High cost of new iPad components drives down profit margins - Page 3

Originally Posted by jragosta

Really? That information is so oversimplified as to be useless.

First, I doubt if any of the components are within 15% of what Apple actually pays.

Second, it doesn't include any of the non-component manufacturing costs (shipping, assembly, quality control, rework, overheads, packaging, testing, etc). It also doesn't include any of the non-manufacturing costs (tech support, development, design, marketing, sales, distributor discounts, etc).

So if you consider that 'analysis' to be 'pretty technical', I'd suggest that you stay away from any careers in manufacturing or management.

Originally Posted by I am a Zither Zather Zuzz

I was thinking the same thing. But likely they can determine the delta between the new parts and the old, leaving the "lower margin" conclusion intact, even if the exact number is, at best, suspect.

Originally Posted by I am a Zither Zather Zuzz

I was thinking the same thing. But likely they can determine the delta between the new parts and the old, leaving the "lower margin" conclusion intact, even if the exact number is, at best, suspect.

Originally Posted by alexkhan2000

If Apple’s profit share of the global cellphone market is around 75% with only 9% market share by units, you gotta think that the profit share in the tablet market is close to 100% considering that Amazon is selling the Kindle Fire at a loss and many other other tablet makers have been blowing out their tablets at a loss as well (HP TouchPad, RIM PlayBook, etc.). Samsung itself has also said that it isn't doing well with the tablets.

Apple could afford to absorb the higher cost on this one although I think Apple is probably getting a better deal than what's listed on this external BOM. Apple seems set on maintaining these price points. The iPad pricing structure seems like an impregnable wall for the competition. It's still an "uphill" battle for the iPhone and Mac businesses in terms of market share but the iPad business is looking more like defending the fort from the mountaintop - kind of like what the iPod business has been over the past decade.

Originally Posted by shompa

"A5X costs an estimated $23"
This have to be wrong. I understand that BOM are guesses, but they need to have some logic.

The A5X is an gigantic SoC. Larger SoC = more expensive to manufacture.
The 23 dollar price is calculated on a Wafer price of 5000 dollars and that you get about 220 die candidates from a wafer.

At least 10-20% of the dies will fail validation. + design cost + license cost to ARM and PowerVR.

Compare it to Tegra3. Its 50% smaller on a smaller 40nm process. Nvidia charges up to 50 dollar for it.
A5X is almost 5 times larger then Tegra2. Tegra2 cost 25 dollar to buy.

The A5X is a mess. This is clearly a desperate plan B SoC. Same old process node as A5. 45m. Not 40. 32 or 28nm.
Memory that is not integrated into the SoC.
The size of A5X is like an Intel Sandy Bridge CPU. The only good thing about being so big is that Iphone NeXT wont get this SoC. It wont fit inside a Iphone.

Originally Posted by myapplelove

16$, 32$ and 64$ more dollars per device would have bumped the storage to 32, 64 and 128gbs respectively, and since more storage would give people a higher insentive to buy more content from apple, it's arguable they would be making this money back from the content anyway.

They are being dishonest here though. The ipad might have the same price points, but storages of 16 and 32gbs are not viable anymore given the maturity and posibilities of the platform, as well as the ever increasing content and size of content provided by apple itself, and the demands on storage by the retina display. They are essentially then pushing most people to buy the high end model(s) where their profit margin is also the highest if they want a device with decent life span and usage possibilities. I am very disapointed with them for doing this, and like I said it's a shame, they would have still kept the same margins and made it up on content sales anyway...

And I also feel strategically it's going to come back and bite them in the ass when in a couple of months time androids with retinas from samsung with sd card slots are going to be popping up and they are left with plenty of embittered customers who own ipads otherwise great but crippled in capabilities by their limited storage. They are abusing their dominant position in the market here and being careless and greedy. As much as I admire them for coming up with the ipad and finally revolutionazing the tablet to what it is right now, and as much as I dislike both google and samsung, I will be happy when (it's not an if for me, it's when) they get what's coming to them for crippling this generation of ipad in terms of storage.

Originally Posted by myapplelove

It makes it less important to a certain extent, you can't cloud away 1.5 gb games and textbooks, or a minimal 50% increase in the combined storage for apps due to retina, you can't also cloud away much larger files for magazine subscriptions again due to the retina display, or 1080p movies from the iTunes stores. You can't also expect an iPad to store just a couple of movies, a couple of reference textbooks for uni/work, a few apps and a couple of games and then keep swapping on and off the cloud.

In any case we ll see how this plays out in the future which is the ultimate (although certainly not always fair or impartial) judge of people's and companies choices. I firmly believe apple have chosen unwisely and greedily here to save up a few $ per device when they already have more than adequate margins, volume in sales, and content to sell and recoup the extra $ for more storage. They have also chosen unwisely because one of their arch competitors is also one of their prime hardware manufacturers.

