And while it may not come as a terrible surprise to anyone who’s been paying attention to personal technology trends during the last few years, there’s nothing like a cold, hard number to make the point crystal clear.

Word of this tipping point came quietly in the form of a press release from the market research firm IHS (the same group formerly known as iSuppli). The moment came during the second quarter of 2012. For the first time in a generation, according to the firm’s reckoning, PCs did not consume the the majority of commodity memory chips, also known as DRAM (pronounced “DEE-ram”).

During that period, PCs accounted for the consumption of 49 percent of DRAM produced around the world, down from 50.2 percent in the first quarter of the year. The share of these chips going into PCs — both desktop and notebooks — has been hovering at or near 55 percent since early 2008, IHS says.

As shifts in market share statistics go, it at first seems insignificant until you consider the wider sweep of memory chips in the history of the modern technology industry. PCs have consumed the majority of memory chips since sometime in the 1980s. IHS couldn’t say when exactly when the first personal computers started showing up in appreciable numbers in homes and businesses.

And where are all those memory chips going? Tablets and smartphones for starters. IHS says that phones consumed more than 13 percent percent of memory chips manufactured, and it expects that figure to grow to nearly 20 percent by the end of this year. Tablets — including the iPad — consumed only 2.7 percent of the world’s memory chip supply. The remaining 35 percent, which IHS classifies as “other,” includes servers, professional workstations, and presumably specialized applications like supercomputers and embedded systems.

And given their rates of growth, IHS expects phones and tablets combined to consume about 27 percent of the world’s memory by 2013, while by that time PCs will consume less than 43 percent, making the decline, in the firm’s estimation, irreversible.

For PC-making companies, notably Hewlett-Packard, Dell and Lenovo, the shift marks the beginning of an overall decline in the importance of PCs in the overall chip supply chain. Memory chip makers like Samsung, Hynix and Micron will focus increasingly on winning the business of phone and tablet makers and over time concern themselves less with the needs of PC makers. “PCs are no longer generating the kind of growth and overwhelming market size that can singlehandedly drive demand, pricing and technology trends in some of the major technology businesses,” is how IHS analyst Clifford Leimbach put it.

Depending on when you start counting it, took about two decades for the PC industry to sell its first billion units, a milepost that the research firm Gartner pegged to the summer of 2002. Judging by its annual global sales figure since then, it took about five years to sell the second billion, and about three more years to sell the third billion.

Last year, PC makers shipped about 353 million machines, an increase of about one-half of one percent, and it wouldn’t surprise anyone to see the industry finish the year with a slight decline in shipments year-over-year. No less a barometer of the PC industry than Intel lowered its sales guidance for the third quarter of this year, citing weak demand. It is currently in the midst of a campaign to both re-ignite market interest in PCs and attack the market for phones and tablets.

Compare the PC to smartphones. IHS expects people around the world to buy 655 million smart phones this year, which would amount to nearly twice the number of PCs sold last year and almost three times the number of notebook PCs that will sell this year.

And as for tablets, look no further than the iPad: For the last four quarters reported (Q4 2011 through Q3 2012), Apple has sold 55.4 million iPads, which amounts to only 5 million fewer than all the PCs that Gartner says HP sold in 2011.

So perhaps now the academic debates about where the Post-PC Era begins can come to a close. I remember the first buzz about it back in 2000 with consumer electronics makers like Sony — jealous of being left out of the PC feeding frenzy brought on by the first wave of the consumer Internet craze — tried to sell “Internet devices” that looked like PCs and served up the Web and email without costing quite as much as one. They didn’t take.

PDAs like the Palm Pilot and Microsoft’s Pocket PCs made some progress, priming us for living with handheld devices that stored data we needed close at hand. The Blackberry and the Treo became the first of what we would call “smartphones.”

But the PC always held sway as the home base of any digital person’s daily life. Now, it’s entirely possible, though not yet common, to get through modern life without one. Some people have sought to “go paperless” in their day-to-day lives by relying on tablets and smartphones for the things they used to print to paper. I wonder now if there may soon be a trend of going “PC-less.” It’s not gone yet, but it is going.

Samsung’s latest attempt to tilt at Apple’s windmill is the Galaxy Note 10.1. Released in the U.S. on Aug. 16, at a high-profile event in New York, it sells for a starting price of $499.99 for a 16 gigabyte version. Like other tablets from Samsung, it runs Google’s Android operating system, specifically the version from last year known as Ice Cream Sandwich, though an upgrade to the newer Jelly Bean is coming eventually. It has also been reviewed favorably, including last week by AllThingsD’s Walt Mossberg.

Now, the gearheads at IHS iSuppli — the folks who last month dismembered Google’s Nexus 7, and before that Apple’s latest iPad — have taken the Galaxy Note 10.1 apart to see what makes it tick. More importantly, they’ve also estimated how much Samsung spends on the components used to assemble it; from that, it’s pretty easy to guess at Samsung’s profit margin.

Rassweiler says the firm tore down a version of the tablet that includes the ability to connect to 4G wireless networks (it is not yet available in the U.S.), and which sells at retail for about $640. As yet, the only model available in the U.S. is a Wi-Fi-compatible model. All told, the cost of the components — “bill of materials,” or BOM in industry lingo — for that model adds up to $283. Take out the 4G wireless components and leave the Wi-Fi-only, and the BOM estimate comes down to about $270, he says.

Technically speaking, says analyst Andrew Rassweiler, who supervised the teardown, the Note 10.1 doesn’t break any new ground. “As is usually the case, each hardware release offers an incremental set of improvements over the last generation,” he says. The tablet’s main microprocessor chip is the quad-core Samsung Exynos processor, made by its own chip division, and based in part on a design licensed from ARM. The chip has already been seen in the Samsung Galaxy S III smartphone, and costs Samsung about $18.

Also seen in the torndown unit, and spotted before in other Samsung devices, is a wireless chipset from Intel’s recently acquired Infineon division. “By reusing components, Samsung can negotiate better pricing with suppliers, and it shrinks the incremental cost of developing other devices like this tablet,” Rassweiler says. Combined, all the wireless components add about $15 to cost, and a little less in the Wi-Fi-only version.

The Galaxy Note’s main differentiating feature is the digital pen, or stylus, that lets users write and sketch on the screen. The main part that allows that is a hybrid capacitive touchscreen that also allows the conventional touch interface that tablet users are accustomed to. Samsung’s combined cost of the display and touchscreen components adds up to $100. The pen comes from Wacom, the same company known for its graphical tablets favored by digital artists.

Also spotted inside the Note: A gyroscope chip from STMicroelectronics, a power-management chip from Maxim, a touchscreen-controller chip from Atmel, and an audio chip from Wolfson Micro. Some of those companies are also regular Apple suppliers.

