What's in an iPad? About $260

An analysis of the guts of the iPad shows that Apple uses a lot of chips in it and has spent a lot on the appearance.

By Charley Blaine Apr 7, 2010 12:54PM
Steve Jobs and the iPad © Kimberly White/Reuters/Landov
So, how much stuff is packed into Apple's (AAPL) iPad tablet computer? If you were just buying the ingredients, it would set you back about $259.60.

Manufacturers of the various components represent a who's-who in technology, including Samsung Electronics, Broadcom (BRCM), Texas Instruments (TXN) and Cirrus Logic (CRUS).

Materials for the iPad, which went on sale Saturday, include a touch-screen display that costs $95 and a $26.80 processor, according to an analysis by iSuppli, a research firm in El Segundo, Calif.

Apple designed the A4 processor; it was manufactured by Samsung Electronics. BusinessWeek reported on iSuppli's analysis.

ISuppli's analysis means the components of the lowest-priced iPad, which includes 16 gigabytes of memory, constitute 52% of its $499 retail price, BusinessWeek said.

To put that in context, that's on par with other Apple products, including the iPhone 3GS.

Apple announced the iPad, which users can hold in their hands for reading and watching videos, on Jan. 27.

A midpriced 32-GB version of the iPad that sells for $599 contains $289.10 worth of materials. A high-end 64-GB version, which retails for $699, contains components that cost $348.10, according to iSuppli.

Much of the iPad's component costs went toward making the device appealing to use, iSuppli principal analyst Andrew Rassweiler told BusinessWeek. He supervised the "teardown" analysis of the product.

More than 40% of the iPad's costs are devoted to powering its touch-screen display and other components of the computer's user interface -- "what you see with your eyes and what you feel with your fingers," he told BusinessWeek reporter Arik Hesseldahl.

The distinctive aluminum casing on the back of the device contributed about $10.50 to the cost of materials.

Research firms conduct so-called teardown analyses of consumer electronics to determine component prices and vendors and to estimate profit margins.

The estimates don't include costs for such items as software development, advertising, patent licensing or shipping.

In February, iSuppli had estimated that the least-expensive iPad would carry $219.35 worth of materials.

Once it took one apart, iSuppli found more silicon chips than it had expected powering interactions with the iPad's 9.7-inch screen.

Three chips control the iPad's touch screen. "Because of the sheer scale of this device, we're seeing more here than we expected to," Rassweiler told BusinessWeek.

Over time, Apple may have leeway to combine many of the iPad's electronic components or integrate them into the display. "We'll see a lot less silicon required to make them work," he said.

The most-expensive component in the iPad is its touch-sensitive, custom-manufactured screen.

South Korea-based LG Display (LPL), Samsung and Japan's Epson supply the liquid-crystal display (LCD), according to iSuppli.

Taiwan-based Wintek makes the glass overlay that detects the touch of a user's fingertips. The screen's special design makes it about twice as expensive as the screens used in comparably sized netbook computers, according to Rassweiler.

Flash memory chips were also a significant portion of the iPad's costs, accounting for $29.50 in costs on the 16-GB model, $59 on the 32-GB model and $118 on the 64-GB model, Rassweiler said.

Samsung's $26.80 processor includes two chips: the main processor itself and a memory chip attached to it. The price was higher than the $17 price iSuppli had expected.

Other chips in the iPad also proved more costly and more numerous than expected. Broadcom supplied an $8.05 chip that handles Bluetooth and Wi-Fi wireless data connections, and two additional chips used to control the touch screen, which cost a combined $3.70.

Texas Instruments supplied a $1.80 chip used to help control the iPad's touch screen. Cirrus Logic supplied an audio chip that costs $1.20.
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