They carved the tablet market for themselves, they priced the iPad so competitively that no one managed to undercut them. They should have given everyone the coup de grace here by bumping the storages up considerably and completely dominating the tablet market. If people bite the bullet and get 16gb iPads and realise after a short while that storage is ridiculously low for their usage, and they can't even sell their device cause other people have realised this too, you bet apple are going to have a lot of embittered customers who are going to jump on the next tablet with an sd card around the corner and consider it the next best thing to sliced bread for giving them this flexibility. Then apple will have needlessly vindicated all those idiots blathering on about apple being restrictive to choice.

Originally Posted by shompa

The A5X is a mess. This is clearly a desperate plan B SoC. Same old process node as A5. 45m. Not 40. 32 or 28nm.

Originally Posted by Suddenly Newton

Yeah, people who buy hardware for bragging rights should probably buy something else. The A5X is clearly not 28nm enough for you.

Everyone else who wants the best tablet experience should buy a new iPad.

Originally Posted by Dick Applebaum

Ya' know this is getting a bit old... Like your endless rants about a matte display (now in your sig).

I have grandchildren who exhibit less of a "sense of self-entitlement" than you do... Grow up!

You can no more goad Apple into giving you exactly what you want than you can goad someone into liking you... Move on!

Originally Posted by myapplelove

What are you on about? I haven't talked about a matte screen for more than two years. I am sorry you think this is a sense of entitlement to demand decent minimum storage specs for using the product as apple intended and consuming their content via their stores. Apple dropped the ball wih storage on iPad 3, and they have absolutely no excuse for no storage bumps in more than 2 years.

Originally Posted by Apple ][

This just proves how totally clueless certain people are. You know exactly who I'm talking about. I'm talking about the people who constantly whine and moan about there only being incremental updates. These people with their brilliant minds wouldn't even be able to run a lemonade stand, let alone running a tech company or deciding what sort of features are relevant for inclusion on a tablet.

For the same $499 price as the previous iPad, the new iPad features a display which is significantly more expensive than the previous display. Being on the cutting edge aint cheap homie. It's the best display ever to exist on any tablet. The NAND cost is the same, but the DRAM cost is almost double that of the previous version. The processor cost has also been greatly increased and the new camera costs three times as much as the old one. The higher capacity battery also costs a great deal more. Is it any coincidence that Apple is the first company to be able to release such a display in a $500 device?

The profit margin might be slightly less for Apple, but they'll still be making a pretty handsome profit which all other companies would kill for. While most other tablets are pieces of junk that should never have been made in the first place, the iPad is a technological marvel, a timeless classic that many have attempted to duplicate, but zero have succeeded in.

Originally Posted by Vadania

So does this mean the "Apple tax" my guy friends are telling me I'm paying are false? Cool! I'm printing this article out. I'll put it under my 'smart' cover. :o)

Originally Posted by bigpics

i.e., about $42+ in extra cost is going for $129 for 4G models - and on the iPad 2 3G variant, Apple's charging us the same $129 for $26 in extra build costs (and no new R&D). I'm all for healthy margins, but a 500% gross margin (on the iP 2) and 300% on the rest of the line upgrades seems, dare I say, a bit steep, even for Apple.

Now you could argue I just answered my own question - they sell fewer so need higher margins to justify their being in the line - but on the other hand, gouging for the 4G radio is part of what holds the sales of the cellular data models down.

Surely the prices of SSD storage have been following the same downward curve as all silicon - and Apple certainly knows that App sizes, photo sizes, 1080 video sizes, iBook sizes, movie downloads etc. are going to rapidly fill up a 16GB model. Yet there's still no 128 GB model, and the models atop the 16GB are comparatively overpriced (along with the 4G's).

Originally Posted by bigpics

However, speaking of margins, Apple taxes and "static pricing" - assuming these "best estimate" figures are anywhere in the ballpark - I truly don't get why Apple's marking up the 4G and higher storage parts so much more than the iPad itself - especially considering none of the more tricked out models sell as well, and for the storage, NO new engineering's required on a part that's likely cheaper than it was last year..

Originally Posted by digitalclips

That was my first thought. This is pretty much speculation based on guess work. I bet Tim got some pretty good deals.

The good news is that with out the sort of volume Apple can buy at, no one else can make a tablet that comes close. The price of these components is even worse news for the Android clones and even for Microsoft's Win8 tablet.

As I see it, by the time the Win8 tablet sees the light of day, supposedly Fall of 2012 we will already be reading the rumors of the upcoming iPad 4 due out, no doubt, March 2013. IMHO Microsoft are between a rock and a hard place in trying to get into this market.

