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Why Apple Can Produce Tablets for Less Money

By - Source: IHS | B 44 comments

IHS released a report that describes some of the reasons why Apple has critical advantages in designing the iPad and why it may be able to keep those advantages in the foreseeable time.

The market research firm believes that Apple's control over the entire platform, especially the software provides it with a unique opportunity to design tailored hardware that deliver cost and integration scenarios its rivals cannot achieve.

“Apple takes a vertically integrated approach to its products, from the operating system to the user interface, to the hardware design, down to the selection of individual parts used in the device,” said Wayne Lam, senior analyst, competitive analysis, at IHS. “For example, Apple even uses its own applications processor design in both the iPad and iPad 2. In contrast, Android tablet makers buy those capabilities from the likes of Nvidia, Texas Instruments and Qualcomm. This gives Apple greater control in multiple areas of product development.”

For example, IHS said that Apple's ability to control the OS enables the company to reduce cost by limiting the quantity of memory in the iPad. The current-generation iPad 2 uses 512 MB SDRAM, while its rivals use 1 GB. "This memory density reduction results in a nearly $14 reduction in the bill of materials of the iPad 2 compared to other tablets, the market research firm noted.

“Since Apple controls both the operating system and hardware design of the iPad, it is able to attain design efficiencies that other tablet manufacturers cannot,” Lam said. “These efficiencies become obvious in areas like the memory and the battery, where Apple maintains advantages in cost, space savings and performance compared with every competitor in the business.”

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  • 21 Hide
    Assmar , August 2, 2011 9:30 PM
    Not a single mention of Foxconn? They're replacing their employees with robots soon, because robots haven't yet learned how to commit suicide.
  • 19 Hide
    whysobluepandabear , August 2, 2011 11:11 PM
    CLEARLY Apple passes the savings to you!


    Oh wait.
  • 12 Hide
    cobra5000 , August 2, 2011 10:53 PM
    Apple can produce them for less but will they SELL them for less?
    We know the answer to that one, already...
Other Comments
  • 10 Hide
    dcompart , August 2, 2011 9:22 PM
    Doesn't surprise me! There's no way around it, but Apple has learned to maximize the use of its hardware for the software they employ. Sure the software could incorporate some features that Android has had for a while, but Android has all these powerful phones and tablets and there are distinct performance flaws regardless of the Hardware specs that trump Apple's offerings.
  • 11 Hide
    Ragnar-Kon , August 2, 2011 9:27 PM
    Not a big fan of iPads (or tablets in general for that matter), but you have to admit that Apple is being very smart about this approach in mobile platforms.

    It costs them less money to manufacture the equipment, but yet they sell it for the same price (or more) as the competitors. Genius. Sure the specs of their products may be less than the specs of a competitor's, but if it performs just as well, who cares?
  • 21 Hide
    Assmar , August 2, 2011 9:30 PM
    Not a single mention of Foxconn? They're replacing their employees with robots soon, because robots haven't yet learned how to commit suicide.
  • 11 Hide
    GreaseMonkey_62 , August 2, 2011 9:34 PM
    We are starting to see more Android tablets that are beating the iPad on price now. Acer and Asus come to mind.
  • 1 Hide
    Haserath , August 2, 2011 9:45 PM
    assmarNot a single mention of Foxconn? They're replacing their employees with robots soon, because robots haven't yet learned how to commit suicide.

    Have you even checked the suicide rates of cities the size of the Foxconn factory? I believe there are ~800,000 people working there, which is bigger than the city I live in, and I'm sure there are more suicides here than the ones there. People have real life problems; it might not have anything to do with Foxconn... They did handle the situation poorly though.

    Back to tablets: Has anyone compared Apple's ipad 2 to the competition? The chip has the same 1ghz processor as the Galaxy Tab 10.1(uses Tegra 2), but is 2-3 times more powerful in the graphics department. The Galaxy Tab does have 1GB of memory though, which can be useful. But the ipad 2 also has a longer lasting battery, this is really nice for long trips away from a plug. You can check it out.
    http://www.anandtech.com/show/4445/samsung-galaxy-tab-101-review/7
  • 0 Hide
    belardo , August 2, 2011 10:08 PM
    Acer and ASUS are the only ones... there are others selling tables for $250 or so, but they are easily cheap garbage with low quality displays, very limited memory.

    Like in the old days, there are disadvantages and advantages in typing the software to the hardware. An example, a 1986 Amiga 1000 with 7Mhz CPU and 1MB of memory running AOS2 in 1990, was easily FASTER than a 386 @ 25mhz with 2~4mb of RAM running Windows 3. Why? The OS and software can talk directly to its hardware.

    Bad thing: It means add-ons and some customizations were more challenging.

    So when it comes to the MS-PC world, it always HAS BEEN BRUTE force to get the performance. It always was and always will be this way. So yeah, my iPad1 still feels faster and more responsive in many ways over a TouchPad and Androids with dual core CPUs.

    Apple will continue to make a good profit with its iOS products in ways the Android and others can't (at least for now)... and I'll admit I'm open to going Android for a tablet. WebOS on the HP TouchPad... is very good, there are some areas of weakness as well as the HP brand itself.

    People and business refer to these devices are iPads and tablets. Like Coke and other soda... that's good marketing and how it is.

    Apple has the hardware and software, but it has direct control over:
    - App store
    - iTunes for music and movies
    - eBooks

    Its a different business model than Android and the hardware companies. Asus, Acer, Lenovo, Dell, etc makes money off the sale of the hardware ($30~50 per unit). and that *IS IT*... they are done.

