This shouldn't come as a shock to anyone: just because Apple's touting the "magical" $499 pricepoint of the iPad doesn't mean they're selling it at a loss. After carefully poring over the iPad's internals,
iSuppli has waved its hands in the air and added up a thoroughly guesstimated bill of materials as low as $259.60 for the 16GB iPad, including $95 for screen and $26.80 for the A4 processor. Sure, we suppose we can believe that, although that number doesn't really explina the final price tag, since it fails to include include gigantic costs like, oh, say, "development." The good news for us is that there's actually a lot more complexity inside the iPad than iSuppli was expecting, and that means the raw component prices might come down over time as things like the three-chip touchscreen controller get simplified over time. What might seem silly and wasteful at $499 could seem all-too-tempting at $299.
posted April 7th 2010 10:18AM
@Jack
Hence why I said they *should* drop the price and not they *will* drop the price, lol. The second generation would need to be a pretty significant upgrade in my mind to be worth $500-$800, given that the current models surely don't do it for me, and a year from now we'll have even higher expectations for tablets and what should follow up the first generation of hardware specifically.
I have no problem with a yearly refresh. I think it's a great way to continuously sell products year over year rather then bunching them all up every 2-3 years. I think it also actually helps the buyers remorse problem because people come to terms with the fact that something better will *always* be coming next year and just buy what they want, when they want it. It allows impulse purchasing easier I think, though many people would disagree with that if you look at it from a different perspective, which I can understand.
Anyway, I'm all for a second gen iPad with some new features, but much like the iPod and iPhone lines, prices do eventually drop on specific models when the time calls for it. The original iPod was $400, but now the 160GB classic is down to $250. Likewise the iPhone came out at $600 but now bottoms out at $100 for the 8GB 3G model. The iPad might follow suit, but I doubt it.
@kenny goo
Once the R&D costs for this are covered they will pull out all stops developing the next big thing. See you in 2013.
Needless to say, by that time everybody here will be using tablets and claim that Apple had nothing to do with that.
http://www.isuppli.com/News/Pages/Mid-RangeiPadtoGenerateMaximumProfitsforApple,iSuppliEstimates.aspx
+ $XXX millions of dollar they spent on marketing. freckin every other tv commercial and bus stop.
WHAT??? How dare a company make any profit on a product!
Please please stop giving iSuppli publicity. Stupid pointless name, stupid pointless guesswork.
i doubt it'll ever get to $299.. there's R and D cost, logistics, labour, assembly, overhead..... getting down to $399 is more reasonably for a balance of benefits to both consumer and business.....
Whoever wrote this article is clueless about what it takes to run a business. A 50%+ component cost is actually quite high. Probably the analysis is flawed somewhere, as Apple has a history of knowing how to make money. I doubt that the price point was so important to them that they compromised their profit plan. Either that or they have a lot of near-term cost reduction projects in the pipe.
This makes sense. Companies like profit.
As for thise expecting a price cut to $300: Not gonna happen, competes with iPod touch, bla bla bla etc. They'll just use the optimization to get more profit out of it. [Why would they cut the price anyways? They won't, generally, if it proves to do well. I could see a cut to $400, which preserves tiers.]
I sold electronics for lighting for 10 years, and worked with production managers in S. Korea and China. Any attempt to predict their production costs is futile. I had one tell me candidly, the incentive for the Chinese factories is to keep their workers busy, not to make a profit.
Wow, anyone who thinks it would be fair for this device to be priced at $300 is absolutely ridiculous. Why the hell would Apple shoot themselves in the foot like that? They already have a multi-touch entertainment device in that price range, it's called the iPod touch. I believe the 64GB iPod touch is actually $399.. Why would they give you a HUGE iPod touch that costs twice the materials and development to make, for about the same price??? Don't be ridiculous people.
Why does iSuppli only do a breakdown of mainly Apple products? I want the same breakdown for the other products too, like the JooJoo and other hardware that use free software (Android, Linux, etc).
@pika2000
Because they want the publicity and hope to sell more research to businesses. I just don't think that this stuff would help their reputation with smart business leaders who realize that iSuppli is smearing Apple.
They forgot to factor in that the Apple logo is $200.
"What might seem silly and wasteful at $499 could seem all-too-tempting at $299."
Probably not.
Just for fun, let's use iSuppli's logic for other popular products:
* Apple's entire music catalog would be valued at $0.
* Every app in the app store would be worth $0.
* Every book ever written isn't worth more than the paper they're printed on.
* Every copy of Windows is worth $0.05.
* Steam's entire game catalog is valued at $0.
... yep, the rest is just pure profit... [facepalm]
Ultimately the pricing of devices is set by markets.
Priced too highly, sales are hurt, and profit is reduced.
Priced too low, profit per item is squeezed and profit is reduced despite higher volumes being sold.
All companies are obliged to find the sweet spot in between.
The trick is to make something that the market thinks is worth more than the cost of manufacture.
What is galling for a company like HP is their low-end netbooks and laptops are priced to suit the market, but they only make $15 per unit.
C.