Which brings us to another important point: Samsung gets most of the parts from itself. It is the world’s biggest manufacturer of memory chips, and one of the biggest manufacturers of LCD screens. It also ranks at or near the top of the world’s suppliers for chips to smartphones and tablets generally, and even manufactures, under contract, Apple’s own A5 chips used in the iPhone and iPad. “Samsung’s competitive strength is in controlling a large percentage of the parts that go into their final product,” Rassweiler says. Most of the key components — the display, the memory, the main processor and the battery — were all made by different branches of the far-flung Samsung empire.

By comparison, the total cost of all the components on the latest iPad, as estimated by IHS iSuppli at the time of its release in March, was $316. Oddly enough, Samsung made the so-called Retina display that Apple touts as that device’s main differentiating feature. The cost to build the Nexus 7 was estimated at $152.

And while a cost of about $270 might lead you to the conclusion that Samsung is taking a fat $230 on each unit sold, Rassweiler says there are more costs to consider that a teardown can’t account for — software and development costs, for starters.

In the end, Samsung may not be coming even close to denting Apple’s commanding market share, but it may be making a slightly better profit. One fact that emerged from the epic patent lawsuit between Apple and Samsung is that Apple’s iPad gross margin runs between 23 percent and 32 percent. Rassweiler says that even after accounting for software and other non-material costs, Samsung probably makes a slightly larger margin. There is that.

“In terms of iPhones in general in mainland China, we were incredibly pleased with our results,” Cook said. “We were up over 100 percent, year over year.”

That’s an impressive achievement. But Apple still has a lot of work to do in China before the iPhone claims the same levels of market penetration it enjoys in the U.S. In China, the iPhone has captured about 7.5 percent of the smartphone market, compared to rival Samsung, which has claimed more than 20 percent, according to IHS iSuppli. Despite its popularity in the country, the iPhone is still ranked seventh in the Chinese smartphone market.

Why? Two reasons. First, Apple doesn’t yet offer a truly low-end smartphone that appeals to price-conscious Chinese consumers. (To be clear, China Telecom is offering the iPhone fully subsidized, but it requires subscribers to sign a contract that ties them to a two-year $62 per month plan.) Second, and more importantly, the iPhone doesn’t yet support Time Division Synchronous Code Division Multiple Access (TD-SCDMA), China’s homegrown wireless standard. And until it does, China Mobile, the world’s largest wireless carrier, can’t offer it to its 688 million or so subscribers.

“Among all the international smartphone brands competing in China, Apple is the only one not offering a product that complies with the domestic TD-SCDMA air standard,” IHS iSuppli’s Kevin Wang said in a statement. “For Apple, this is a huge disadvantage, as TD-SCDMA represents the fastest-growing major air standard for smartphones in China, with shipments of compliant phones expected to rise by a factor of 10 from 2011 to 2016.”

In other words, if Apple wants access to the massive addressable market that China Mobile has to offer, it’s going to have to offer a lower-end iPhone variant designed specifically for TD-SCDMA, something it has been loath to do in the past, and hasn’t given any indication that it’s willing to do in the future. As Cook said during Apple’s last earnings call, the company feels that its business is strongest when it focuses on making the best products it can, not the most inexpensive ones.

“I firmly believe that people in the emerging markets want great products, like they do in developed markets,” Cook said. “And so we’re going to stick to our knitting and make the best products. And we think that if we do that, we’ve got a very, very good business ahead of us. So that’s what we are doing.”

That’s the impression that analysts at the research house IHS iSuppli got when they did just that: They took a Nexus 7 apart in order to see what components are inside, and to estimate what each of them costs. The early verdict, shared exclusively with AllThingsD, is that the low-end eight gigabyte model of the Nexus 7, which sells for $199, costs $151.75 to build.

The higher-end 16GB model, which sells for $249, costs $159.25, the difference being the cost of the memory chips inside.

Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model, and will turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

The IHS iSuppli cost estimate is about $30 lower than an early estimate put out last month by another research firm, UBM TechInsights. However UBM’s estimate was made without having first obtained the hardware for analysis.

The Nexus 7 is similar to Amazon’s Kindle Fire tablet in many respects, but it has some better features. For one thing, the Nexus has the Nvidia-made Tegra 3 processor as its main computing engine. It’s a four-core chip, meaning it has four main processing brains. The Kindle Fire has a two-core OMAP 4430 processor from Texas Instruments. TI, however, supplied two chips for the Nexus 7, one a power-management chip, the other a low-voltage transmitter.

But the Nexus 7, manufactured by Asus for Google, also has a better display, with a resolution of 1,280 pixels high by 800 pixels wide, versus 1,024 by 600 for the Kindle Fire. Rassweiler said the display uses a technology known as in-plane switching, and added $38 to the hardware cost of the Nexus 7, versus $35 for the display in the Kindle Fire, Rassweiler said.

The Nexus also has a camera that added $2.50 in cost to the Nexus, and which the Kindle Fire lacks. The Nexus also has a chip from NXP that supports near field communications (NFC), a close-range wireless technology that’s intended for wireless commerce transactions. Broadcom supplied GPS receiver chips to support mapping functions.

One other part caught Rassweiler’s attention: A gyroscope and accelerometer from InvenSense. While it’s common to see InvenSense gyroscopes, it’s rare to see it combined with into the same chip with the accelerometer. Both are used to determine position and movement of the device. The only other combined gyro-accelerometer seen before, Rassweiler said, was seen in Samsung’s Galaxy S III smartphone, and was made by the European chipmaker STMicroelectronics.

All told, IHS iSuppli figures that the Nexus 7 costs about $18 more to make than the Kindle Fire. But that’s likely to change soon. A New Kindle Fire with a better display arrives this fall.

Image: Courtesy IHS iSuppli

So far, the launch hasn’t gone quite so well. First there was a lackluster review. Then, days after going on sale on Easter Sunday, the company has admitted to a software glitch and is offering people who bought one a $100 credit in addition to a software patch. The credit makes the phone free to buyers willing to take a two-year service contract.

Now the market research firm IHS iSuppli has taken a Lumia 900 apart and, in a report shared with AllThingsD that will be released later today, has determined that it costs Nokia about $209 to build. And, judging from the parts being used, it’s not exactly built like the most cutting-edge phone on the market.

In fact, it seems like Microsoft and wireless chipmaker Qualcomm are both making an effort to showcase how efficient Windows Phone 7 for mobile can be; at the same time, they seem to be aiming to entice other hardware manufacturers by demonstrating that a full-featured smartphone can be built using components that are about a generation behind the current high end, and therefore cheaper, says Andrew Rassweiler, the iSuppli analyst who supervised the teardown.

For example, the teardown found that the Lumia 900 uses a single-core Qualcomm chip that costs $17 as its main applications processor; a phone with similar features running Google’s Android OS, such as Samsung’s Galaxy SII Skyrocket, uses a higher-end dual-core processor that costs $22.

