicroelectronics accelerometer, and a Murata-assembled wireless communications package holding chips made by Broadcom.
«134

Comments

  • Reply 1 of 72


    Originally Posted by AppleInsider View Post

    Teardown reveals iPad mini yields at least 42% gross margin for Apple


     


    Nope.

  • Reply 2 of 72
    bsenkabsenka Posts: 799member
    iSuppli only lists the cost of the bucket of parts. They don't understand the R&D, they don't know what the QC is like at those plants (how many get rejected). What's the failure rate on the aluminum enclosures, for instance (both the milling and the assembly)? What are Apple's costs related to marketing and distribution? I ordered mine with free shipping, how much does that cost?
  • Reply 3 of 72

    Quote:

    Originally Posted by Tallest Skil View Post


     


    Nope.



    Close. If starting BOM is $188, then subtract that from $329 & you get a difference of $142.  $142 is approximately 43.16% of $329.  That's a decent starting gross margin.

  • Reply 4 of 72


    This is simply a raw parts cost, nothing else.

  • Reply 5 of 72


    If the sales numbers are below expectations Monday this would give some wiggle room to lower the price. Holiday sale time soon.

  • Reply 6 of 72
    paxmanpaxman Posts: 4,595member
    seanorse wrote: »
    If the sales numbers are below expectations Monday this would give some wiggle room to lower the price. Holiday sale time soon.
    Or it will allow for some upgrades in the forseeable future without having to increase the price.
  • Reply 7 of 72
    apple ][apple ][ Posts: 8,657member

    Quote:

    Originally Posted by SeaNorse View Post


    If the sales numbers are below expectations Monday this would give some wiggle room to lower the price. Holiday sale time soon.



    I admire your optimism.image


     


    Let me save you from some disappointment though. It's not gonna happen.

  • Reply 8 of 72

    Quote:

    Originally Posted by SeaNorse View Post


    If the sales numbers are below expectations Monday this would give some wiggle room to lower the price. Holiday sale time soon.



    $20 off for Apple's black friday sale!

  • Reply 9 of 72
    paxmanpaxman Posts: 4,595member
    bsenka wrote: »
    iSuppli only lists the cost of the bucket of parts. They don't understand the R&D, they don't know what the QC is like at those plants (how many get rejected). What's the failure rate on the aluminum enclosures, for instance (both the milling and the assembly)? What are Apple's costs related to marketing and distribution?
    I am sure they understand - it's just not what they do. They simply break the thing down and tell you how much the parts are costing Apple. Period.
  • Reply 10 of 72
    solipsismxsolipsismx Posts: 19,566member
    Close. If starting BOM is $188, then subtract that from $329 & you get a difference of $142.  $142 is approximately 43.16% of $329.  That's a decent starting gross margin.

    BOM now equals gross margin?
  • Reply 11 of 72
    apple ][apple ][ Posts: 8,657member

    Quote:

    Originally Posted by paxman View Post





    I am sure they understand - it's just not what they do. They simply break the thing down and tell you how much the parts are costing Apple. Period.


    Maybe they understand, but it seems that a lot of other people don't.

  • Reply 12 of 72

    Quote:

    Originally Posted by SolipsismX View Post





    BOM now equals gross margin?


    (BOM / Selling price) x 100

  • Reply 13 of 72
    archarch Posts: 66member
    Gross margin is the difference between revenue and cost before accounting for certain other expenditure like R&D. The costs to be subtracted include not just BOM but also stuff like assembly, shipping, dealer margins, etc. The 42%u2105 figure in the article makes very little sense.
  • Reply 14 of 72
    solipsismxsolipsismx Posts: 19,566member
    (BOM / Selling price) x 100

    Good luck with that.
  • Reply 15 of 72

    Quote:

    Originally Posted by Shameer Mulji View Post


    Close. If starting BOM is $188, then subtract that from $329 & you get a difference of $142.  $142 is approximately 43.16% of $329.  That's a decent starting gross margin.



     


    Not what Tallest Skil meant by "Nope". Selling price of $329 is indeed a 43% profit margin on $188 - but that's the highest profit estimate, not the lowest, since it doesn't take into account R&D, shipping costs, etc. The article title should read "Teardown reveals iPad mini yields at most 43% gross margin for Apple", difference emphasized.

  • Reply 16 of 72
    archarch Posts: 66member
    (BOM / Selling price) x 100

    ((selling price-BOM)/Selling price) * 100
  • Reply 17 of 72
    archarch Posts: 66member
    Not what Tallest Skil meant by "Nope". Selling price of $329 is indeed a 43% profit margin on $188 - but that's the highest profit estimate, not the lowest, since it doesn't take into account R&D, shipping costs, etc. The article title should read "Teardown reveals iPad mini yields at most 43% gross margin for Apple", difference emphasized.

    gross margin is not supposed to tke into account R&D
  • Reply 18 of 72

    Quote:

    Originally Posted by arch View Post





    gross margin is not supposed to tke into account R&D


     


    My argument was not about gross margin vs profit, but least vs most.

  • Reply 19 of 72
    archarch Posts: 66member
    Not what Tallest Skil meant by "Nope". Selling price of $329 is indeed a 43% profit margin on $188 - but that's the highest profit estimate, not the lowest, since it doesn't take into account R&D, shipping costs, etc. The article title should read "Teardown reveals iPad mini yields at most 43% gross margin for Apple", difference emphasized.

    profit margin and gross profit margin are two different things! AI also doesnt seem to get this right
  • Reply 20 of 72
    archarch Posts: 66member
    My argument was not about gross margin vs profit, but least vs most.

    i agree with most. AI editor should read the wiki page on gross margin and net margin at least before attempting such an article.
Sign In or Register to comment.