IHS SAYS LOW-END IPAD MINI HAS $188 BILL OF MATERIALS

(The following is a reformatted version of a press release
issued by IHS and received via electronic mail. The release was
confirmed by the sender.) 
IHS iSuppli News Flash: Low-End iPad mini Carries $188 Bill of
Materials, Teardown Analysis Reveals 
This is an IHS iSuppli News Flash from information and analytics
provider IHS (NYSE: IHS) covering the IHS iSuppli Teardown
Analysis Service’s physical teardown of Apple Inc.’s iPad mini. 
The base model of Apple’s new iPad mini with Wi-Fi only and 16
gigabytes of NAND flash memory, carries a bill of materials
(BOM) of $188.00, according to a preliminary estimate from the
IHS iSuppli Teardown Analysis Service. When the $10.00
manufacturing expense is added in, the total cost to manufacture
the iPad mini rises to $198.00. 
Please note that this teardown assessment is preliminary in
nature, accounts only for hardware and manufacturing costs and
does not include additional expenses such as software,
licensing, royalties or other expenditures. 
Based on the ratio of cost to retail price, IHS has concluded
that the iPad mini is slightly more profitable on a percentage
basis than the comparably equipped version of the New iPad when
it was released in March 2012. 
“With the iPad mini, Apple is sticking to the premium-brand
strategy it has always used for its media tablet and smartphone
products,” said Andrew Rassweiler, senior principal analyst,
teardown services, for IHS. “Apple’s strategy entails offering
differentiated hardware that justifies higher price tags than
comparable products. This differs markedly from Amazon’s 7-inch
Kindle Fire HD and Google’s Nexus 7 tablets, both of which are
essentially low-margin or no-margin giveaways at a $199.00
retail price. Apple makes healthy margins on its hardware, while
Amazon and Google employ different strategies with their 7-inch
tablets.” 
Amazon’s Kindle Fire HD and Google’s Nexus 7 have set new
consumer pricing expectations for 7.x-inch media tablets,
starting at the $199 point. These low-priced tablets pose a
competitive challenge to Apple’s media tablet dominance. 
“Amazon and Google want to put tablets in consumers’ hands--even
if it means doing so at a minimal hardware profit-- with the
intent of making their money on the content users buy, and/or
the advertising and paid content they will be exposed to by
buying the devices,” Rassweiler observed. 
With the iPad mini, Apple continues to garner even greater
profits from sales of the higher-end tablet models that have
greater amounts of flash memory. Because Apple provides
consumers no option to expand the iPad mini’s storage capacity
with any sort of removable memory card, the only way users can
upgrade the amount of flash available on the product is to buy
the higher-end 32GByte and 64GByte models. 
These higher-end models--with or without 4G wireless
capabilities--are priced at $100 intervals, at $429 and $529.
However, the incremental cost of the additional NAND flash
memory to Apple is only $9.60 for the additional 16GBytes of
memory and $19.20 for an additional 32GBytes of memory. This
means that compared to the 16GByte model, the 32GByte version of
the iPad mini generates about $90 in additional profit for Apple
for every unit sold. For the 64GByte model, Apple’s profit is
about $171 higher than the 16GByte version. 
The individual iPad mini dissected by IHS included only a Wi-Fi
connection, with no 4G Long Term Evolution (LTE) wireless
hardware included. Based on the preliminary teardown analysis,
the addition of the 4G LTE module hardware would cost
approximately $34.00. This cost excludes essential intellectual
property (IP) licensing fees, such as those for CDMA/WCDMA/LTE
wireless technology. 
The defining feature of the iPad mini is its 7.9-inch display,
larger than comparable 7.x-inch tablets, whose displays are
nearly 1-inch smaller, at just 7.0-inches. The iPad mini employs
GF2 multi-touch touchscreen technology, which allows the
touchscreen module to be thinner than competing tablets.
However, the new GF2 technology also makes manufacturing more
challenging during initial production by reducing manufacturing
yields. 
This drives up pricing for the touchscreen module. The initial
cost of the display and touchscreen module is preliminarily
estimated at $80.00, representing a hefty 43 percent of the
total BOM for the low-end iPad mini. 
The main display suppliers for the iPad Mini are likely to be LG
Display of South Korea and AU Optronics (AUO) of Taiwan. LG
Display has been supplying panels for the entire iPad line since
the launch of the first iPad, and is likely to be the main
supplier for the iPad mini displays. The IHS iSuppli Teardown
analysis service identified Samsung as the supplier of the
display in the individual New iPad that was dissected in March.
It is important to note that Apple has multiple sources for many
key components, such as the display. 
With the high price of the display module, Apple needed to
reduce expenses in other sections of the iPad mini. The most
notable example of cost cutting is in the processor: an A5 chip
manufactured with a 32-nanometer process technology. The A5 used
in the mini is a part that has been used in two other Apple
products, including the latest Apple TV model--with that version
using only one of the cores in the A5 32nm--as well as the
latest version of iPad 2. Because of this, the A5 processor
costs just  $13.00, accounting for only 4 percent of the total
BOM. This compares to $16.50 for the Texas Instruments Inc. OMAP
processor used in Amazon’s Kindle Fire HD. 
“The use of the A5 is a great example of Apple leveraging a
common component in as many devices as possible in order to
increase purchasing volumes and keep costs to a minimum,”
Rassweiler said. 
Despite the well-publicized legal battles between Samsung and
Apple, Samsung remains the manufacturer of the processor, the
same as in the iPad 2 and New iPad. The A5 is based on Apple’s
own design, and Samsung simply serves as the part’s foundry
manufacturer, rather than as its supplier. 
Other notable suppliers in the iPad mini include: 
·         SK Hynix and Elpida, which respectively supply the
NAND flash and DRAM, which are collectively estimated to cost
$15.50
·         Dynapack, the maker of the $13.50 battery
·         STMicroelectronics, which sells the gyroscope used in
the user interface and sensor combo module. 
For more information, please contact: 
Jonathan Cassell
Senior Manager, Editorial
jonathan.cassell@ihs.com
Direct: + 1 408 654 1714
Mobile: +1 408 921 3754 
Or 
IHS Media Relations
press@ihs.com
+1 303 305 8021 
(kgt)NY 
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