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  • Apple's Cost for $499 iPad? $270


    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.
    Though Apple prices the 3G-enabled iPad at a hefty $130 US over similarly configured WiFi-only models, the actual hardware difference between the two is only a $12 baseband processor and a $4 transceiver. This surcharge struck one observer as "slightly ridiculous," and led him to speculate that Apple had artificially inflated the price tag on the 3G models to essentially subsidize the low-end iPads. Aaron Vronko, the chief executive of Michigan-based Rapid Repair - a company that specializes in iPhone and iPod service and repairs - said that he thought "the 3G price is where Apple wanted the price of the iPad to be, but they felt a lot of pressure to hit a pricing mark." In fact, Steve Jobs made pretty much that point in his presentation, saying that Apple "not only had specific technical goals and user interface goals, but an aggressive price goal, because we want to put this in the hands of a lot of people."

    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
    This article was originally published in forum thread: Apple's Cost for $499 iPad? $270 started by Paul Daniel Ash View original post
    Comments 80 Comments
    1. Happy Noodle Boy's Avatar
      Happy Noodle Boy -
      Quote Originally Posted by Melech518 View Post
      It is funny that throughout all of the complaining about the iPad, no one has said ONE WORD about the lack of a Verizon announcement....I mean, I knew it was BS from the very first rumor, but I love how no one has complained about that.
      They're still in a corner crying and recuperating.

      AT&T 4 life.
    1. Bluprint's Avatar
      Bluprint -
      I used to work for apple and let me just get the record straight, apple does not pay good at all. Btw apple doesn't care about you, all your devices will be obsolete in a few years that's apple's plan. They will continue to sucker you in every year, trust me.

      This device is a giant ripoff and most of you are getting sucked in by this marketing monster. For example, the whole "no-contract" for a data plan is total marketing crap, ofcourse if your paying for the device at full price and more for an add-on feature like 3g how can they obligate you to sign a contact?! Trust me don't support this device, remember the first iPhone was retailed at $600 and after a short month it was lowered to $499, those who paid more only got a iTunes card for the difference paid.
    1. sciberjack's Avatar
      sciberjack -
      Sorry to hear that Blu...

      As to the rest of you try this on for size.

      I am 35 year old Investment banker. I put my first Apple ][ together in 1984 (10 years old for the slow ones) and I know the value of a good medium when I see it and you guys will be surprised at how many people like me will buy it. Educational systems will be buying this thing like there is no tomorrow once it starts catching on like the iPod Touch has with the Minnesota school systems. The kids there are so enthusiastic about the little iPods and the big names in school books are already signed on with Apple (check the list of publishers selling their books on that slide show and then look in your back pack...)

      I can download my presentations to the investors and then play them over an HD projector with this thing = investors informed. I can then crunch the numbers for them and modify everything as they watch it over the projector and answer their questions = investors appeased, Then I can use it to securely log in to my office server to download and update new contracts with out missing a beat = investors impressed. The investors can then sign the contracts right then and there on the iPad and know for a fact that they are getting a good deal = my kids get fed.

      I have to continuously go to school for re-certifications and better market comprehension, the feds are always changing the rules. Sitting in an airport trying to read something on a laptop, if you are lucky enough to find a plug-in, and an immense amount of heat on the groin area if you are playing a game or editing presentation videos.... that is a pain in the (*%^... now this thing will let me relax with a real book like feel and weight= me happier. Having something that I can carry to a property site and use to order more supplies for the contractors or show him a complete copy of his signed contract = renovations cost less = cheaper price for my investors = more contracts for me = more food for them rugrats running around whining about they want something for nothing.... like what I am hearing here. Being able to play warcraft online once they get the 3rd gen of iPad launched = me impressed and in heaven.

