The man who makes no mistakes does not usually make anything - Edward John Phelps
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Apple slaps a $400 premium on its Ipad 2 32GB
ANALYST OUTFIT Isuppli has taken apart an Ipad 2 32GB 3G to find out that it costs Apple less than $337 to build it.
Isuppli's teardown found that an Ipad 2 32GB 3G bill of materials (BOM) came to $326.60, with the analyst outfit slapping on a further $10 for manufacturing costs. Over half of the BOM cost is made up of the screen and memory, which cost $127.00 and $65.70, respectively.
While Isuppli might have calculated that the Ipad 2 32GB 3G costs $336.60 to make, Apple is currently flogging the device to US punters for $729.00. What is more shocking is that, according to Isuppli's breakdown, the baseband modules cost Apple a mere $18.70, yet Apple slaps a $130 premium on the Ipad 2 3G model over the WiFi-only Ipad 2.
Despite Apple's CEO Steve Jobs taking a pop at Samsung during the Ipad 2 launch for its Galaxy Tab sales figures snafu, Isuppli's data shows that Apple still needs Samsung in order to produce the Ipad 2. Not only does Samsung fabricate the A5 chip for a mere $14.00, but Apple also buys its multi-level cell NAND chips and the LCD timing controller from the Korean electronics giant.
While Apple has to wrap further costs into its final retail price of $729.00, it's hard to see how Apple isn't retaining a very hefty profit margin on each Ipad 2 sold. And, as expected, Ipad 2 units are flying off the shelves with Apple restricting online orders to only two per customer.
So if fanbois are happy to pay over the odds for their shiny toys, it seems harsh to mock Steve Jobs for peddling a device that could be sold at significantly lower prices. After all, he's just helping to maintain Apple's high stock price, and that's his job. µ
Tags: Apple
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you have to invest 1st
and yes, R&D includes some kind of market analysis
Remember that you have to sell certain amount of devices until you get even. If your market share never gets big enough too bad! You need to also put the correct price tag on your product.
Price includes also transport, stocking, dealer profit. Just a slice goes into my pocket as a shareholder because the CEO's of today get too big benefits (%¤#&%¤/¤
Apple had success and it's profiting for it. Right time innovation has been Jobs driving force and Apple's key feature.
They could sell iPad 2 & iPhone 5 at lower prices, but can they manufacture enough devices then and will it then iSymbolize wealth and attitude anymore?
you don't always profit more with larger volume and more sales although market shares are sometimes very important if your enemies have higher cost structure. You can starve them to death legally.
Okay, so Apple, which cannot keep the iPad in stock should drop its evil price. Then more folks who bought them could make even more on the markup for resale to eBay? Apple could have even longer lines? No other products are sold in stores at a significant markup??? So much is not factored in. This reminds me of the book How to Lie with Statistics. What are the physical costs of Microsoft Office vs its costs, or any Apple software? Silly math, and a slap in the face of good logic. It's too high priced and will never sell, as with the iPod, iPhone and iPad 1. Shame Apple miscalculated on pricing so badly folks walked away in disgust at their pricing. ;-)
When a device is made of 'off the shelf' components, I think using the term research and development(R&D) is a bit of a stretch.
How about calling it 'focus group' testing or perhaps an even more apt term would be 'crowd testing', ie everyone who used a pad1.
It would seem from a technical consumer perspective, most of apple's R&D budget probably goes into the advertising department, where they R&D new ways to make you want one...
Shame the department that dose the durability and user testing don't get a bigger slice of the pie, perhaps then might get these device right on the first revision...
10 Bucks says the phone5 comes out before the white phone4. ;)
Personal, I think apple took a page from the ford model-t book, "you can have it in any color you want, as long as it's black...
The cost of making the iPad is useless. The main cost of the iPad is *designing* the hardware, the R&D involved, large number of prototypes, software design and development, testing, marketing, all operations, ... in fact all of whatever people at Apple do.
