Profit potential: iPad Air costs from $274 to make, teardown reveals

Check out our iPad Air tablet review.

Upon unboxing their brand new iPad, most people will immediately begin deliriously swiping, tapping, caressing, and possibly drooling over their shiny new device. However, there are a few people out there who enjoy nothing more than tearing it apart to discover what exactly is under the hood.

Some curious souls at research firm IHS, for example, have taken their hammers and spanners to the very latest iPad, the recently released Air, in a bid to determine its value and give us an idea how much profit Apple makes with every KERCHING! of the cash register as another one is sold.

IHS’s researchers compared the Air to the third-generation iPad – the last model they took a look at – and found that Apple has managed to reduce the cost of components used in its new tablet.

For example, they estimate the total cost of materials and manufacturing for Apple’s 16GB, Wi-Fi-only iPad Air to be $274, which is $42 less than the equivalent third-generation model. Consumers have to pay $499 for the tablet, allowing the tech company to make a tidy $225 profit. While the third-generation cellular 16GB iPad cost an estimated $331 to produce, the equivalent iPad Air comes in at $310. That one retails for $629. KERCHING!

IHS points out that the profitability of the iPad Air increases significantly as you move onto models with more memory. For example, the 32GB iPad Air costs the Cupertino company only $8.40 more to make, but has a retail price that’s $100 higher. KERCHING!

Though the total cost of components is less than that of the iPad 3, the iPad Air’s touchscreen display comes with a slightly higher price tag than before – $90 compared to $87. The Air’s display incorporates new materials and a different design, resulting in Apple’s thinnest ever tablet.

“While the iPad Air slims down in size, the profit margins are getting fatter,” said IHS’s Andrew Rassweiler. “Although the Air’s new, ultrathin display and touchscreen are more expensive than for the third-generation iPad, Apple has held the line on cost by taking advantage of price erosion in other areas.

“Furthermore, the iPad Air leverages the same components and suppliers that are used in the iPhone 5S and 5C as much as possible.”

Apple sold 14.1 million tablets in the three-month period from July to September, compared to 14 million a year earlier. Revenue for the quarter revenue hit $37.5 billion, with a net profit of $7.5 billion (kerching).

The iPad Air went on sale in 42 countries last Friday, marking Apple’s biggest ever launch for one of its tablets. By all accounts, it’s got off to a flying start, resulting in lots and lots of noisy KERCHINGing for the tech giant.