This compares to the $269 BOM for the 16GB version of the original Apple iPad Air, based on a finalized estimate from IHS in November 2013.

Although the profit margin appears to be the same for Apple at the low end of the iPad Air 2 line, the product produces lower gross margins for Apple at the high end with 64GB and 128GB worth of NAND flash. This is because the 64GB and 128GB models of iPad Air 2 are selling at the same price point as the original iPad Air 32GB and 64GB models. The additional cost of memory trims the estimated margins slightly.

"The Air 2 delivers a series of refinements compared to the original Air but features nothing earthshaking," said Andrew Rassweiler, senior director, cost benchmarking services for IHS. "With largely identical display specifications and minor improvements in most other areas, Apple continues to offer evolutionary upgrades to the iPad lineup. It’s interesting to note that by offering the consumer a 128GB model for the same price as last year’s 64GB iPad Air, Apple actually has taken down our estimated margins a bit on both the 64GB and 128GB models. The increased memory configurations to 64GB and 128GB are some of the key upgrades here."

The resolution and diagonal size of the Air 2 display has not changed from the first Air model. The Air 2 also has the same number of light-emitting diode (LED) backlights to illuminate the display as the original Air, at a count of 36.

Because pricing for electronics decreases over time, and due to the fact that has not been a major upgrade to the display specifications, the display panel and touch screen are less expensive than they were when the original Air was introduced one year ago.

For the Air 2, the display costs $77.00, while the touch screen comes in at $38.00. Based on pricing from November 2013, the original Air’s display amounted to $90.00, and the touch screen was $43.00.

One area where Apple significantly upgraded the Air 2 compared to the Air is the processor. The Air 2 employs the Apple-designed A8X processor, compared to the A7X in the last-generation iPad Air. The A8X, along with the M8 motion coprocessor—a separate integrated circuit—is estimated to cost a combined $22, up from $18 for the A7X and M7 coprocessor combination.

The use of the A8X conforms to another Apple pattern. The iPhone 5S had an A7 and the iPad Air had an A7X processor. The iPad Air 2 features an A8X processor, which is a slightly different variant of the A8 used in the iPhone 6 and 6 Plus.

The A8X employs a different integrated circuit (IC) package that has no package-on-package memory, and also features a metal cap on the IC that acts as a heat sink. The A8X likely carries a larger processor burden than the A8. This is because of the A8X’s faster clock speed and the iPad Air 2’s larger screen, which put increased graphics processing load on the iPad processor vs. that of the iPhone.

As a result, the A8X, like the A7X before it, likely runs a bit warmer than the A8, requiring the heat sink to help keep the central processing unit (CPU) cool.

Also, the larger size of iPad Air 2 chassis compared to the iPhone 6 and 6 Plus models gives Apple more space inside to lay out the printed circuit boards, eliminating the need to conserve space by placing the dynamic random access memory (DRAM) directly on top of the processor.

The big story with the A8 and A8X processors is that Taiwan Semiconductor Manufacturing Co. (TSMC) now accounts for a share of processor production. Samsung previously held a monopoly on the manufacturing of older Apple processors, such as the A7 and A7X.

With the addition of TSMC, the semiconductor manufacturing technology for the A8X also has advanced to 20 nanometers (nm), compared to 28nm employed in the A7 and A7X processors. This more advanced semiconductor process improves energy efficiency for the A8 and A8X processors.

For the Air 2, Apple once again has reduced the battery size and capacity, while maintaining a similar usage lifetime. The iPad Air 2 has a battery with a 27.6 watt/hour (Wh) capacity, down 16 percent from 32.9Wh in the original iPad Air, which in turn was down 23 percent from 42.5Wh in the third-generation iPad.

Apple manages to maintain battery life while reducing battery capacity by improving efficiency throughout the design, including improvements in the display and by employing more advanced process chips, such as the aforementioned A8X produced in a more advanced semiconductor process.

The Air 2 is thinner than the original iPad Air at just 6.1 millimeters thick. The smaller battery pack and thinner display help contribute to the slimmer form factor. As always, Apple pays close attention to the details to achieve this.

The Air 2 uses twice as much DRAM as the iPhone 6 and 6 Plus, at 2GB, compared to 1GB in the most recent iPhones. This additional memory likely is required to support graphics on the larger-sized display.

The Air 2 adds a fingerprint sensor, which was not in first-generation Air. This technology is still relatively novel and unique to Apple, and represents a significant cost within the category of sensors inside the iPad Air.

The two camera modules appear to be the same as in the iPhone 6, with resolutions of 8 megapixels (MP) and 1.2MP-without optical image stabilization. This is an upgrade from the previous 5MP and 1.2MP combination used in the previous-generation iPad Air.

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