“It appears what Microsoft and Qualcomm and Nokia are trying to do here — and this is being driven by Microsoft more than anyone else — is streamline the OS so it can run on a lighter processing platform,” Rassweiler told me. “The point being is to undercut the higher end phones.”

The choices don’t end with the processor. The phone contains only 512 megabytes of DRAM memory, where most phones would use one gigabyte. And the trend is expected to continue, as the next generation of Microsoft’s mobile OS will require even less memory.

Another example: The Bluetooth chip. Nokia is using a slightly older chip from Broadcom, and not the latest, greatest Bluetooth part. The difference between them is only $2.50, but it serves as another example showing that Nokia is aiming to compete on price.

For Nokia, the strategy seems to be one of aiming to compete against other phones on price, while offering similar features. The Lumia is thought to sell for $450 at retail without a subsidy, or about $200 lower than Apple’s iPhone 4S, which starts at $649 without a contract, depending on model, and costs between $188 and $245 to build.

Microsoft is also thought to be helping Nokia out, says iSuppli’s Wayne Lam, who also participated in the teardown analysis. While software costs are not considered in a teardown analysis, he says Microsoft is thought to be making less than $5 per phone in licensing fees on the Windows Phone 7 operating system, far lower than the $15 per device it is said to want. That would be in line with the $3 per phone price that Nokia is thought to have paid in licensing fees for the Symbian OS it used previously, and of which it was a partial owner. “Nokia is getting a fantastic discount,” Lam told me.

One place where Nokia didn’t skimp? The gyroscope chip, which determines how the phone is being moved. It contains the same gyroscope chip from STMicroelectronics that goes into the iPhone 4S. There are, apparently, some things on which you simply can’t compromise.

Market research firm IHS iSuppli said Tuesday that U.S.-bound shipments of flat-panel TVs will drop 5 percent in 2012, slipping to 37.1 million units from 39.1 million units in 2011. And that decline will likely continue for the next few years. By 2013, IHS figures shipments will drop to just below 35 million; by 2015, they’ll be hovering around 34.2 million.

That’s a precipitous drop for a market that has never seen a year-over-year decline, even during the lean years of 2008 and 2009. So what’s behind it? IHS believes two factors are at work here. First, the maturation of the U.S. television market. Second, the industry overestimated demand in early 2011 and flooded the channel with inventory it was forced to discount later in the year.

“The main factor behind the expected slowdown in the U.S. TV flat-panel market during 2012 can be attributed to the TV market reaching a state of maturity for this particular region,” IHS analyst Lisa Hatamiya told AllThingsD. “Flat-panel TVs experienced major uptake since their release because they offered a much slimmer form factor compared to CRT tube TVs and were also easier to place into secondary TV-viewing areas of the household. While 2011’s incredibly low price declines were aimed to boost flat-panel TV sales last year, consumers reacted very positively to this, and the flat-panel TV market reached nearly 39 million units.”

But the industry cannot afford to offer those same low prices this year, said Hatamiya. “So we expect that U.S. TV prices will not experience huge price declines this year, and as a result, shipments will fall 5 percent year over year.”

(Image courtesy of Andidas.com)

The analysts at the market research firm IHS iSuppli, considered by the investment community to be the most reliable of the organizations that conduct teardowns, were among that set. Today, somewhere in Southern California, an iSuppli analyst stood in line at a store and promptly took an iPad to a lab, where it was torn into, initiating the interesting process of estimating what it all cost to build.

Here’s what iSuppli’s team found: First off, there weren’t many changes from the last iPad, in terms of suppliers. “It’s most of the same characters we saw last time around,” analyst Andrew Rassweiler told me today. Wireless chipmakers Qualcomm and Broadcom both reappeared — Qualcomm supplying a baseband processor chip, Broadcom a Bluetooth and Wi-Fi chip, TriQuint Semiconductor suppling some additional wireless parts. STMicroelectronics once again retained its position supplying the gyroscope. Cirrus Logic supplied an audio codec chip.

The 16 gigabyte, Wi-Fi-only iPad that sells for $499 costs about $316 to make, or about 63 percent of the device’s retail price. On the upper end, the 4G-ready 64GB model that sells for $829 costs about $409 to make, or about 49 percent of the retail price.

The new cost figures represent an increase of between 21 percent and 25 percent, depending on the model, from the iPad 2, which iSuppli tore down last year.

So what did they find inside? An expensive Samsung display, for one thing. All those millions of pixels don’t come cheap. ISuppli analyst Andrew Rassweiler estimates that the display, which cost $57 on the iPad 2, has grown in cost to $87 on the latest iPad.

Rassweiler says that two other vendors, LG Display and Sharp Electronics, have inked display supply deals with Apple for the latest iPad, but only Samsung is thought to have fully ramped up production. Depending on the vendor, the display may cost as much as $90, he said.

One set of components remained essentially the same as before: Those that drive the touchscreen capabilities. Rassweiler says that three Taiwanese companies, TPK, Wintek and Chi Mei, supply parts related to driving the central interface feature of the new iPad, but he says to expect a major shift in how Apple handles the touch interface on future iPads.

The combined cost of cameras, including the front-facing and back camera, is pegged at $12.35, more than three times the cost of cameras found on the iPad 2, Rassweiler says. But it’s essentially the same setup as that on the iPhone 4, he says. As has been the case with cameras, the identity of the supplier wasn’t easy to determine because they try hard to hide identifying information from the prying eyes of teardown analysts. The candidates, however, include Largan Precision Co., a Taiwanese supplier of camera modules to wireless phone companies, and Omnivision. On the iPhone 4S, a research firm called Chipworks identified the supplier of the CMOS sensor in one of the cameras as having come from Sony.

As with other Apple devices, the main processor chip is an Apple-made A5X processor, one manufactured under contract by Samsung. The estimated cost of that chip is $23, up from $14 on the iPad 2.

Another part that’s more expensive than on the last iPad, but also better for a variety of reasons, is the battery. This one is estimated to have cost Apple $32, up from $25 on the iPad 2. But it constitutes a significant upgrade, Rassweiler says, with 70 percent more capacity than before. Apple benefited in part by lower prices in the lithium polymer material used to make the battery, offsetting the cost of adding a vastly improved battery.

ISuppli wasn’t the only outfit conducting teardowns of the iPad today. An enthusiast site called iFixit that encourages consumers to learn how to repair and upgrade their own electronics, flew technicians to Australia to conduct its own teardown analysis.

No, the iPad’s biggest rival was the newly introduced iPhone 4S.

According to a report issued Thursday by IHS’s iSuppli, the iPad’s share of the tablet market slipped to 57 percent from 64 percent in Q4 2011. But that decline was driven by its diminutive iOS sibling, not the Fire.

