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Analyst: iPad Costs Apple $270.50 to Manufacture

By - Source: Tom's Hardware US | B 70 comments

Apple to pull in $208 per iPad.

With all the rumors pointing to a nearly-$1,000 price point for the Apple tablet, Steve Jobs surprised onlookers last week when he revealed that the starting price for the iPad would be $499. Of course, in comparison to netbooks, $499 is still very expensive.

Granted, the iPad does come with an LCD display that surpasses the quality of many notebooks, let alone netbooks, but don't be fooled – Apple will still make a tidy sum from the iPad, according to analyst estimates.

According to Computerworld, Brian Marshall of BroadPoint AmTech estimates that the cost of goods inside a 16GB Wi-Fi-only iPad totals to $270.50. This would mean that Apple would make an estimated $208 on every 16GB iPad sold. Of course, the bill of materials does not include the R&D behind the iPad and other value-added services along the supply chain, but it does show that there will be money made at all levels.

Predictably, the most expensive component in the device is the 9.7-inch IPS panel, which costs an estimated $100. The rest of the components are considerably cheaper: 16GB of memory and the aluminum case cost about $25 each, while the Apple A4 chip was listed at $15.

Apple's profit margin on the iPad grows with the larger capacity models, with steeper premiums charged for the 32GB and 64GB models. Interestingly enough, Apple will charge an added $130 for the 3G-enabled versions of its iPad, but analysts guess that the added hardware will only jack up costs by $16.

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Top Comments
  • 27 Hide
    Niva , February 2, 2010 10:56 PM
    What I'm honestly surprised by is that they're not charging more. That's the real news here.
  • 23 Hide
    dsaver , February 2, 2010 11:24 PM
    R&D didnt cost a thing, hmm lets make the iphone bigger, beautiful, blah blah blah
  • 21 Hide
    AMW1011 , February 2, 2010 11:06 PM
    I'll stick with the Archos 9, Viliv S10, Viliv S7, Viliv E70X, or Archos 7 IT if I wanted a UMPC, ultra mobile PC. What I am really interested in is the pocketable market, like the Viliv S5, Viliv N5, Cowon W2, or UMID BZ.

    Every single product I listed is a real PC, can multi-task, and many have true dedicated keyboards.

    So why should someone buy an iPad again?
Other Comments
  • -7 Hide
    pink315 , February 2, 2010 10:49 PM
    I believe this a product before its time. I feel its searching for a market, instead of inventing one. Right now its a fail, in a couple years we will all own something like this where we get our digital media fix. Right now though, a product between a laptop and smartphone isn't needed, and if it was wanted, the ipad certainly leaves much to be desired. No 16:9 support, no flash, and wallet burning prices. I'm all for this, but they need to get it right number one, and there has to be a market for it.
  • 27 Hide
    Niva , February 2, 2010 10:56 PM
    What I'm honestly surprised by is that they're not charging more. That's the real news here.
  • 21 Hide
    AMW1011 , February 2, 2010 11:06 PM
    I'll stick with the Archos 9, Viliv S10, Viliv S7, Viliv E70X, or Archos 7 IT if I wanted a UMPC, ultra mobile PC. What I am really interested in is the pocketable market, like the Viliv S5, Viliv N5, Cowon W2, or UMID BZ.

    Every single product I listed is a real PC, can multi-task, and many have true dedicated keyboards.

    So why should someone buy an iPad again?
  • 8 Hide
    idisarmu , February 2, 2010 11:08 PM
    I think the iPads should be $100 cheaper, and instead of going up by $100 for each tier-up, it should go up by 50, with 3g being added adding another $50-75.

    The base model should then be 400, and the top model should be 550-600.
  • 20 Hide
    doc70 , February 2, 2010 11:09 PM
    how is this news, if apple would have charged less then yes, that would have been news.Overpriced apple hardware is nothing new.
    On a different note, it is good to know. One can make an informed decision about not buying one.
  • 19 Hide
    JohnnyLucky , February 2, 2010 11:12 PM
    Manufacturing cost is only part of the total cost.
  • 4 Hide
    Anonymous , February 2, 2010 11:13 PM
    A product ahead of it's time? This tech is already old as crap as far as computer lives go (see: HP Compaq TC1100). The only difference is the price, which has of course down as the technology aged. I'd rather have something new than rehashed garbage that tools will gobble up because of the brand name.
  • 1 Hide
    touchdowntexas13 , February 2, 2010 11:17 PM
    That's strange. I wonder why it costs so much to produce. I mean you can get laptops/netbooks with the same amount of firepower for cheaper. Either Apple just has really high costing production methods, or the profit margin for the laptops/netbooks is much much smaller.

