Apple making $400 profit on each 3G iPad 2 sold

Apple spends $336.60 manufacturing every 32GB 3G-enabled iPad 2, giving the firm close to a $400 profit margin with each sale, according to analyst IHS iSuppli.

Despite the obvious changes to the new model like the casing and the battery, the iPad 2's components and design are very similar if not the same as those of the original device, noted Andrew Rassweiler, senior director and principal analyst and teardown services manager for IHS iSuppli.

Prices of key components have increased, however, and the touch screen remains the most expensive part of the device, even though it appears to utilise the same LG display, according to Rassweiler.

The touch screen subsystem in the iPad 2 costs $127.00, compared to the $95.00 for the first-generation device. This large price difference has been attributed mainly to low supply and high demand for the technology.

Other contributing factors include the use of more expensive glue to improve the efficiency and performance in the bonding, thinner Gorilla cover glass and the requirement of additional equipment to carry out more detailed inspections, Rassweiler continued.

As expected, the A5 dual-core processor, which delivers twice the performance and nine times more graphics power than the A4 chip, also costs 75 per cent more than its predecessor.

The A5 chip costs $14, but IHS iSuppli does expect the cost to fall quickly as production is increased. This will in turn further increase Apple's profit margins.

The price of memory has increased moderately from $59 to $65.70 for 32GB, while the incorporation of the camera costs just $4.30 extra, a surprisingly low figure for the new iPad addition.

In terms of power, the iPad 2 features a thinner battery that offers improved performance and is $4 more expensive than the one found in the iPad, at $25.

Although other manufacturers are using similar flat-pack batteries, these thin batteries together with the power management circuitry allow Apple to maximise battery lifetime while minimising size and weight of the device, Rassweiler added.

Costs of the original iPad were pegged between $229 for the entry-level 16GB Wi-Fi only model, with the fully equipped 64GB 3G device costing $346.15 to manufacture.