Said IHS’s Rhoda Alexander, “The rollout of the iPhone 4S in October generated intense competition for Apple purchasers’ disposable income, doing more to limit iPad shipment growth than competition from the Kindle Fire and other media tablets.”

Interesting, no? Seems the tablet market is looking more and more like the digital music player iPod market every day …

That said, the Fire performed pretty well. Amazon shipped 3.9 million Fires in the fourth quarter to claim 14.3 percent of the market. That makes it the world’s second-largest tablet vendor, surpassing Samsung, which has been in the market far longer and with many more devices.

“Kindle Fire shipments in the fourth quarter came right in line with the IHS early December forecast of 3.9 million units, representing a respectable start for the Fire.” Alexander explained. “However, the long-term viability of the product will hinge on the success of Amazon’s business gamble, which depends on tablet sales driving substantial new online merchandise sales at Amazon.com in order to attain profitability.”

Veghte joined HP in 2010 after 20 years at Microsoft, where he managed the $15 billion Windows business and oversaw the launch of Windows 7. At HP, he has been credited with growing its software revenue by 18 percent last year.

Given Veghte’s history as a software guy, his appointment to this role can’t help but be seen as a key signal by CEO Meg Whitman of the role she sees software playing in HP’s strategy going forward. That was one of the things I asked Veghte about when we spoke by phone earlier this week.

AllThingsD: What, in your view, is the role of the chief strategy officer at HP, and what do you expect it to entail in the coming year?

Bill Veghte: As we’re out talking to customers, they’d like to buy more from HP; they’d like HP to be more successful. They look at the advances we’re making in networking or storage or printers, but they want to know why the whole is greater than the sum of is parts. What is HP’s strategy for continued leadership in the market transitions that are going on? And some customers would say that where HP is concerned, that’s not a fully realized opportunity.

And you’re coming at it from the software part of the business, and we’ve heard from Meg saying she’d like to grow opportunities in software. Your appointment, to me, sends a bit of a signal that software is going to be a big part of HP’s strategy to get things turned around. Is that accurate?

I think, certainly, as I talk to Meg and Ray [Lane, HP chairman], and with the members of the executive committee, I’ve found that this is a catalyzing role. If done right, there are different models of strategy in different Fortune 500 companies. And the one that makes sense here is catalyzing with other business units. Whether that’s Vijay Joshi in printing and imaging, or with Todd Bradley in PCs, or John Visentin in the enterprise group, there’s a strategy that each one of those is trying, and which is accretive to a whole that is greater than the sum of the parts. And so, to the extent that software is glue or networking is glue, I think it’s a statement that has more to do with a pan-HP strategy than something that’s specific to software.

What’s Job One, starting on your first day?

Job One is making sure that as we have those conversations with customers, they see an HP that is unified around a set of constructs and offerings that deliver what they need. It’s different from having offerings that are, by themselves, individually great. It’s about having unifying themes and constructs.

It seems that you’re talking about finding a way to routinely and thoughtfully combine different things that HP makes or does, in ways they aren’t being done now. Is that what you’re getting at?

I think that very accurately characterizes the opportunity. When we talk to the leadership team, we hear a lot of the same thing. There is a lot of great stuff within HP, whether you get that in terms of market position, or IP, or people. I like how you put that: How do you routinely and thoughtfully combine things, particularly in light of the market inflections that are happening. We are in a tectonic shift, and that can be an opportunity, if you clearly spell out the value proposition for customers. Not only in each one of the units, but where you’re thoughtfully combining them so that the whole is greater than the sum of its parts.

I thought of an example around meeting the needs of the market. There was an IHS iSuppli report out earlier this week about cloud servers, which are growing. But customers are going to Taiwanese ODM companies to get customized products, while at the same time cloud servers are growing generally. Is this the sort of thing that might affect HP?

I was talking to Dave Donatelli [general manager of Enterprise Servers] about this recently. It’s interesting, because it seems like in more recent months it has flipped back, because of the integration within that customization. A great example that Dave and I have been working on is the whole cloud system piece. You’ve got a lot of great stuff in automation and orchestration software that is inherently cross-platform, and which crosses virtualization engines and marrying that deeply with the converged infrastructure. We’re the only company that can give you a single stack, soup to nuts, from a single vendor. The core construct is that there’s a lot of private cloud build-out going on, and those customers who are doing it are saying they don’t want to be the systems integrator for six different vendors, and they also prefer not to be locked in to a single vertical stack. That’s a huge advantage for us. And to your point about routinely and thoughtfully combining, we should do exactly that. It’s been doing well for us in the marketplace, but how do you make that routine against the opportunities we see in the marketplace?

You spent about 20 years at Microsoft. How does that inform what you’re bringing to this job?

At the core, any of these jobs are about identifying and exploiting market shifts for customers. I had the privilege of having a front-row seat during some big marketplace disruptions, and helping catalyze businesses and delivering superior market positions and solutions. It’s all about handling change, and turning it into an opportunity.

Library of Congress

While research houses like Gartner and IDC can’t seem to slash their 2012 spending forecasts fast enough to keep up with the ever-gloomier outlook, it’s a different scene in the area of servers used to build cloud services.

IHS iSuppli is out with some new research saying that the number of cloud servers sold this year will be 875,000 — or nearly double the 460,000 sold in 2010 — amounting to a surge of 35 percent over 2011, when 647,000 were sold.

And it gets better: The rate of growth is expected to continue over the next three years, in the 20 percent to 30 percent range. Cloud server sales will grow at a rate that’s five times faster than the rate of growth for general-purpose servers, iSuppli says.

And while cloud servers amount to only a 5 percent sliver of the overall server market now, by 2015, that will reach 15 percent. Apple, Google, Amazon and IBM will be pushing more cloud services to companies and to consumers; cloud-services companies like Salesforce.com, Workday and NetSuite, to name just a few, will be adding more services and more capacity as their businesses grow.

It’s good news for companies turning out servers, like Hewlett-Packard, Dell, IBM and even Cisco Systems, which is an increasingly important player in the server market, along with chipmaker Intel.

There is one wrinkle, iSuppli says. The market for server vendors is starting to widen away from the traditional vendors. When companies can’t get the customized products they want from traditional players like HP and Dell, they’re increasingly turning to Taiwanese ODM companies like Quanta and Wistron to build hardware just the way they want it.

This is, of course, bad news if you’re in the business of making the commodity Dynamic Random Access Memory chips that go into PCs, servers and smartphones. A state of oversupply coupled with weak demand means the chips command lower prices than they otherwise would. The situation can be good, however, if you’re buying computers, because memory upgrades get cheaper.

The problem, as related by the research firm IHS iSuppli, is a rise in inventories of chips that its analyst Mike Howard describes as “alarming.”