    Either way, I'm surprised they didn't charge more. But still, I don't find myself needing or even really wanting the device...
  • 23 Hide
    dsaver , February 2, 2010 11:24 PM
    R&D didnt cost a thing, hmm lets make the iphone bigger, beautiful, blah blah blah
  • 2 Hide
    jsc , February 2, 2010 11:31 PM
    That's no surprise. Basic OPM (Operations and Production Management) says that wholesale, out the factory door cost generally needs to be about half of retail cost for any mass produced item.
  • -7 Hide
    dheadley , February 2, 2010 11:39 PM
    Sorry the last line muct have had characters that the board couldn't display.

    It should have read Actually you could just say insert company has always been known to overcharge for their insert product and be equally correct.
  • 2 Hide
    masterjaw , February 2, 2010 11:48 PM
    Surprisingly, they would still sell these things and expect to gain profit from it despite of its shortcomings. Well of course, the fanatics won't miss this chance to acquire an over-sized and overpriced iPod Touch and brag about it.
  • 3 Hide
    enzo matrix , February 2, 2010 11:58 PM
    Is that not good? I mean, it would cost quite a bit more after factoring in manufacturing costs, delivery, research and anything else related. Plus the "apple tax".
    Still, I am assuming that that is the cost of the parts in the base model.
  • 2 Hide
    Shadow703793 , February 3, 2010 12:00 AM
    JohnnyLuckyManufacturing cost is only part of the total cost.

    Agreed. What about R&D.

    Note: I doubt Apple had to do much R&D considering it's just a bigger iTouch/iPhone. Then again, Apple's OSX is based on BSD where most of the handwork is done by other people... and Apple wouldn't need much R&D budget anyways...
  • 6 Hide
    Anonymous , February 3, 2010 12:53 AM
    Seems to me thatApple went from an R&D innovative company ie PowerPC, Newton, etc to a marketing machine ie restrictive mp3 players, overpriced pc's
    "Build it shiny and they will come" is this the slogan at Apple?
  • -6 Hide
    joey_sfb , February 3, 2010 1:13 AM
    I think most tech savvy people would still stick to Windows. I like Apple as it provide the badly needed competition for rest of the markets. M$ is not able to market tablet PC successfully to the general public maybe Apple could with its ipad. The price of $US499 is ok compare to M$ $US200 for their Windows XP Tablet OEM license.

    I really hope they do, imagine the Apple's folk moving around the street with ipad and generate another $US10 billion in revenue, that would force M$ to innovate at that area as well. And, no excuse this time!!!
  • 5 Hide
    razor512 , February 3, 2010 1:52 AM
    There was no r&d done for the ipad, try this, open a program like maya, create a 3d model of the ipod touch (don't worry about rounding the corners as that adds about 5 extra steps to the building)

    then now scale everything except the buttons to match the size of the ipad

    you will be surprised to see that it looks the same as the real ipad just with out the rounded corners, the borders get bigger, as you increase the width and height, the button stays the same size.

    other than the CPU, everything else is pretty much cookie cutter from the ipod touch, they just forgot to hit ctrl + z when the idiots mistakenly deleted the camera before sending it off to get turned into a physical ipad

    apple can easily sell the device for $300 and still make a decent profit. Many lesser known companies often sell products with pretty small profit margins because they don't have a name behind them they can only sell based on price and a hope that it doesn't break in like a week

    when you sell a item cheaper, you get more people buying the product. would you rather have 10 people buy a product from you at $100 profit, or have 1000 people buy the product from you at $10 profit. the problem is that when blinded by greed, many companies cant see the logic in charging less, they see charging less as less profit with out considering that they will get more customer.
    Another benefit from charging less is, you will order more supplies each time, which means larger volume discounts which further lowers production cost which will give you the option to further lower the price of the item and get even more customers.
  • -1 Hide
    razor512 , February 3, 2010 2:09 AM
    forgot to add, the only products that I can see reasonablly having a large profit margin is specialty product designed for professional use, for example programs like maya or programs like omnisphere or in the case of hardware davinci resolve (used for post production for many hit movies)

    these items are expensive because they cost a lot to make but the target market is very small, you may only sell a few thousand units and you have to charge a lot to make up for the cost of developing the product.

    but for consumer products, they have no excuse for the price gouging as their target market ranges in the billions, the high prices are just greed and stupidity
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