16GB iPad components estimated to cost Apple $219 - Page 3

Oh, its better than that. Apple's gets free utilities in a donated building. The Postal Service give the company free postage. FedEx and UPS make all deliveries free of charge. All the employees work for the sheer joy of it and take no salary or wages. Even Apple's lobbyists legal teams donate their services. What this really gets down to is that Apple's only expense is component parts for its products.

OK, use that example. To make it more believable, imagine that the protagonist buys a plot of land and builds his house there over 3 years, paying cash.

The point is the same, that the suggested method of accounting yields no useful information. Use any example that floats your boat.

This is like those people who complain about the alleged profit margins the pharmaceutical companies make on a prescription drug. Sure, the pills themselves cost little to make; the 1st one, however, costs over $1 billion.

You make it sound like having a mortgage is so much better than renting, when it's really a 15 or 30 year ball and chain around your neck of hidden and never ending costs, taxes and insurance, disasters and maintenance that offsets the supposed savings over renting.

All for what? No equity for the next 20 or 30 years, no mobility and a decreasing property value. Good luck trying to sell or get credit so you can move closer to that new job.

Great post! I hadn't thought about those things...

Yes and this frankly is what Apple is up to with iPad. IPad is a computing platform that meets the needs of many people at a substantially lower cost that previous hardware from Apple. In effect Apple is putting money into the pockets of people with limited computing needs.

It is doing lots of things. It gives them extreme leverage for one. It allows them to pay cash up front for components, sometimes $500 Million at a time. It allows them to buy companies right and left as needed. Similarly it allows them to invest in other companies like ARM and imagination to keep them interested in supporting Apples needs. It allows for a bit of charity. Some of it needs to be held in reserve for legal reasons like the Nokia actions. Some of that money is going directly into the future with the new Apple campuses and data centers being built. Finally I'm sure I missed somethings but you get the idea.

In any event 30 billion sounds like a lot. The reality is that it is for an individual but not so much for a corporation. Especially when a state of the art semiconductor plant might cost 5 billion. The big question is this; adjusted for inflation how does that comare to what Ford had in the heyday of it's existance?

Again I don't know if you are simply out of touch or have other problems but Apple has invested massively in the US in the last few years. They are building a massive new datacenter and a new campus in California. They are searching for new employees right and left with I suspect many of those becoming permanent employees. They purchased one whole company (PA Semi) before it went bankrupt.

So honestly I don't know where your statement comes from. I'd be the first to admit that few of those jobs involve manufacturing but then they have to compete with everybody else. The imporant thing to realize though is that they are creating jobs over seas which believe it or not is a good thing. We really do live in a global economy and it is important that people be able to take part in that economy throughout the world. Even then Apple has been on a highering binge in the US so again I don't understand your whine.


Dave

I can't believe the stupid thoughts I read on these postings. This is like saying the total cost of printing a magazine can be boiled down to the paper and ink cost to print it. Or break down the cost of a bicycle into its component parts and that's the total cost to make, sell, and deliver.

The component parts of any device make up only a portion of the cost. There is research and development, patents, shipping, retailing (inventory and sales, etc). People have to get paid who design, engineer, market and sell these devices and all that has to be built into the PRICE. This ignorant third grade view of GREED is really tired and boring. Get a life. Or better yet, get an education.

Hey Tecky ... if you want to claim to be a realist, you've got to try harder. I'll explain it to you like you're a 5 year old because, judging from your postings, that may be close to the truth.

In the free enterprise system that we live in only the marketplace as a whole can determine the value of a product or service, and since Apple is the ONLY entity that knows the whole cost of researching, designing and manufacturing .... not to mention delivering, promoting and associated warranty costs .... they are the only ones who can determine the greed factor (your words, not mine) of any product. The validation of any products initial price will be set by the marketplace .... they will either buy it, or not.

For any individual, especially you, to think that they know how much a product or service should sell for to the rest of the marketplace is arrogance at it's worst or stupidity at it's best. I suspect you may well be in both categories.

Lastly, to use your line of thinking, when you consider the cost of a blank media disc to be less than 1.00 (bulk pricing) ... MSFT must be extremely greedy to sell Windows7 on a $1.00 disc for hundreds of $$$$.

Thanks for the tip. Only wish there was a was to totally delete the offender. Owe you one.

Well then that's all good then.

ITT: Everyone is a Nobel prize winning economist.

Look, I understand there's a lot more to it than component cost, I get the recoup of research and development, marketing and so on, but as a consumer, it is too much for too little at the current time. I'm hoping for something more advantageous for me, in pricing or compelling content, before running to buy.

Now, let's be honest:
Anyone disagreeing with Apple's pricing is a pinko.
Anyone defending Apple's pricing has no idea what they're talking about.

There.

hello Tekstud,

what about these costs?

