Apple's Cost for $499 iPad? $270

[Paul Daniel Ash]

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

[StealthBravo]

Good for them. Glad they are making a decent profit margin on it

[RKirk7741]

horray for lower priced iPads!

[chrlswltrs]

With that much of a profit margin why can't they include the basic functionality of a netbook so that the web is usable. Put freaking flash on it!!!!! Do that and I'll buy it.

[frozenra1n]

Wow that's kinda annoying especially for those of us who are low on cash.

[1shuttle1]

Wifi to 3G $130 upgrade for $16 dollars worth of product. What a douche. Douche, iPad I think there is a theme here.

[snuckols]

Think about all of the development and marketing that went into this device. They have been working on it for years. That is a hell of alot of manhours to account for. Apple pays there people very well to develop this technology. You can't just assume that anything above and beyond the labor and materials is profit...

[adp]

They've made a profit out of every device. I don't know what the point of trashing their profit in these articles. I'm pretty sure the profit Bose, Sony, Monster Cable etc. are larger than these. This is what capitalism is all about; if you don't like it then let's all have socialist phones. Stop complaining about how much apple makes. They deserve it.

[kylen721]

I'm sure that the 3G price difference has something to do with the contract they created with apple for contract free data pricing.

[1shuttle1]

Think about all of the development and marketing that went into this device. They have been working on it for years. That is a hell of alot of manhours to account for. Apple pays there people very well to develop this technology. You can't just assume that anything above and beyond the labor and materials is profit...

I am in Medical Equipment Sales so I understand where your coming from to a certain degree with development. Other then slight software changes and a bigger screen where is the development on this particular device. Maybe if he had not bragged about the 50 billion in sales it would be little easier to swallow. Marketing and advertising are another thing. To see an Apple commercial 30 times a day is a little over the top. Wait till this thing hits the market. I can't think of any one that advertises as much now as Apple at least on TV. And we are paying for those commercial in the retail price.

[cpotoso]

It is OK for them to make a profit, but why they douche us with the "add ons" is incredible. E.g., whey I bought my mac pro (4 core 2 xeons), apple wanted $600 for upgrading the memory from 1GB to 4GB, newegg sold me 4 GB (additional to the 1GB already present) for only $150... Same thing with the HD, upgrading from 250 GB to 500 GB was an $250 add on; buying an *additional* 500 GB hd from newegg: $120 (and I got to keep BOTH HD's). This is apple... They charge you $100 to upgrade from 16GB to 32GB of storage when it costs them $15... BAD BAD BAD.

[M4tt Dam0n]

Good for them. Glad they are making a decent profit margin on it

Lol what a fanboy you are. You are actually happy a company makes profit.

Anyway this is a giant iPod only a small bumb in processing power but that's it. It's no surprise it doesn't cost too much.

[StealthBravo]

You are actually happy a company makes profit.

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.

[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.

[Melech518]

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.

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...

[FreshPrince]

Hate to say it, but this is typical from Apple. The thing should be $299.

[Melech518]

I always wonder the age of the users making these comments. There should be an Age input on the user info

[StealthBravo]

lol. Honestly they are mostly 14-20. The age of arrogance and entitlement

[L00i3]

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.

I can see your point, but where is the value at $499? You can get a 32GB iPod Touch for $299. The screen costs them $100, so that equates to about $80 or so over the Touch. The storage capacity is halved on the Pad, so that's about $25 less.

So Touch (299) + screen (80) - storage (25) = 354

I could maybe see $399 being a decent price for the low end Pad since it's nothing more than a big iPod Touch.

[battlecrushr]

lol apple knows business