ISuppli measures how much unsold inventory the chipmakers themselves have in their warehouses — which include Micron Technology in the U.S., Elpida in Japan, and the South Korean pair of Samsung and Hynix. The higher the number is, the more intense the downward price pressure becomes.

The stockpile of DRAM chips as of the end of the third quarter of 2011 stood at 12.8 weeks, which is nearly a third higher than it had been three months earlier and double what it was in early 2010. It’s also a lot higher than the typical average of 9.2 weeks.

There are a lot of factors creating the glut. Tablets like the iPad and Kindle Fire are eating into notebook sales, and don’t require nearly as much DRAM as notebooks do. And new operating systems don’t require the incremental boost in onboard memory as had been typical.

Nor is the economic uncertainty caused by the sovereign debt crisis in Europe helping. Flooding in Thailand has also disrupted the supply of hard drives which has in turn affected the overall demand for PCs and servers. Computer makers who can’t get hard drives simply won’t build as many computers, and thus won’t be buying the DRAM they otherwise would be.

Something similar happened in 2008 when the global recession sapped computer demand and caused a pileup of DRAM chips that lasted nine quarters. This cycle could turn out to be worse, iSuppli says.

Overall, iSuppli reckons the market for DRAM chips was worth about $6 billion in the fourth quarter of 2011, down by 11 percent from the prior quarter, and it’s only heading further south. The worst, Howard says, is apparently yet to come.

If the economy turns upward, or even is perceived to be on the mend, the glut can work its way down pretty quickly. In 2009 the stockpile dropped by more than half over three quarters.

And if it seems obvious that these chip companies should just stop making DRAM and let demand catch up with supply, it’s actually not that easy. Chip factories, or fabs, contain billions of dollars worth of manufacturing equipment running processes that are difficult to stop and start. Also, it’s more expensive to have them sitting there doing nothing but depreciating than turning out a product that brings in revenue, even if it’s running at break-even or a slight loss.

The country is now beginning the arduous job of cleaning up from the floods that killed upwards of 600 people and dealt a body blow to its industrial and manufacturing base.

One industry hit especially hard is the computer business. The world relies on factories in Thailand to turn out critical components used to build hard drives, and factories there are out of commission for now. This is not a trivial problem — the factories in question are not easy to replace, retool and restart once they dry out. Nor is the answer simply for the hard drive manufacturers to build new factories somewhere outside the flood zone.

This is the kind of supply chain disruption that the computer industry hasn’t seen in many years. I had a chance to talk with Steve Luczo, the CEO of Seagate Technology, for his view of the situation. Seagate has been relatively lucky in that its factories haven’t been directly impacted like those of Western Digital and Toshiba. But many companies that supply Seagate with necessary components have been hit, and it will be some time before they’re back on their feet.

Luczo told me that the computer industry as a whole — including companies who make PCs, servers, workstations and any other device that contains a hard drive, whether a set-top box or an enterprise storage device — can expect acute supply-chain disruptions to last well into 2012, and that it will take until the end of 2013 for the industry to return to its pre-flood operating posture. You read that right: It will be two years before the supply of hard drives is anywhere near “back to normal,” and there are simply no easy solutions for getting it fixed.

An estimate by the market research firm IHS iSuppli pegs the available supply at 125 million units, which is about 29 percent short of demand of 175 million units. By its reckoning, more than one-quarter of the world’s hard drive manufacturing capacity has been disrupted in one way or another, including 45 percent of the capacity devoted to making hard drives for personal computers. I spoke with Luczo by phone yesterday, and tossed in an extra eighth question because of the importance of the subject.

AllThingsD: Steve, at a high level, I think everyone understands the problem. There’s been a terrible flood in Thailand, and a lot of factories that make crucial parts for hard drives are out of commission. To that end, I think people expect this to be a temporary problem that works itself out in a couple of months. But you say it’s a much more complex problem than most people realize. You’re tracking this situation day to day, and probably hour by hour. So, how bad is it, really? And what’s likely to happen?

Luczo: What’s surprising to us is that even with all the data out there — we’re six weeks into it — there are a lot of fairly sophisticated companies that haven’t fully come to grips with the depth of the problem and the duration that is likely to occur. What is going to happen in the next couple of weeks is that the real shortage begins to show up right about now. There was already a lot of built inventory and a lot of finished goods moving through the system. And now all that is gone, and I think customers are starting to see shelves of parts go empty, and realizing that they’re not going to be filled for anywhere from one to two months. So the concern is heightened.

We heard Meg Whitman talk about this on HP’s earnings call Monday. She said HP stepped in and started doing some strategic buying. She says HP is going to see effects at least through the first half of next year. Apple talked about it on its earnings conference call, too. Are you hearing from them?

Tim Cook at Apple was way in front of this. I saw Tim the first week it happened, and took him through the situation, and in 15 minutes he understood the magnitude of it. Meg was on the second week of her job as CEO when I went to see her, and she got it right away. HP’s procurement VP, Tony Prophet, was also early to understand this. Companies like that reached out to us early on, because they understood that this is going to be an extended problem. They started asking for longer supply agreements. Deals that would typically last about a year, they’re now asking for two years.

How bad is it really going to be? What’s your outlier worst-case scenario, and then what do you think is a little more realistic?

If you think pre-flood, a mix [of products] that the customers need, the industry had the capacity to ship about 190 million units a quarter. Pre-flood, we expected the demand to be pretty consistent at about 180 million a quarter, with a bump in September 2012 for Windows 8. We now believe the March quarter is going to much more difficult than the December quarter, and December is going to be about 120 million or so. We think the March quarter will be about 120 million, in the best-case scenario. And that’s with customers mixing down pretty aggressively; and by that, I mean companies like Western Digital, who don’t have access to the sliders [a critical component in a drive], are shipping one- and two-headed devices so they can ship more units. So instead of shipping a drive that contains two disks and four heads, which is what the market needs right now, they’ll be shipping a one-disk, one-head or one-desk, two-head product. They’ll be maximizing the units they can sell, rather than shipping the product the customer actually needs. … So we see something like 130 million for March on the optimistic side, and then 150 million for June, 170 for September and then 190 million for December. And so by the end of 2012 you’re back to being close to industry demand. But even then, you’ve not included the impact of that missed 100 million units. And that will take another year to absorb, because it’s not like the industry is building new factories to chase that demand. We can’t over-invest to meet some bubble and then get stuck with excess capacity.

I think, intuitively, people expected companies like Seagate to just build more factories outside of the flood zone, but it’s not that simple, is it? Would this not be a moment to add capacity?

