iPad 3 Teardown Reveals Higher Production Costs

Like clockwork, as soon as Apple releases a new product, teams like IHS iSuppli rush to disassemble the device into its component parts. The new iPad is no different, and the teardown has revealed a slimmer profit margin for Apple due to more expensive components.

This comes as no surprise, especially with the Retina display costing an estimated $30 more than its predecessor. Including manufacturing, the new 16GB Wi-Fi only iPad costs $316 to make, compared to the iPad 2 at $245. Apple has chosen to keep retail pricing for the device level at $499 despite this $71 difference.

In addition to the Retina display, which quadruples the number of pixels from the old model, IHS cites the higher capacity battery and LTE wireless components as major contributors to the increased cost. Thanks to Samsung's production of the application processor and Retina display, they have topped the vendor list with a 30 percent share of Apple's total parts bill. The Retina display itself costs $87, making it the most expensive part in the new iPad.

When it comes to LTE connectivity, the new components are estimated to cost $41.50, which exceeds the previous 3G-only hardware price of $25.60 on the iPad 2. Other details discovered by IHS include the fact that although the new iPad battery exceeds the previous model in wattage by 75 percent, the cost to Apple only went up 40 percent to $32.

Apple makes more profits by selling the higher-tiered models of iPad thanks in part to the pricing of NAND flash memory. According to IHS, the $100 increase in price between the 16 and 32GB models more than covers Apple's cost increase of $16.80 to provide extra storage. Now that the new iPad has been properly dissected analysts can have a field day crunching numbers on Apple's bottom line.