      Listen you think newegg and the rest of them don't charge 100% markup? You ARE nuts. I had to work at staples a few years ago while I finished my first set of degrees. The average markup on a staples product is 185% for the name brand and 250% for the staples brand.... why do think they can do those 50-75% off sales so often. NO store is any different. My contractors who I know and trust run the price up on me 125%. WHY you ask? If a guy going to install a $10,000 dollar (yes they make them that high priced) he is going to charge $25,000 to install it. If the idiots working for him drops the thing and breaks it, I won't pay for it again, so he has to... Then he has to have it replaced - $10,000 (that half of the contract costs right there), then he has to pay his labor for installing it twice... then he has to pay income taxes, insurance costs, taxes on the door, taxes on his guys labor (fed and state) costs, insurance for the idiots (work comp) and their replacements, medicare and medicaid for them, licensing fees, accountant fees and the list goes on, before he pays his own mortgage and truck loans or groceries for his kids. There is a lot more to running a business then just how much does it cost for the materials and how much you pay some highly trained burger flipper standing at an assembly line or some bimbo to sit next to a phone and tell you the problem with you internet service is the router you are using and not the fact that they oversold the capacity of their backbone....

      I took a few classes with one of the guys on the iPhone development team, he said their biggest costs is not the labor or the materials, its all of the red tape they have to cut through. How much do you think Obama's FCC people are going to charge Steve for getting permission to license the thing just to sell it to you, and then Uncle Sam is going to take 30% of that profit in taxes. After research and development, political red tape, patent research licensing and the attorneys to make sure Bill Gates can't xerox it like he did with the OS... $499 is a bargain price, it will take the first 6 months just to break even, anything after 8 months on the market and these guys will start making enough money to add a camera to it or other nice amenities, and then they will lower the price to something a little more reasonable because the hard part of the R&D is already paid for. Apple has always sold its products at a fair market value, this time they started off a lot cheaper then everyone thought to begin with, because they know the economy is hurting.

      The things are being sold unlocked right from the start, if you think you can find a cheaper plan then what is tied to it, tell me where I need to save some money myself, AT&T doesn't have service here in Montana and I have to pay $99.94 a month for unlimited nationwide data that is only guaranteed here in Montana. I really appreciate some of the skill and talent you younger guys have with breaking and coding these things, but if the two Steves had stuck with a 20-30% markup they would have never left that garage in the 70s. Not to mention the really awesome concerts The Woz through in the 80s. The Woz man is still out there inventing stuff and this is just the next step. Yes, some of us do have to pay a high premium for today's soon to be outdated gadgets, and we do not because we can, but to support what might be. My company is already on the notify me list and we have scheduled the release date to be a few blocks from the Apple store nearest us, 400+ miles, we are planning on buying four of the high end 3g models. That way when they come out with the next one of these our kids will get a nice slightly used iPad to do their homework on.

      You guys want to make some money???? Come up with an app that will edit PDFs on the iPad, I know for a fact you will be able to get $100 per sale for it. Some of you are smart enough to do that in less than an hour. If you only sell one you make $100 an hour, anything after that is pure gravy. Of course you will have to pay the advertisers, the server access fees... and NEVER forget to pay Uncle Sam. The biggest crook in the business doesn't like not getting paid, they really are worse then dealing with the mob sometimes.
    1. adp's Avatar
      adp -
      ^ wow I'm amazed by that video. Hilarious, but so true at the same time. It pretty much puts it all together. Props to whoever did the editing.
    1. confucious's Avatar
      confucious -
      I think it will sell very well here in the UK - assuming the pricing is not did-similar to the US to the US, of course.
      If people don't like the pricing, it won't sell and Apple have got their price wrong.
      If it sells well, Apple have got their price right.
      Does no one believe in supply and demand now.
      If you don't like the price, don't buy it. It's really quite simple.
    1. emendonca79's Avatar
      emendonca79 -
      Well put!

      Quote:
      Originally Posted by StealthBravo
      I own a business and when the economy is bad as it is, its nice to see a business make a decent profit margin.
      What you don't seem to understand is that you should want companies to make a profit. If they do not then they won't be in business for long (unless you are in the automotive or banking business ). So yes I am very happy for Apple and I think $499 is rather cheap.

      Quote:
      Originally Posted by mikerlx
      I am glad to see apple making a profit meaning more money for the company and more people employed to provide for there family.
      Well said, both of you!
      I would never expect a company to produce a product and give it away without making a decent profit from it. This economy would fall apart if business cannot turn a profit...

      Quote Originally Posted by Melech518 View Post
      Well said, both of you!
      I would never expect a company to produce a product and give it away without making a decent profit from it. This economy would fall apart if business cannot turn a profit...

      I agree with everyone of you. The point of how much profit a company is making on parts/labor should not apply for this case.
      This product took apple 1 year to get it done which cost money.
      Also everyone forgot that just before the offical release all the rumors were between 600-1000.