1. cost before manufacturing: research & development, design, financing
2. cost during manufacturing: financing, quality control, safety, maintenance, selling cost, logistics, distribution networks, information
3. cost during consumption and usage: maintenance, information, complaints handling, invoicing, software upgrading
4. cost after consumption and usage: waste management, re-cycling

Good thing years of R&D, followed by support, marketing and warranty service, are cost-free

This is self-evident.

The reason (hopefully also self-evident) for my comment, is to make light of the nonsense interpretation that this tally of parts costs is equal to what it costs Apple to develop, make and market the iPad.

As with most everything else in life, to buy or rent must be made in the context of each individuals personal situation and since I don't know your situation it would be inappropriate and arrogant of me to take my situation and attempt to apply it to you.
I can tell you, however, that I have been a long time renter and waited until I was 60 years old before buying (now 68) .... still carrying a mortgage but my net asset base has increased by over 200K even in today's real estate market. It turned out to be one of the best financial decisions I ever made ... wish I had done it sooner.

The reason for most people not buying, I suspect, is likely to be the same as it was for me .... not making it the top priority in my financial decisions. That is the toughest decision to commit to but IMHO it it the most important one. ...just my 2c worth ...

Here we go again.

NO way.

This cost estimate does not include everything. That is just parts and assembly of the hardware.

You have to add to that cost lots of things before the product gets to market.

- The operating system software
- All the Apps included
- Shipping (multiple times)
- Warehousing
- Retail store operation costs
- Research and Development costs
- Accounting costs
- Labor costs of every employee that has anything to do with handling, creating, marketing, or selling the device
- Advertising expenses required to sell the product
- A portion of plant and equipment expenses (including buildings and utilities)
- Taxes, tariffs, and duty fees
- Costs of offering warrenties

Apple is operating on very thin margins at $499 I don't think we will see it much lower. We may see some discounting on the models with more features.

Some people do not understand all the costs of running a business and all of those costs have to be added to the parts cost to come up with the real cost of a product.

Does this surprise you? If it does, you have no idea what goes into the design, patent, and engineering evolution of electronics. I think it would be safe to say this took 5 years to come to market and much of it had to do with the speed, size and cost to manufacture the chip technology. On top of that, the multi-touch screen technology, not to mention the battery technology made the iPad almost impossible to make 2 and 3 years ago. There were so many steppingstones that needed to be laid down before the iPad could come to market and still more before its release. The primary difference between an old IBM Think Pad and the iPad, ultimately, will be content delivery and a whole new factor in software development and all of that is coming together will will be coming together in the next 12 months and longer.

You two spend way too much time talking about this subject. Also most forums do not have the ability to block an IP address and even if that did that wouldn't work very well seeing anyone can clone their IP and most use dynamic IP addressing.

I have a question, does putting "mac", "apple", "stevej" or for the sake of argument "tech" in your user name suppose to validate the fact that you an actual apple user and not just a regular old troll?

btw IIgs is the first apple I purchased.

Wrong! All popular forum applications have this ability.

Originally Posted by wizard69

"We really do live in a global economy and it is important that people be able to take part in that economy throughout the world. Even then Apple has been on a highering binge in the US"


An obvious catch from a guy with "tripper"as part of his name ..... still funny 'tho.

As soon as Steve Jobs announced the pricing, I thought it was about $100 too much (on each version). Obviously companies can charge anything they want, but if they knocked $100 off the price for each one, they'll have tons more people buying it.

If they knocked another hundred off even tonnes more would by it. I just thought of something, if they knocked another hundred off of that even more tonnes would buy it.

Pretty much everyone was surprised it was so cheap. It's not a netbook and shouldn't be directly compared to its price point, especially if one only looks at the display size and resolution as proof that they are the same.

You know if you don't think the price is right for you its simple, DONT BUY IT, simple as that. Meanwhile the rest of use will be enjoying our iPads while you moan and groan.

Sure they do. And the average 16 year old knows how to cloke his IP address. Not to mention most ISP use dynamic IP addressing and not static. So the point is if a member is really stressing you out that much put them on ignore and then shut up about it.

The 64 gig + 3G Wireless model is (slightly less of ) the device that we were expecting. At $829, that's not that far off from the $1000 "expected" price - though I personally never expected it to be this high. Throw in the almost essential accessories and you're sitting pretty at a cool grand for this little gizmo.

While i believe the iPad platform will grow to become important over time, in its current form it it overpriced. And I'm saying that with full realization that there aren't really any products that will deliver the same experience with the offering Apple is making available.

-Blurp

It should be a felony to display the profit margins of any company. Think about it. Like anyone wants to disclose cost of goods. I don't think so. I use to work for Tandy/Radio Shack back in 1980. I was privy to costs of goods. Margins were very impressive. Had I been blabbing about this, legal action would have ensued.

1) iSuppli doesn't work for Apple and are under no NDA to prevent them from locating the individual components and pricing them out.