There are some in the investment community who think that’s what is going to happen, and that there will end up being a supply glut after all this is over, but it’s not the case. For us, it’s more a function of how to recover the supply chain and then work with the customer to get a good read on what their needs are for the next several quarters. If we see a multiquarter shortage that goes beyond what I described before, then we would think about maybe putting some capital in place. But we’re not going to do that to solve a temporary problem, because we end up being stuck with the excess capacity. Now if it turns out there is no recovery, and then the industry is more constrained than I first described — and that, by June, the industry is still 30-40 million units short and looks like it will be for the next six quarters — we might revisit. But then we’d want longer-term commitments to make sure we’re not overinvesting. But we’re not to that point yet.

What is this doing to prices? And what does that mean to the person who wants to buy a computer or server this year or next year?

If you look at a 10-year moving average trend, the industry has in general seen prices come down about 2 to 3 percent a quarter, and that is for a particular product. In 2009, there was a little price erosion, and that was because the storage industry recovered quickly from the recession. And there had been massive capital cutbacks, so there were big shortfalls through all of 2009 and into 2010. Then, when the Greece crisis happened, that put a big flatline on a lot of growth, and the industry had put in a lot of capital because everyone expected there would be growth. So, since spring of 2010, the price erosion has been higher than normal, which would show that supply is greater than demand. And what this flood has done is drive the supply curve down, while the demand curve has stayed constant. For OEMs [original equipment manufacturers, or the PC and server manufacturers like Apple, HP and Dell, who buy directly from Seagate], you’re seeing an average increase of about 20 percent, and in the channel [resellers who sell parts to smaller PC and server vendors], probably much higher. So all the sensational quotes you see about pricing are about those that occur in the channel, where we have no control whatsoever.

The markups in the channel are much higher? Are the channel guys taking advantage of this?

Yes, they’re higher, but I don’t think they’re taking advantage. I’ve heard stories about drives that we sell to OEMs for $60 that show up in the channel at $105. Normally the channel price is within about 10 percent of the OEM price. It’s just the law of supply and demand. They can’t get supply. The channel is getting about a third, at most, of the supply they would typically get. The OEMs are the ones with the supply agreements, so everyone in the channel is way short. In some market segments, supply is about 70 percent below what the demand is. And so those shortages are very acute. The channel is selling the few drives that are out there to whoever needs them the most and is willing to pay for them.

So what does all this mean for Seagate, specifically?

For us it’s a different story, because we’re going to be driving more volume than our competitors, because we’re not as directly affected, and we’re going to be making some  technology transitions. When we do that, it lets us take cost out of our product, so we can offer more capacity for the same or fewer parts. That helps us drive down pricing. Our goal is to recapture some of the more aggressive pricing of the last eight quarters, in order to sort of get our business back in balance. Our long-term business model calls for gross margins of 22 to 26 percent. And we use our manufacturing expertise to drive down our costs and then pass that on to our customers. This quarter, end users really won’t see it, because product has been built and has been on the shelves. As the shortages just started occurring, you’re starting to see prices increase in the channel. And then at the OEM there will be shortages in some high-value areas like enterprise storage or cloud computing. You’re going to have to see price increases, because there’s such big shortages.

One thing that occurred to me when I first wrote about this a month or so ago is that it represents an opportunity for the flash memory chip companies to make some inroads against hard-drive guys like you, mainly on notebooks. Is there a threat that flash could pick up some of the demand?

Some of it, but not very much. I think to the extent that there is a high value purchaser who can afford to pay $200 for 100 gigabytes, then that market will expand from 1-2 percent to 3-4 percent. Of the 35 to 40 percent shortage that exists, could you see a little of that get absorbed by silicon? The answer is yes. But there’s a cap. There’s just not enough of a raw supply of silicon to meet all the demand. Our industry will ship 400 exabytes this year. We would have shipped 450, were it not for the floods. Of that, 180 exabytes is notebooks. Reduce that by 30 percent, and you get about 55 or 60 exabytes. If you were to take all of the capacity from Samsung’s newest state-of-the-art flash factory, and dedicated it just to notebooks, it would only put out 7 exabytes a year. Plus, there are already other markets demanding flash, like  tablets and cellphones and other things. So it’s not like you can steal from those other markets. You’re not going to take a $32 product and replace it with a $350 product. Can you do it at the edges of the market? Sure. But the threat is capped by the amount of silicon available and the price point for flash storage, which is still an order of magnitude higher.

Yesterday, I published a story about the teardown analysis by IHS iSuppli of Amazon’s Kindle Fire tablet. And, as you may remember, the story related how, in the opinion of its analysts, it cost Amazon $201.70 to buy the parts and build the Fire — a sum which is only slightly above the $199 retail price of the device.

The other big news was how dominant the chipmaker Texas Instruments is among the suppliers. Its applications processor chip, wireless chips, and audio and power management chips add up to about $25, approximately 12 percent of the bill of materials (BOM), which is the aggregate cost of all the components. It’s a pretty solid victory for TI in the competitive tablet field, where, outside of Apple’s iPad, success has been rare.

Naturally, I asked Texas Instruments for a comment about this, and expected none. I’ve been writing teardown stories for six years (here’s the first I ever did); never once has the manufacturer of the device in question, nor any of its suppliers, given anything more than a “no comment.”

Manufacturers tend to hate teardowns because they’re invasive. Take a product apart and you find out who a company is working with — and you learn a lot about how they see things. With the Kindle Fire, for example, we learned that Amazon deliberately took a “less is more” approach to keep costs down, minimize its loss and pave the way to eventually selling the device at a profit.

Suppliers hate teardowns, too. There is nothing more secret — or more interesting to know — than what company is supplying a manufacturer with a key component. Companies can rise or fall on a strategic relationship with someone like Apple or HP — or Amazon. The first iPod, for example, put an otherwise unknown company named PortalPlayer on the map — until Apple replaced its chips with something else. Now that company is part of Nvidia.

Usually these suppliers are unwilling to rock the boat, and usually they’re covered by nondisclosure agreements. So when I do the typical reporter thing and call them for a comment, after a teardown clearly shows their chip or display or other component inside the product, the supplier always — 100 percent of the time, without exception — says, “No comment.” Probably they’d like nothing more than to brag about how their chip makes this or that product do amazing things, but usually they just can’t, won’t and just don’t say a word.

Until today. Today, in response to my questions of yesterday, I got a comment from Texas Instruments. And that meant I just had to share it. Here it is, courtesy of a company spokeswoman:

“We can confirm that TI’s OMAP4430 processor and WiLink 6.0 connectivity combo solution are inside of the Kindle Fire. … TI is thrilled to be a part of the Amazon Kindle Fire, which boasts powerful performance and engaging consumer experiences that are sure to make it a coveted device this holiday season.”

Not exactly riveting. But rare!

This essentially confirms what everyone has suspected for a while — that Amazon expects to lose a little money up front on the $199 Fire, in hope of selling in volume. It also hopes to make more money on sales of the digital media and physical goods consumers may order from Amazon on the device.

