iPad Air Teardown: Retina Display Is Costly

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Peeking inside the iPad Air shows that Apple spent a lot of money to make the device thinner and lighter than previous models. Analyst firm IHS estimates that the iPad Air costs Apple between $274 and $361 to build, depending on the storage and other options. The costliest component? The iPad Air's Retina Display.

IHS expected the iPad Air's innards to resemble those of the iPhone 5s. They do and they don't, according to IHS' Andrew Rassweiler, who spoke to AllThingsD. The most impressive aspect of the new tablet is the screen. Apple has switched technologies that allow the screen (and the tablet) to be thinner than ever.

Touchscreens are composed of several layers, including the glass, the actual display, and the touchscreen controls. According to IHS, the touch control assembly is using a cycle-olefin polymer (COP) sensor. This module used to require two layers of glass, but the new COP sensor allows the Air's screen to require only one layer. Further, Apple significantly reduced the number of LED lights that are used to illuminate the display. Where the iPad 3 had 84 LEDs, the iPad Air has just 36. Fewer LEDs helps reduce power consumption as well as weight. The top layer is Corning's Gorilla Glass, which is somewhat more resistant to breakage than normal glass.

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IHS estimates that the display itself costs Apple about $90 each (at production volumes) and the touchscreen module adds another $43. The entire display costs a whopping $133. The benefits? The iPad 3's display measured 2.23 mm thick. The iPad Air's display measures 1.8mm thick. (Yes, the display dropped one-half of one millimeter.) There's no word on the difference in weight.

What's incredible is that the $133 display represents about half the total manufacturing cost of the iPad Air (16-GB Wi-Fi model). IHS says all the other components combined add up to $141. That includes the aluminum shell, the battery, the A7/M7 processor unit, the RAM and storage, and other components needed to make the iPad Air tick.

Looking at the rest of the internal components shows that, despite the pricey screen, Apple was able to save some cash on the rest of the iPad Air's parts. Samsung's A7 processors, for example, cost Apple about $18 each. That's $5 less than the outgoing A5 processor from the iPad 3. The flash modules that give the iPad Air its storage options (16 to 64 GB) range from $9 to $60.

Though it's not baked into every model, the cellular wireless module has really helped Apple cut down on manufacturing costs. The module, supplied by Qualcomm, costs $32. The benefit is that it supports nearly every frequency of LTE around the planet. By putting support for nearly every LTE network inside a single chip, Apple can get away with manufacturing fewer SKUs.

Some of the other component manufacturers found to reside inside the iPad Air include AKM Semiconductor, Bosch Sensortec, Broadcom, Cirrus Logic, Elpida, SK Hynix, STMicroelectronics, and Toshiba.

IHS estimates the total bill of materials costs Apple $274 for the 16-GB Wi-Fi model and $361 for the 128-GB LTE model, with the storage and LTE options providing the variation in between.

IHS looked only at raw component costs and did not estimate the costs of R&D, packaging, shipping, storing or marketing of the iPad Air. Apple's gross margins across its entire business average between 30 and 35%. That said, Apple makes a healthy profit on its iPads, especially the higher-end models.