In fact, even Xoom's cost to manufacture is just $360... but they sell at $800. In Cisco's high-end routers, the cost of manufacturing is $4k, and they sell them for $100k.
http://www.isuppli.com/Teardowns/News/Pages/XOOMBOM-Totals-$359-92-IHS-iSuppli-Teardown-Reveals.aspx
So the retail price of a product is the manufacturing cost + so many other costs that it can reasonably be several times the manufacturing cost.
@mycelo said: 'The blame is on those who agree to pay such premium price.'
What premium would that be? The $70 more that the Moto Xoom charges over a similarly configured iPad? Or Rim's $500 7" playbook that, by the way, ISN'T shipping yet. Or HP's Toughpad...you know the one without a ship date, or posted PRICE!
As far as 'fanboys' buying iPads—guess again. From Fortune magazine: http://tech.fortune.cnn.com/2011/03/13/piper-jaffray-ipad-2-totally-sold-out-70-to-new-buyers/
The blame is on those who agree to pay such premium price.
If they ever refused to do so, then those companies would consider lowering them.
The blame is on fanboys and that's all.
Qoute: "a device that could be sold at significantly lower prices."
If it can be made and sold at a significantly lower price, then *why doesn't anybody do that*?
If it's so easy to do, it ought to be a golden opportunity, right?
More click-bait from the inquirer. <sigh
Anyone with the IQ of an avocado realizes that a BOM (Bill of Materials) is a poor way to calculate actual costs to produce a product or the resulting profits to the manufacturer.
As for Apple's 'premium', please find a 10" tablet computer that is currently shipping that costs less than the iPad. Anyone that thinks comparably configured Android-based products are going to sell for less than an iPad is fooling themselves.
Apple's R&D spending is only about 5% of revenue. They simply enjoy very high markups compared to other consumer products - largely on the basis of a monopoly position they have built off excellent design, marketing, and supply chain management.
Greedy motorola is asking for lot more for it's bricky, buggy xoom ;)
Anyway, who gives a fcuk how much apple does get. They are here to make a money like all the rest. And people are willing to pay for it because it's a good produck. Just get over it
used when designing consumer electronics. Take your parts costs and multiply by 3 to get RRP. After you've manufactured your device, paid for the R&D, plus certification of the wireles bits, added some profit margin, shipped it to wholesalers, they've made some margin and shipped it to retailers, who also want to make some margin then you end up with a number fairly near that.
Now look at the BOM on devices like the XOOM and the Galaxy Pad. It would seem that their engineers use the same numbers also.
I agree with the previous comment in that rightly apple has other significant overhead costs to build in and its ultimate goal is to generate shareholder value.
Let us not forget though that it also take 30% of all app store sales values for which running the app store is by comparison not a costly exercise. Add in all the other revenue streams connected to Ipad etc and there may be some justification for price reduction.
Does it matter though when it is claimed sales of unit could exceed 40 million. If we are willing to pay, Apple is willing to let us!!
Apple adds value to glass and silicon like McDonalds adds value to bread and meat?
I don't think they'll welcome the comparison.
And I don't think McDonalds will appreciate you claiming that they sell customers 4 cents worth of food and call it a nutritious meal.
Observe that the prices in the article do allow for the cost of "cooking" the hardware - but not of designing and developing the software.
The point is that McDonalds "supersizes" your meal for a small premium charge, but Apple supersizes the iPad memory (which is just analogous to fries, you take as much as you want) for a large premium charge.
The other point that crosses my mind is that the researcher took the most expensive iPad and busted it to find that out, which is money straight into Apple's coffers, so I think they'll be delighted about that. Or maybe I'm wrong and it's fixable. Or it was stolen. Or it was broken already. Anyway, the researcher apparently does this for their personal amusement, unless they get a discreet fee from The Inquirer as well for doing it.
The problem with this math is that you remove all the operating expenses of a company and the expense of R&D which makes these products so amazing! Factor in the millions of dollars Apple poured into the iPad over the last 4-5 years (yes, that's about how long they've been working and getting patents for this product) the price point is warranted. That's like saying McDonald's should sell us hamburgers for 4c as that's what it costs them, it's ignorant to ignore the enormous operating expenses of a company like Apple the way this article does.