Andrew Rassweiler, the IHS iSuppli analyst who supervised the teardown, said the analysis is still under way, and that the firm may reduce its final estimate slightly. Update: It’s done: The final figure is $201.70.

That Amazon’s model with the Kindle Fire is essentially the opposite of rival Apple’s has been understood for some time. Apple’s iTunes store runs at or slightly above the break-even point, and encourages the sale of higher-margin hardware like the iPad, iPhone and iPod. The teardown study gives both a rough idea of how much Amazon can realistically expect to lose on the Fire, and also the extent to which it took steps to minimize those losses.

There are several examples of where Amazon clearly intended to minimize its hardware costs, Rassweiler says. For one thing, most tablets contain 8 gigabytes gigabits of DRAM memory. The Fire contains only four. It also contains only 8GB of flash memory used for storing content, where the iPad starts at 16GB and goes up to 64GB. Amazon also skipped other features, like a camera and Bluetooth connectivity, and more expensive wireless chips.

“All the choices have been made here to minimize the hardware cost,” Rassweiler says. “We expected to see a certain wireless module that’s commonly been seen in other tablets, and we were surprised that it wasn’t there. There was a cheaper one with fewer features that saved them a few bucks.” The chips were combined into a module manufactured by a previously unknown company called Jorjin, he says.

The box contents are also minimal. The box the Kindle Fire ships in is the same box it comes in when sold by third-party retailers like Best Buy. And the only accessories inside are a wall charger and a cord. Rassweiler says iSuppli initially expected the box contents to cost more than $5; instead, the cost is closer to $2 or $3. “Amazon’s approach was to take out everything they didn’t need,” he says.

But, as is always the rule with consumer electronics, prices come down. That $25 worth of TI chips will cost about $12 in the near future, meaning that Amazon will in time be able to sell the same device, but at a much lower cost to build. Of course, if it’s successful, consumers will want one that’s a little more fabulous, perhaps with a bigger screen, perhaps.

Inside the Fire, chipmaker Texas Instruments appeared to be the big winner, supplying numerous chips that combined for about $25, about 12 percent of the total materials cost. One TI chip, the OMAP4430, is the main applications processor in the Fire. It has previously been seen in the Droid Bionic, the LG Optimus and Research In Motion’s PlayBook. TI also supplied chips that help manage audio, power and Wi-Fi.

It’s a victory for TI, which appears to have beat out Qualcomm, who supplied Hewlett-Packard with the applications chip in its now-abandoned TouchPad tablet, as well as Nvidia and Broadcom, who have been competing for business with other tablet outfits.

South Korea’s LG Electronics supplied the display. LG has a relationship with E Ink Holdings, the company that has supplied the displays on Kindles, and also Barnes & Noble’s Nook, since the beginning. LG is also thought to supply displays for the iPad to Apple.

Along with the display are touchscreen components. Rassweiler says the touchscreen controller chip is from a previously unknown supplier known as Ilitek. The appearance of lesser-known suppliers for these components is increasingly common, Rassweiler says. A surge in demand for touch devices has brought forth a bumper crop of new companies supplying the components that make them work.

Amazon declined to comment directly on iSuppli’s findings, but CFO Thomas Szkutak said in an Oct. 25 conference call with analysts that the company is counting on the device to serve as a platform for the sale of content; Szkutak emphasized the “lifetime value” of the device.

It may just work. Amazon is said to be seeing higher-than-expected demand for the Fire, and is reported to have ordered another million units from its manufacturing partner, Taiwan’s Quanta Computer. Still, it will take many more than that to make a dent in iPad sales.

Amazon shares fell by more than 4 percent today. The shares are down from a recent peak, after the company disclosed an earnings miss on Oct. 25.

Click to see a bigger version of the exploded view, courtesy of iSuppli, below:

Western Digital CEO John Coyne warned yesterday on a conference call with analysts that the company expects significant impact to its hard-drive manufacturing operations in that country. It is one of several tech companies that has suspended operations in Thailand amid the worst flooding there in a half century.

Seagate, which reported earnings yesterday, also has operations in Thailand and said those are running at full capacity, but that some of its component suppliers have been affected by the floods.

“Given the severity of the situation and the extensive supply constraints caused by the disruption … the effects on our industry are likely to be substantial and will extend over multiple quarters,” Seagate said in a statement.

With the prospect of an industrywide shortage of hard drives affecting one vendor but not the other, shares of Seagate today shot up by $3.36, or more than 27 percent, to $15.42; Western Digital fell nearly 10 percent yesterday, but recovered today.

I checked in with Fang Zhang, who tracks storage for IHS iSuppli, the research firm that covers the electronics supply chain. While it’s too early yet to know the full impact, her initial estimate says that the worldwide production of hard drives will drop by about 30 percent, from 176 million units projected pre-flood to 125 million drives in the fourth quarter.

Apple CEO Tim Cook addressed the potential for a shortage on Apple’s earnings call with analysts on Tuesday because, naturally, it will affect his ability to turn out Macs this quarter and probably into next year. “I’m virtually certain there will be an overall industry shortage of disk drives as a result of the disaster,” he said.

One question I have is whether this could turn out to be an opportunity for the solid-state storage companies — the main supplier that comes to mind here is Samsung — that are popularizing flash-memory based storage drives in PCs like the MacBook Air and other machines. Will they boost production to fill that gap?

(Image via Consumer Queen.)

As you may remember, for whatever reason, probably competitive concerns, Apple takes great pains to obfuscate the identity of the company that supplies it with the cameras inside the handset. When IHS iSuppli shared the findings of its teardown analysis with me yesterday, its analysts had no idea who had built that particular part. Two candidates were mentioned: Largan Precision Co. of Taiwan and OmniVision.

A hint had come from a teardown analysis by another company, Chipworks, which had taken the iPhone apart, put its individual chips under a microscope and found a Sony-made imaging sensor inside it.

One reader wrote in to point out this story from April in The Wall Street Journal, detailing an interview in New York between AllThingsD’s own Walt Mossberg and Sony CEO Howard Stringer, where Stringer is quoted talking about how Sony supplies Apple with cameras. “It always puzzles me,” Stringer said at the time. “Why would I make Apple the best camera?”

So there’s some confirmation, of sorts, that Sony is supplying Apple with at least a part of one of the cameras in the iPhone. Analysts have speculated that Apple, always careful about its supply chain arrangements, has probably tapped two suppliers for the main camera, and that Sony and OmniVision are sharing the job.

Now we have even more information. In an update to its analysis of the phone, Chipworks said today that OmniVision appears to be the supplier of the secondary, front-facing camera in the iPhone. As Barron’s noted today, OmniVision’s stock shot up on that revelation.

