Apple Looking At Cheaper Components For iPad 2 Followup

A recent report revealed that Apple has added four new Taiwan based companies to the next generation iPad support chain, Novatek Microelectronics, Richtek Technology, Capella Microsystems and Integrated Memory Logic(iML).

It seems that the reason these four Integrated Circuit design houses from Taiwan have entered the supply chain is because Apple is looking for ways to keep costs low, by reducing the next iPad's bill of material.

"Apple is now more willing to adopt IC solutions from Taiwan-based IC design houses as it is adjusting the cost structure for iPad tablets in order to compete with an array of tablet PCs to be launched by rivals in the second half of 2011," a report on Digitimes citing industry sources read.

When Apple went from the iPad to iPad 2 the production costs also increased. The bill of materials for the iPad 2 was $323 for the 32GB CDMA version, much more than for the original iPad at around $260, according to iSuppli.

The increase in costs was mainly due to the A5 processor, the cameras and most of all because the touch screen panel makers weren't ready for the high demand of the iPad 2. Apple paid $95 for the original iPad touch screen panel per unit and the iPad 2 touch screen panel units cost Apple more than $30 extra, at an estimated $127.

On the other hand, increased economies of scale with the iPad 2 will have enabled Apple to grow profit margins considerably.