iPad Air costs $274 to build, $42 less than iPad 3

iPad Air (IIHS iSuppli BOM teardown)

Thanks to Apple’s economies of scale, advanced manufacturing, smart engineering and the latest technological solutions, Apple’s fifth-generation full-size iPad, the iPad Air, is actually cheaper to produce than the third-generation model – despite packing in the latest technology, research firm IHS Suppli has discovered in a new teardown analysis.

Total cost of components that go into the latest iPad is between $274 and $361, depending on the model, which is still $42 cheaper than the entry-level iPad with Retina display. The priciest iPad Air component by and large is its Retina display and the touchscreen assembly.

Both components incorporate a number of improvements such as fewer, more advanced LED lights providing the backlighting to the display and a new type of sensor known as a cycle-olefin polymer (COP) sensor located right underneath the outer layer of Gorilla Glass. More tidbits right bellow…

The $42 difference could easily account for the missing Touch ID on the iPad 3.

According to the teardown findings obtained by AllThingsD, the iPad Air’s display assembly uses only one layer of glass instead of two like before. This has enabled Apple engineers to reduce the thickness of the whole display assembly from 2.23 millimeters down to just 1.8 millimeters.

At an estimated combined cost of $133 (about $90 for the display and $43 for the touchscreen parts), it’s a lot more expensive than before.

IHS analyst Andrew Rassweiler says LG Display and Samsung supply the screens.

iPad Air Home screen

The new LED backlighting module achieves the same level of brightness with just 36 LED lights versus 84, which is less than half the LED lights compared to the iPad 3. Fewer LEDs also contribute to the iPad Air’s reduced weight and power consumption.

Rassweiler says that while it’s possible that the LED lights are brighter and more efficient with than in previous models, Apple is also using thin layers of optical film to distribute the light from the LEDs across the entire display.

The iPad Air bill of materials is as follows: the display costs $90, an additional $43 covers the touchscreen components, Qualcomm’s cellular networking LTE chips are $32, Toshiba-made NAND flash storage is between $9 (16GB) and $60 (128GB) and DRAM chips manufactured by Elpida are ten bucks.

As for the Apple-designed, Samsung-manufactured 64-bit A7 processor, it costs $18 per unit, which is five dollars less per unit than the A5 chip cost eighteen months ago. Depending on the model, IHS estimated the iPad Air component costs between $274 and $361.

iPad Air promo (A7 closeup 002)

The iPad Air’s cellular capabilities are especially interesting, notes IHS:

With the iPad Air, Apple appears to have reached a new milestone on the wireless front: It can support every LTE frequency with a single combination of chips.

“This is something Apple tried to do with the iPhone 5s and 5c, but it couldn’t quite get there,” Rassweiler says. “One single model of the iPad Air is able to work with all U.S. wireless carriers.”

Qualcomm’s latest world-mode wireless chips allow Apple to build fewer cellular SKUs, in turn reducing total costs overall and increasing gross profits. For those wondering, space constraints have prevented Apple from putting these chips inside the much smaller iPhone 5s and iPhone 5c housing, Rassweiler said.

Other tidbits: the iPad Air’s power management chip is made by Dialog Semiconductor, Broadcom makes a touchscreen controller silicon, Cirrus Logic supplies an audio chip, a gyroscope processor is a STMicroelectronics component, Bosch Sensortec supplies the accelerometer, a compass chip is of AKM Semiconductor variety and Skyworks, Avago Technologies and TriQuint Semiconductor all supply different bits of the wireless technology.

iPad Air teardown photo courtesy of iFixit.

IHS pegged Apple’s gross margins on the iPad Air at 45 percent for the 16GB Wi-Fi only version to as much as 61 percent for the top-of-the-line 128GB cellular variant.

The device retails for $499 for the entry-level Wi-Fi-only model with sixteen gigabytes of storage and all the way up to as much as $929 for a 128GB variant with cellular connectivity. As per usual, these estimates exclude other costs associated with product assembly, marketing, packaging, distribution, cost of sale, licensing, research and development and more.

You may also want to check out iFixit’s iPad Air teardown, a microscopic analysis of the A7 processor with Secure Enclave by Chipworks as well as IHS’s teardown of the iPad mini, the iPhone 5s/5c, the iPhone 5 and Samsung’s Galaxy S4.

As for the iPhone 5s/5c, IHS’s estimate of bill of materials for the entry-level model is $199/$173.