      I am very happy with the product and price can see a big boost in sales for this product!
    1. lolcats1's Avatar
      lolcats1 -
      did anyone actually read what sciberjack wrote? cause i sure as hell didn't.
    1. StealthBravo's Avatar
      StealthBravo -
      ^ I did and he made some wonderful points. When you have a moment read it a couple times
    1. Bluprint's Avatar
      Bluprint -
      Quote Originally Posted by emendonca79 View Post
      Also everyone forgot that just before the offical release all the rumors were between 600-1000.
      Yeah all rumors also indicated OSX to run in the iPad but it didn't. An oversized iPod at 500-699 dollars is nothing to be excited about, a 3g module that only cost $30 to implement should not be $100 to the consumer. I own my business too but that's nothing compared to those big corporations that will abuse their loyal customers.
    1. confucious's Avatar
      confucious -
      If you don't like it, don't buy it. Time will tell if it's a hit or not.
    1. dsg's Avatar
      dsg -
      It'll sell, it's shiny and it's Apple
    1. confucious's Avatar
      confucious -
      Mmmmmmm shiny
    1. StealthBravo's Avatar
      StealthBravo -
      What everyone really wants to know is will confucious own one?
    1. confucious's Avatar
      confucious -
      ^ +1
    1. rhekt's Avatar
      rhekt -
      ya'll know this isnt the actual BOM. as they havn't released the ipad yet for it to be fully torn apart by a third party analyst to get an actual depiction of the cost of materials.
    1. confucious's Avatar
      confucious -
      While what you say is very true, does it matter?
      Unless you think everyone owes you everything it makes no difference.
    1. sziklassy's Avatar
      sziklassy -
      Quote Originally Posted by Melech518 View Post
      FYI- The iPhone 3GS is $599 for the 16GB model and $699 for the 32GB. The $99, $199, and $299 pricing is what's called "subsidized pricing" through At&t and other official carriers. The carrier takes on the burden of the actual cost of the device and offers it at a reduced rate when entering into a 2-year agreement of service. You are actually paying much more than the retail price of the phone through subsidized pricing due to your monthly fees over a 2-year period.
      It's good you pointed this out. Unfortunately for you he was comparing prices of the touch not the iphone. So... his statements were completely accurate.

      I am sort of happy this is nothing more than an oversized touch. I am not compelled to buy one anymore LOL.
    1. sciberjack's Avatar
      sciberjack -
      Thanks Stealth,

      sorry lolcats, keep forgetting short sentences and small words.... lol

      seriously though guys....

      as smart as some of you are you can make some cool apps for these things and then buy one just for giggles...
    1. TheDirtyDiddler's Avatar
      TheDirtyDiddler -
      Quote Originally Posted by FreshPrince View Post
      Hate to say it, but this is typical from Apple. The thing should be $299.
      There is no reason why an iPad should be expected to cost less than an iPod touch. Women spend more than this on a single pair of shoes or a purse. You really are getting a lot for your money when you think about it. It's just that so many of us are already used to the features because of the ipod touch. Stop looking at it for how it compares to other Apple products and start looking at it for how it compares to other tablets/multimedia devices. We know it's very similar to the touch, but the touch is an amazing product, so what's the problem? No one is telling you to own both.
    1. redcard's Avatar
      redcard -
      Quote Originally Posted by Bluprint View Post
      I used to work for apple and let me just get the record straight, apple does not pay good at all. Btw apple doesn't care about you, all your devices will be obsolete in a few years that's apple's plan. They will continue to sucker you in every year, trust me.

      This device is a giant ripoff and most of you are getting sucked in by this marketing monster. For example, the whole "no-contract" for a data plan is total marketing crap, ofcourse if your paying for the device at full price and more for an add-on feature like 3g how can they obligate you to sign a contact?! Trust me don't support this device, remember the first iPhone was retailed at $600 and after a short month it was lowered to $499, those who paid more only got a iTunes card for the difference paid.
      Apple do pay well. Maybe they didn't pay you well. Tough tits.

      Obsolete in a few years? Wow. Just like EVERY TECH GADGET EVER?

      I'm buying an ipad when it't out. You stick to your dinky little notebook.