Inside, the phone is similar too, but there have been some strategic changes from one generation to the next that have important implications for Apple’s many suppliers. According to a teardown analysis conducted by the research firm IHS iSuppli, chipmaker Intel, which last year acquired the wireless operations of the German chip concern Infineon, has been almost entirely bounced out of the 4S in favor of a set of chips from Qualcomm. The shift to Qualcomm had been rumored as far back as last September.

Before Intel acquired its wireless unit, Infineon had previously supplied Apple with a chip known as a baseband processor that Apple had used in combination with chips from Skyworks and Triquint to work with wireless phone networks. “Qualcomm is the big winner here,” says Andrew Rassweiler, an analyst with IHS iSuppli who conducted the teardown. “It is selling Apple a whole suite of chips that adds up to about $14 to $15 per iPhone.”

Intel spent $1.4 billion to acquire Infineon’s wireless chip operations last year in a move seen as meant to shore up its presence in the wireless phone industry overall. It has struggled to win business for its Atom line of microprocessors, which are aimed at mobile devices like smartphones and tablets.

Infineon still has a small chip in the iPhone, but Rassweiler says it’s far less significant and a lot less costly than the one it supplied Apple before. “It’s almost like Apple threw them a bone with a 50-cent part after they lost a much more high profile chip that cost about $10,” he says. Intel had no comment.

ISuppli regularly conducts teardown studies of wireless phones and other consumer electronics devices in order to find out who a manufacturer’s vendors are — like most manufacturers, Apple prevents its suppliers from identifying themselves, much as they’d love to — but also to determine what each part costs. The combined cost of components — analysts check on the list prices of each part — is known as a bill-of-materials (BOM) estimate that gives a fair idea how much a manufacturer, in this case Apple, makes in gross margin on each device sold. Apple doesn’t disclose its gross margin on a per-product basis but when it reported its quarterly results yesterday it said its overall gross margin was 40.3 percent.

In the case of the iPhone 4S, Rassweiler estimates that the BOM cost ranges from $188 for the 16 gigabyte version of the iPhone 4S to $207 for the 32GB version and $245 for the 64GB version. Apple and its carrier partners sell the phones for $199, $299 and $399 respectively, typically with a two-year contract for wireless service that carriers use to subsidize the cost they pay Apple.

The costliest components are the ones that determine the price: Memory chips. Apple has been known in the past to rely mostly upon South Korea’s Samsung Electronics, the world’s largest supplier of memory, and from Japan’s Toshiba. In the phone that Rassweiler’s team tore down, the memory chips came from Samsung rival Hynix Semiconductor. “That struck us as a bit of a surprise,” Rassweiler says. It’s hard not to wonder if adding Hynix to the stable of iPhone memory suppliers is a partial response by Apple to the complicated patent fight it is waging with Samsung in courtrooms around the world.

Even so, Samsung appears to be have maintained its role as the manufacturer of the Apple-designed A5 processor that provides the iPhone 4S, and also the iPad 2, with most of its computing horsepower. Some published reports in recent months had suggested that because of the patent fight, Apple might end a relationship that dates back to the original iPhone and move its chip manufacturing contract to Taiwan Semiconductor Manufacturing Co., the huge chip manufacturing foundry. Rassweiler says there’s no sign on the latest A5 chips that that has occurred. “The markings are the same as what we saw in the iPad 2,” he says. The estimated cost for the A5 chip is $15 each, he says.

Apple started designing its own chips for the iPhone and iPad products beginning in 2010 with the release of the first iPad. The chip is thought to have been designed by teams from PA Semi and Intrinsity, two privately held chip design firms that Apple acquired in 2008 and 2010 respectively.

However, it’s also clear that the A5 chip is taking on more of the heavy computing lifting inside the device than the previous A4 chip, Rassweiler says. For example: The iPhone 4 contains a chip from privately held Audience Semiconductor, based in Mountain View, Calif., that handled noise cancellation. There’s no such chip inside the iPhone 4S, Rassweiler says, so it appears that noise-cancellation duties may have been moved to the beefier A5 chip itself.

Triquint Semiconductor provided a set of chips that make up a wireless transmit module that works with the wireless phone networks. Triquint has traditionally been an iPhone supplier, Rassweiler says, but the value of what it supplies to Apple appears to have dropped. One wireless chip company that has seen the value of what it supplies to Apple increase is Avago Technologies. Like Triquint, it too has been an iPhone supplier, but the overall value of the chips it supplies has gone up in the 4S.

STMicroelectronics, the European chipmaker, maintained its role as the supplier of gyroscope chips that help determine the phone’s position and rotate the screen for playing games and displaying pictures and videos. AKM Semiconductor again supplied the compass chip. Texas Instruments continued in its role supplying the chip that controls the iPhone’s display, and an audio chip.

One vendor could not be identified. Rassweiler says that Apple appears to have taken pains to hide the identity of the company that supplies the parts that power the iPhone 4S’s highly regarded 8 megapixel camera. This is not new, and the candidates include Largan Precision Co., a Taiwanese supplier of camera modules to wireless phone companies, and Omnivision. “We don’t know exactly who makes it,” Rassweiler told me. Whoever the supplier is, Rassweiler estimates the camera added $17.60 to the cost to build the iPhone. And they’re likely to make a lot on the deal. IHS iSuppli is forecasting that Apple will sell 81 million iPhone 4Ss around the world next year.

Update: A few of you have written in saying that it was Sony who supplied the camera. Maybe. The folks at Chipworks dissected the camera module and found a Sony-made CMOS image sensor inside it. That doesn’t make the whole module a Sony’s however. It could be a Sony camera or it could be that whoever made the camera used a Sony sensor. And last week Barron’s reported on some debate among analysts over whether or not Apple has split the camera supply contract 50-50 between Omnivision and Sony.

According to the latest figures from IHS iSuppli, global media tablet shipments will hit 60 million units this year, up a jawdropping 245.9 percent from 17.4 million in 2010. And of those 60 million tablets, 44.2 million will be iPads.

In other words, Apple is expected to account for 74 percent of media tablet shipments in 2011. And with the company expected to ship 120.1 million iPads in 2015 — up from a previous forecast of 97.9 million — it’s looking like Apple will claim the majority of the market for the next couple years. Indeed, IHS expects the iPad to dominate through 2013, a year longer than it previously predicted, because so many rival tablets (one in particular) have failed to gain mass appeal.

“All the momentum in the media tablet market is with Apple right now,” said IHS analyst Rhoda Alexander. “The competition can’t seem to field a product with the right combination of hardware, marketing, applications and content to match up with the iPad. Furthermore, Apple’s patent litigation is serving to slow or complicate competitors’ entry into some key regional markets. With Apple lapping its competitors, many of whom are still struggling to get out of the starting gate, this remains a one-horse race.”