Apple’s newest iPad continues to fly off store shelves, and though the device comes with some new hardware like front and rear facing video cameras, the device’s BOM (bill of materials) checks in at nearly the same price as the original.
iSuppli tore apart the 32GB iPad 2 and found that the GSM model has a BOM of $326.60 while the CDMA version has a BOM of $323.25 (the difference is because of the baseband/RF transceiver and the GPS). In comparison, the BOM for the original 32GB iPad came in at $320.
Despite the obvious changes to iPad like the enclosure and the battery, and the less obvious changes in the touch screen, the iPad 2’s components and design are remarkably similar if not the same as those of the iPad 1. The iPad 1 and iPad 2 use the same components and suppliers for the NAND flash, the multi-touch controllers and touch screen drivers, as well as the same core chip in the wireless section as was found in the iPhone 4. Many of the other components—including the apps processor and the Bluetooth/frequency/global positioning system/wireless local area network chips—have the same suppliers and are essentially new revisions of the chips found in the previous iPad and other iPhones.
Like the original iPad, the most expensive component of the iPad 2 is the display which iSuppli estimates costs $127. The second most expensive component is the memory at $65.70 while the battery costs approximately $25.
Apple often reaps the benefits of fat margins on account of its uncanny ability to incrementally lower the BOM of its products while keeping the ASP steady. Case in point – iSuppli observesthat the component costs associated with building the iPad will also ebb lower and lower. To wit, the report notes that the A5 chip, priced at $14, is 75% more expensive than the A4 chip used in the original iPad. However, “the cost of this processor,” the report notes, “is expected to erode quickly over the course of the next year as Apple ramps production.”
Apple has also helped its bottom line by securing long term supply contracts for component parts for years at a time. In addition to securing supply for important components, it also helps Apple secure favorable contract terms.
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