2) There component and manufacturing speculations are not stating the profit margins. Apple will do that for us in their quarterly earnings as required by law.

All these replies and no one mentioned economies of scale?

I think the price seems good enough since it's under the $499 barrier. Granted, that's for the base version, if you want 64GB and 3G that is nearly if not as expensive as a base Macbook. It's more a case of penetration pricing than price skimming for all the business guys here. I'd even go as far as saying that the base price grabs the customer, and the limitations of the base model will make the more expensive ones all so tempting...

With these obvious insights, perhaps I should be an analyst!

Bingo. You win the cookie for today.

It costs easily billions just to "keep the lights on" at Apple. In business this is called overhead. Further, they don't sell boxes of parts, they sell products that have to be designed, marketed, manufactured, and shipped. Even if Apple told us how much they spent on R&D for the iPad, that still would not tell us the actual costs behind the product, since a good part of it is wrapped up in general overhead. The iSupply numbers are sort of interesting (even though based mainly on guesswork), but not very illuminating as far as telling us how much this product costs Apple to sell on a per-unit basis.

Not necessarily.

Based on your theory, and as solipsism commented, knocking off another $100, tons more people would buy it.

Continuing on, at what point would you price it at so that everybody would get one?

As we have seen quite often here that members suggest software that is totally free; that it does everything that the high priced ones do. However, there are very few takers.

Why?

Well first of all, nobody is promoting it. At least there is not enough noise to create sufficient awareness.

Secondly, there is virtually no support. Perhaps in the beginning, but the developer can't obviously maintain it due to lack of funds or the wife finally says, 'get a real job. One that pays.'

Lack or universal acceptance and usage, and no enterprise or few consumers will touch it.

Since the developer can't cover his costs, distribution becomes an issue. As OS's are updated, he can't get fixes out fast enough.

Then somebody comes out with a 'better' mouse trap and all of a sudden his application is questioned even by the same people who originally pushed it.

In this day and age, technology is advancing so fast, that there is no guarantee that a developer/manufacturer will recover their cost before a competitor comes along with a perceived better product. As well, just seeing some of the posts here, often perception becomes reality and it is not always good.

I was reading the estimated cost on all the iPads and I believe the margin was about 41% on all of them. I don't really see the price dropping what I do see is the 16GB being discontinued after a while and the 32GB dropping to 499.00.

Apple tends to try and keep the same price point but give you more for the same price over time as the cost of technology drops.

Another reason for Apple to bring the manufacturing back in-house then the components would be free too.

Edit: I'm sure MacWorld would give them a free booth this year.

If you would like to know Apple's Actual Revenue, their Actual Cost of Goods Sold, their Actual R&D expense, their actual Selling, General and Adminsitrative Expense, their Actual Taxes....and thereby know their Actual Gross and Net margin, you can find it all in this secret report called an Income Statement which was leaked here:

http://finapps.forbes.com/finapps/js...apl&period=qtr

Apple set the price and they can change the price as required. The price of NAND flash per GB will continue to decrease as new processes come on line. Intel/Micron just announce 25NM process which means that memory capacity will again double next year for about the same price so if you wait a year you can probably get 32, 64, 128 for the price of 16, 32, 64 the IPad will also probably have a new A5 processor and maybe even a camera with Ichat. The technology changes all the time. The device can either do what you want or not. If not don't buy it, wait for the next version.

I still believe Apple should have the right to keep their data private. On the other hand we have this:
http://finance.yahoo.com/family-home...iggest-ripoffs

This is what I was initially thinking. But knowing Steve's obsession about not selling any computer product (obviously excluding iPods) below $500, a more likely scenario is that the base model will be $499 with 32GB and the 64GB model will be reduced to $599. Such a price adjustment would be inline with newer higher density (8GB) flash chips going into production some time in Q2 of this year and will allow Apple to keep high margins while iPads are supply constrained.

If Apple has no supply constraints, another possible scenario is that the base model ($499) will remain WiFi only but the 64GB model ($599) will get 3G radio in addition to the 64GB memory. I don't think it is practical for Apple to stock 6 SKUs for this product in the long term.

How did you calculate the 41% margin. Even allowing for 15% sales/distribution/channel overhead, if the cost points iSupply is reporting is anywhere near the truth, the gross margins for iPads are much higher than 41%.

I wasn't talking about profit, I as talking about cost of the parts compared to what the different versions were selling for. Actually looks like this site has the gross margin at about 51% for the 32gb 3G

http://techcrunchies.com/appleipad-bill-of-materials/


iPad 32GB : $296.00
iPad 64GB : $347.00
iPad 16GB 3G : $286.50
iPad 32GB 3G : $312.00
iPad 64GB 3G : $363.00

The implied gross margin is the highest for iPad 32GB with 3G at 55.1%