Apple Mum on Initial iPad 2 Sales, IHS iSuppli Cost Estimate

Apple didn’t immediately respond to a request for comment on how many iPad 2s it shipped or sold since the device’s Friday launch, or the estimate by research company IHS iSuppli that the 32-GB version of the new device has a bill of materials (BOM) cost of $326.60. Analysts projected that as many as 1 million iPad 2s were sold at launch and many stores reportedly sold out of the device over the weekend.

Apple “held the line on” on the iPad’s BOM, “maintaining virtually the same costs as the first version of the device,” IHS iSuppli said, citing the findings of a teardown analysis of the version of the device that features the Global System for Mobile Communications/high-speed packet access (GSM/HSPA) air standard. The version that features the code division multiple access (CDMA) air standard carries a BOM of $323.25, it said. Adding on manufacturing costs, the cost to produce the GSM/HSPA version increases to $336.60, while the cost of the CDMA version grows to $333.25, it said. The first 32-GB iPad carried a BOM of $320, IHS iSuppli said.

"Despite the obvious changes” that were made to the new version of the iPad, including its enclosure and battery, as well as “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,” said Andrew Rassweiler, senior director and principal analyst and teardown services manager at IHS. The new device’s touch screen, supplied by LG Display, “appears to be the same” as the one from the first iPad, despite the modifications made, he said.

The first iPad 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,” Rassweiler said. Many of the other components of the iPad 2, including the applications processor and 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,” he said.

IHS iSuppli estimated that the iPad 2’s display and touch screen subsystem costs $127, up from the research company’s initial $95 estimate for the first iPad based on pricing from April 2010, it said. The increased cost was “due almost entirely to the cost of the touch screen” and the “manufacturing challenges that the touch screen manufacturers have experienced since beginning production,” it said. Production yields “have been improving,” but were “very low throughout 2010, and drove prices to be much higher than initially expected,” it said. Meanwhile, “refinements in the touch screen specifications have driven the price point even higher for the iPad 2,” it said. Other “contributing factors to that cost increase include more expensive glue to improve the efficiency/performance in the bonding, thinner Gorilla cover glass and more detailed inspection process requiring additional equipment for optical and panel examination,” IHS iSuppli said.

Because the recent iPhone 4 CDMA used a Qualcomm chip solution, IHS iSuppli had speculated that Apple might consolidate wireless chip suppliers and use a Qualcomm solution in the iPad 2 GSM/HSPA version. But the iPad 2 “uses the same Intel chipset used in the iPhone 4 GSM/HSPA version,” the research company said. For the CDMA version of the iPad 2, it “assumed the chips and components from the CDMA version … are those used in the iPhone 4 CDMA,” it said.

The iPad 2’s A5 processor, at $14, costs 75 percent more than the A4 processor in the first iPad due to “improvements in performance and inherent design changes,” IHS iSuppli said. “The cost of this processor is expected to erode quickly over the course of the next year as Apple ramps production,” the research company said.

The improved iPad 2 battery costs $25, up from $21 for the first iPad, IHS iSuppli said. The new device’s battery “is much thinner than the iPad 1’s and uses three cells, rather than two,” it said.