Apple’s lowest-end iPad Air model – 16GB of NAND flash memory and no cellular connection – is $42 cheaper to make than the entry-level iPad 3, according to preliminary results from a teardown by IHS.

Bill of materials (BOM) and manufacturing costs for the older model cost $316, but come in at just $274 for the lowest-end iPad Air.

Apple is managing to trim costs for higher-end Air versions too.

The iPad Air with 16GB of NAND flash memory and cellular connectivity has a BOM of $304, a 6 per cent reduction from $325 for an equivalently-equipped 3G iPad (based on a final pricing estimate for the device at the time of the release in 2012).

When the $6 manufacturing cost of the iPad Air is added in, the total cost to make the tablet increases to $310.

“While the iPad Air slims down in size, the profit margins are getting fatter,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “Although the Air’s new, ultrathin display and touch screen 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.”

The profitability of the iPad Air rises dramatically as the NAND memory capacity increases. For example, the 32GB model costs Apple only $8.40 more to produce but has a retail price that’s $100 higher.

Moreover, the iPad Air leverages the same components and suppliers that are used in the iPhone 5s and 5c as much as possible. For example, the same Apple-designed Samsung-manufactured A7 processor found in the iPhone 5s – with some variations – are used.

The Air also uses the same memory to support the A7 processor as the 5s, employing 1GB of low-power Double Data Rate 3 (LPDDR3) DRAM.

And similar to the 5s for the core baseband and RF transceiver functions, the Air employs the same suite of chips: the MDM9615, WTR1605L and PM8018 from Qualcomm.

Communication breakdown

In contrast to the processor and baseband segments, the RF/power amplifier (PA) modules in the iPad Air are different compared to the iPhone 5s, which, says IHS, makes a big difference to Apple.

The RF/PA section in the iPad Air supports LTE bands for all US carriers with a single-model iPad (there are not different wireless versions for each US carrier). This isn’t the case for the iPhone 5s, says IHS, probably due to space constraints in the smaller smartphone form factor.

Also, the RF/PA subsystem in the iPad Air is laid out on 40 per cent more surface area in the printed circuit board than the comparable function in the iPhone 5s.

Apple has also reduced the capacity of the battery in the iPad Air compared to the previous iPad. Battery capacity in the iPad Air is 32.9 watt hours (Wh), down 23 per cent from 42.5Wh in the 3G model.

IHS says this is most likely because of lower power consumption in the display backlight. The iPad Air uses only 36 light-emitting diodes (LED) to illuminate the liquid-crystal display (LCD), down from 84 in the earlier-generation Pad.

Fewer LEDs results in lower electricity demand, allowing the cut in battery power.

The newest iPad has major differences in the microphones as well. The Air uses digital microphone technology rather than the analog parts in the third-generation model.

Beforehand, Apple has exclusively used analog microphones in all its smartphones and tablets — bar the iPad 2, which sported a digital micro-electromechanical system (MEMS) microphone from Analog Devices.

In another major departure, Apple is employing two microphones in the Air, as opposed to one in the previous models. The second microphone likely performs noise cancellation, says IHS.

Another difference is that iPad Air uses microphones from STMicroelectronics instead of parts from Knowles and AAC found in the other iPad models.