Apple's iPad Air 2 manufacturing costs stay level despite new technology - report

Posted:
in iPad edited October 2014
Apple is estimated to pay suppliers $275 for each base-model iPad Air 2 -- compared to $274 for the first-generation iPad Air -- even as the company made the tablet even more slim, upgraded the application processor, and added a Touch ID sensor and NFC chip for in-app Apple Pay compatibility.




The most expensive 128-gigabyte LTE-enabled model, which retails for $829, is thought to book $358 in manufacturing costs. The figures were released Tuesday by market research firm IHS and first noted by Re/code.

The display continues to be the most costly part, estimated at some $77, but that price would mean Apple is paying approximately $13 less for each display than they did for the displays in the first-generation iPad Air. That drop is likely attributable to Apple's growing economies of scale, as the iPad Air 2's display largely matches that found in its predecessor.

"It's basically the same display from before, the same size, the same resolution, but with an anti-reflective coating added," IHS analyst Andrew Rassweiler told the publication.

The $11 Apple is believed to have spent on cameras for the device is slightly higher than last year's model, likely thanks to the upgraded rear shooter.

Overall hardware profit margins for the iPad Air 2 lineup are thought to be between 45 percent and 57 percent, depending on the configuration. It is unclear whether IHS's numbers include ancillary costs, such as marketing and support.

Comments

  • Reply 1 of 11
    melgrossmelgross Posts: 31,892member
    Feh! Here we go again. I'd like to point out, as I always do, that neither iSuppli, or any other company knows what Apple pays for parts. No company knows what any manufacturer of size pays for parts. This is all guesswork, kids!

    Apple, just like other large companies who can negotiate pricing, doesn't let those numbers out. It's all proprietary, and considered to be secret competitive information. So whatever iSuppli says can be read as just an estimate. They say that this year's Air 2 costs just one dollar more in parts? Really? They are so sure of their numbers that they can make a statement that Apple is paying just one third percent more this year?
  • Reply 2 of 11
    Quote:

    Originally Posted by melgross View Post



    Feh! Here we go again. I'd like to point out, as I always do, that neither iSuppli, or any other company knows what Apple pays for parts. No company knows what any manufacturer of size pays for parts. This is all guesswork, kids!



    Apple, just like other large companies who can negotiate pricing, doesn't let those numbers out. It's all proprietary, and considered to be secret competitive information. So whatever iSuppli says can be read as just an estimate. They say that this year's Air 2 costs just one dollar more in parts? Really? They are so sure of their numbers that they can make a statement that Apple is paying just one third percent more this year?

     

    Doesn't iSuppli get their component costs by getting actual quotes from the manufacturer or base it on similar parts from the same manufacturer?  The actual price that Apple pays for each component is likely to be much lower because of their volumes.  In other words, iSupply might be over-estimating the cost of iPads.

  • Reply 3 of 11
    ralphmouth wrote: »
    Doesn't iSuppli get their component costs by getting actual quotes from the manufacturer or base it on similar parts from the same manufacturer?  The actual price that Apple pays for each component is likely to be much lower because of their volumes.  In other words, iSupply might be over-estimating the cost of iPads.

    In other words, no one should take any of these estimates seriously... y'know, like Apple analysts!
  • Reply 4 of 11

    "The new iPad costs $1 more than last year's iPad, giving me reason to notify my investor clients that they should sell all their APPL positions, as this is a clear indication of Tim Cook's lack of leadership and inability to negotiate. This spells the downfall of Apple, and I predict the upside on the stock is no longer feasible." 

     

    Richard "Dick" Cabeça

    Idiotic Investments, Inc. 

  • Reply 5 of 11
    apple ][apple ][ Posts: 8,696member
    Quote:

    Originally Posted by AppleInsider View Post



    "It's basically the same display from before, the same size, the same resolution, but with an anti-reflective coating added," IHS analyst Andrew Rassweiler told the publication.

     

    What about the bonding process?

     

    And what about the improved touch sensors, if what I read recently someplace else was true?

     

    The bottom line is that these market research firms are merely guessing, because they don't know for sure. They are probably as reliable as analysts who pull figures out of their ass when it comes to AAPL.

  • Reply 6 of 11
    Expensive display. Overall, the margins aren't that great at the quoted prices. I'm sure Apple has better pricing than that.
  • Reply 7 of 11
    melgrossmelgross Posts: 31,892member
    ralphmouth wrote: »
    Doesn't iSuppli get their component costs by getting actual quotes from the manufacturer or base it on similar parts from the same manufacturer?  The actual price that Apple pays for each component is likely to be much lower because of their volumes.  In other words, iSupply might be over-estimating the cost of iPads.

    No. They look at commodity pricing, spot market pricing, and standard manufactuer's price lists. Then they guess what a particular company is paying for those parts. That's it!
  • Reply 8 of 11

    Why would NFC be required for "in-app ApplePay compatibility".  That makes no sense whatsoever: local wireless communication hardware is not needed for a software/internet only transaction!  Clearly NFC is there to enable in-store ApplePay on iPads with a software update down the road.

  • Reply 9 of 11
    some people will see the ipad a just a computer. for me, it's hard to value rock solid reliability, a technical work of art, a unification of hardware and software, by it's component pieces. it's a gestalt thing.

    not to mention that this ignores the billions spent on R&D, prototyping, company overhead, retail operations, returns, repairs, support, etc.
  • Reply 10 of 11
    melgrossmelgross Posts: 31,892member
    nevermark wrote: »
    Why would NFC be required for "in-app ApplePay compatibility".  That makes no sense whatsoever: local wireless communication hardware is not needed for a software/internet only transaction!  Clearly NFC is there to enable in-store ApplePay on iPads with a software update down the road.

    No. apparently, the secure enclave is part of the NFC chip. So in order to use Touchid on an ipad, the chip must be included. In addition, we will be able to use Apple Pay with purchases from Apple, as well as from third party in app purchasing, and, when it's worked out, online stores other than Apple's. Amazon has already enabled their own branded credit card to be used with Apple Pay. A lot of people didn't expect that, at least, not so soon.

    There are no antenna's for NFC in the iPads, so they can't be used to either broadcast NFC for purchase, or read NFC for use as a register.
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