According to a report from iSuppli, it appears that while apple is charging the same price as last year for a significantly upgraded iPad, the iPad 2 is costing them significantly more to make, reducing their profit margins from last year in order to remain competitive.
According to the report, the iPad 2’s touch screen display has significantly increased in price, as well as the increased cost of the new A5 processor in comparison to the A4 from last year. The biggest component cost increase is the display, which has increased $32 in price since last year (rising to $127 from $95).
“The reason for the increase comes in large part from manufacturing challenges that the touch screen makers have been experiencing since beginning high production,” iSuppli’s report reads. “Production yields, though they have been improving, has been very low throughout 2010, and drove prices to be much higher than initially expected.”
That not only explains the iPad 2 touch panel’s high price, but low yields also explain why Apple had nowhere near as many iPad 2s as it needed to have this weekend to satisfy demand.
Prices also appear to have been increased by the new glue used to bond the glass to the touch display, as well as the new, thinner glass, believed to be Gorilla Glass.
As for the A5 SoC, because it is being produced in fairly limited numbers and because it is unique to the iPad 2 for right now, it costs 75% more than the A4 SoC found in the original iPad. However, that premium should erode quickly as Apple ramps up production, especially by the time the iPhone 5 rolls along.