A $499 16GB iPad costs Apple $270.50 US to manufacture, according to an estimate by industry analysts Broadpoint Amtech, resulting in a profit of $228 for each one the company sells. For the top-of-the-line 64GB model, the profit goes up to $446. Large profit margins are common for Apple, with many analysts estimating that it makes 60% profit on each iPhone 3GS sold. Given that the original iPhone sold for $599, though, some observers believe that the low cost may make it possible for Apple to drop prices in the future to boost sales.
Broadpoint Amtech's Brian Marshall did an analysis of the Bill of Materials (BOM) of the various parts that go into the iPad. The single most expensive component was the 9.7-in. IPS LCD touchscreen, which Marshall estimates costs Apple $100. The 16GB of NAND memory in the low-end unit costs $25 each, he believes, and the battery costs $30. The Apple A4 chip, manufactured by Samsung to Apple's specifications, costs $15. The list doesn't include the cost of warranty service, which Marshall estimates will add another $20 to the overall bill.
Ezra Gottheil, an analyst with Technology Business Research, opined that the large margins gives Apple room to play with price.
If [Marshall] is right, this shows that there's room going forward for Apple to reduce the price of the iPad. I think the $499 price point is very aggressive, but if they dropped [the price] it would really put the iPad in the netbook range. At a lower price, consumers will have to decide what they want for a portable work and play device, a netbook or get an iPad.
Apple has not yet released pricing for iPad units that will be sold outside the United States. "We hope to have our international deals in place in [the] June/July time[frame] - we’re starting on that tomorrow," Steve Jobs said on Wednesday of last week.
image via The Guardian
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