IHS: iPad Air 2 costs $275 to $358 to build, implied profit margin of 45% to 57%
Apple's Latest iPad Costs About the Same as the First but With Slightly Lower Profits — Apple's iPad Air 2 costs roughly the same to build as the iPad Air, with profit margins slightly lower than its predecessor …
Context & Ripple Effects
Teardown firms have been auditing Apple's tablet economics for years — iSuppli put the third-generation iPad's bill of materials at $364.35 in 2012, and a 2013 analysis found the first iPad Air carried a spendier display while still costing less to make than earlier models. A week before IHS published these numbers, iFixit had already cracked the iPad Air 2 open, so the build-cost estimate lands on top of an unusually well-documented launch.
The new wrinkle is direction, not magnitude: IHS pegs the Air 2 at $275 to $358 to build — essentially flat versus its predecessor — yet Apple is keeping roughly 45% to 57% margins, slightly thinner than last year's model. That echoes what Apple itself disclosed in a court filing showing U.S. iPad margins run roughly half of the iPhone's, reinforcing that tablets are the deliberately lower-margin end of Apple's hardware lineup.
First-order effects
- Apple is holding the Air 2's price while absorbing slightly compressed margins on a near-flat bill of materials — effectively spending margin points on Touch ID and the thinner chassis rather than passing component costs to buyers.
Second-order effects
- Rival tablet makers now face a published benchmark: Apple ships flagship hardware at a ~50% implied margin at unchanged prices, pressuring Samsung and Microsoft to either match specs at similar price points or concede the premium tier.
Third-order effects
- If each iPad generation trades a few margin points for features while BOM stays flat, the teardown record increasingly frames iPads as an ecosystem-anchor product whose value sits in lock-in rather than hardware profit — consistent with the court-filing gap showing iPhones as the margin engine.
The trend: Annual teardown coverage shows Apple iterating the iPad on a flat bill of materials, quietly conceding small margin points each cycle to keep the tablet competitive as the iPhone carries the company's profits.