    Google makes money off the ads and some off the apps... that's it. That is their business. Not music.

    Meanwhile, Apple makes money off the hardware, the apps, the music and the videos. So you can bet, they want to be on top of everything.

    I wish Apple will stop the law-suit crap... it makes me NOT want to get an iPad3, but I also don't was a 16:9 tablet.
  • 2 Hide
    azcoyote , August 2, 2011 10:43 PM
    assmarNot a single mention of Foxconn? They're replacing their employees with robots soon, because robots haven't yet learned how to commit suicide.


    Which should result in a huge layoff and then MASS SUICIDES.
    Automation is great but there is always a loss of jobs that goes with it.


  • 12 Hide
    cobra5000 , August 2, 2011 10:53 PM
    Apple can produce them for less but will they SELL them for less?
    We know the answer to that one, already...
  • 6 Hide
    xerroz , August 2, 2011 11:11 PM
    Why Apple Can Produce Tablets for Less Money:

    More 'slave' labor
  • 19 Hide
    whysobluepandabear , August 2, 2011 11:11 PM
    CLEARLY Apple passes the savings to you!


    Oh wait.
  • 9 Hide
    christop , August 2, 2011 11:21 PM
    They are greedy and will not sell for LESS. Just by another companies tablet and get more hardware for less cash..
  • -1 Hide
    scuba dave , August 2, 2011 11:34 PM
    Just because Apple can make something for cheaper than anyone else can, is not a good reason for it to also offer the product for less.. From a Business perspective, that is.

    But the article makes sense.. Apple has alot of power, and it can obviously use that to it's advantage.. Also why Apple products tend to just have that smooth "Apple Experience" product owners and fans like so much.
  • 6 Hide
    whysobluepandabear , August 3, 2011 12:18 AM
    scuba daveJust because Apple can make something for cheaper than anyone else can, is not a good reason for it to also offer the product for less.. From a Business perspective, that is.But the article makes sense.. Apple has alot of power, and it can obviously use that to it's advantage.. Also why Apple products tend to just have that smooth "Apple Experience" product owners and fans like so much.

    Can I ask something?


    I would like to know how far, is too far? How far down the greed hole does Apple need to go before it's just too much for you?


    When is enough, enough?

    $1,000 markups? $2,000 markups? Taking a second mortgage out on your house to buy an iMac?
  • 1 Hide
    schmich , August 3, 2011 12:41 AM
    Meh, I was expecting something a bit more informative. A bit common sense and some invalid arguments. I'm sure Android tablets could run at 512MB ram but there's competition so if you have 512 when others have 1024 then people won't pick your target.
  • 0 Hide
    ta152h , August 3, 2011 1:32 AM
    This article ignores that the R&D for Apple is also going to be higher if Apple has to do it by themselves, whereas the rest get it spread out among other companies as well.

    Fact is, Apple has almost always done it this way, with their PCs combining software and hardware, although certainly not to the same extent (they always bought processors from someone else, for example), but Apple products have ALWAYS been extremely expensive for what they were. They still are.

    Obviously numbers will lower the price per unit in terms of R & D, but their R & D costs have to be pretty high compared to other makers right now, and I don't think it makes it a lot cheaper factoring that in. Also, comparing a unit with half the memory isn't really a strong statement for their advantage. Hell, anyone can sell something with reduced functionality for less. That's not really a plus.
  • -1 Hide
    Anonymous , August 3, 2011 1:34 AM
    Apple should purchase AMD, in order to create a similar situation in the laptop and desktop sectors too.
  • 0 Hide
    Richeemxx , August 3, 2011 1:39 AM
    This is really nothing new. For years Apple "could" have pushed put desktops and laptops that were more competitively priced. They just choose to slap an Apple tax on it, vamp up the sales price and proclaim it magical and the fanatics leap for it.

    That Apple clone company showed that OSX ran just fine on "cheaper" alternative builds. They utilize the same parts most PCs do. They just want you to think there is something special back behind that mirror.

    As for iDevices there are a couple things this article missed.
    1) Apple is currently the only company on the market that makes money on the back-end. Most of their revenue comes not from device sales but through the App Sote, iTunes ect. They could give away their iDevices and still make more than most Droid company's do.

    2) A lot of the parts across the board are the same. They don't change up from build to build. So when Apple locked in long term component contracts they got a better deal. They aren't buy something "magical" others can't. They just know how to lock down the competition by locking up the resources.
  • 3 Hide
    Maximus_Delta , August 3, 2011 1:53 AM
    A bad thing... going full circle back to days of hardware being tied to software, a cycle that MS first broke and undoubtably made things better for us all of us with more choice, more options. I don't think an Apple dominated world of personal computing is going to be good for consumers in the end.
  • 5 Hide
    whysobluepandabear , August 3, 2011 2:36 AM
    Maximus_DeltaA bad thing... going full circle back to days of hardware being tied to software, a cycle that MS first broke and undoubtably made things better for us all of us with more choice, more options. I don't think an Apple dominated world of personal computing is going to be good for consumers in the end.

    But you don't understand - These people seriously want to blow Steve Jobs. They have no shame. They will buy anything he gives them.
  • 1 Hide
    eddieroolz , August 3, 2011 2:47 AM
    I find it quite ironic that despite the persistent criticism of a top-down/vertical integration system, a company always seems to come back to it.
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