Originally Posted by mstone

We'll make it up on volume

Originally Posted by SolipsismX

I'm not sure if you are using the term price gouging literally or not but I see nothing that is forcing you to buy the iPad at all, much less one with cellular connectivity, so suggesting that Apple is acting an in unlawful way will need to be supported. I also don't understand where you get your final tally for the total cost of the cellular addition, how you know it's accurate, and why you think that gross margin for an option excessive.

Originally Posted by SolipsismX

For instance, Moore's Law doesn't work with NAND flash so you can't expect that NAND will will get twice the capacity every two years. We're still dealing with the same density chips so only refinements to the process will effect the cost per GB.

Q: Do you think it would have been wise for Apple to not release the Retina Display iPad this year so it can double the capacity of the NAND flash?

I certainly don't think that would have been smart looking at the iPad APR being closer to the cheapest iPad price, not the most expensive. Apple surely knows what customers are buying.

PS: Doubling the capacity will come next year.

Originally Posted by irnchriz

Yet again, these tools at iSuppli publish figures that they effectively pull out of their arses and sites like this make comment based on them being valid. iSuppli have no insider knowledge, they have no idea what deals Apple or others made with manufacturers or assemblers and this 'estimates' should be taken with an iceberg sized pinch of salt.

This fact alone should nullify any comments based on their fanciful estimates.

Originally Posted by Carmissimo

While I agree that the 16GB model is no longer viable for the average iPad purchaser, if you are an average iPad owner and can't figure out how to manage with 32GB, that's your problem and not on Apple. What's going to happen is that most consumers are simply not going to be cheap about their purchase and simply buy an iPad with at least 32GB. Fact is that the onus is on the consumer to make an informed purchase. If, for example, you purchase a car that seats two and then complain that five passengers will not fit, doesn't that reflect poorly on the purchaser more than the manufacturer. Shame on you, not Apple, if you buy a product that doesn't meet your needs. I would think that even the 16GB versions, especially with the iPad 2 models, can be adequate for some consumers. Those consumers are not being asked to pay for capacity they don't need, which is as it should be. Why should such a consumer be forced to subsidize your purchase of a product with additional memory. For example, I just bought an iPad 2 with 32GB and so far I'm thrilled with the purchase. I'm not going to have any major issues working with the available memory. Yet do I resent that by not making 32GB the minimum standard, I'm paying a premium to upgrade capacity. Absolutely not. Even with the added cost of opting for the additional memory, the iPad 2 still represents by far the best value in a tablet of that size. I don't doubt that there are consumers who would be fine with 16GB and for them, $399 US for a decent tablet is a great deal.

It sounds like you couldn't figure out how to manage with even 32GB and all I can say is, if you have special requirements, stop whining and pay for the additional storage.

Apple had particular price points to consider. They wanted to add a high-resolution screen and that meant a beefier battery, more expensive screen technology, and more processing muscle. To deliver that without increasing the base price something had to give and that something this time around is that the memory capacity remained unchanged.

For the next revision, where does Apple go. The screen resolution will probably never be bumped up from where it has just gone, at least not as long as the iPad is intended for use by humans. The next iPad will likely be lighter, with a step up in the processor and probably we'll see the memory doubled, at no additional leap in price. What is not reasonable, though, is to think Apple should have added in a leap in memory in addition to bringing out the new screen. Saving the memory upgrade for next year gives Apple something else to set the new model apart. In the meantime, as word spreads that 16GB isn't a good idea for many consumers, Apple will make additional profit by selling a larger percentage of 32GB and 64GB models. Yet, still, there are some consumers who can make do with a 16GB model, especially if it's the iPad 2.

Yes my iPad 2 cost the same as a 16GB iPad 3 but it's still very much worth what I paid. So far I'm finding that it is everything I'd hoped it would be. I'm willing to bet that I would already be regretting it if I had made the mistake of buying a competitor's tablet instead.

I think what you really don't understand is that the competition is so far behind in terms of offering a integrated, thoroughly evolved tablet experience that bringing out a batch of high-resolution competitors will do nothing to close the gap. And wait until you find out what the price tag will be for those high-resolution tablets. Apple will be able to get the technology a lot cheaper than the rest because of economies of scale. That can't help but be reflected in the cost passed down to consumers. I wouldn't be surprised if even with the premium paid to have more memory, the iPad will still come in at a lower cost than the alternatives.

Originally Posted by myapplelove

@bigpics. Good posts.

Solipsism is incorrect, we are not still dealing Witt the same density chips, http://www.phonearena.com/news/Toshi...phones_id18322

What's more the iPad is not limited in internal space as the iPhone so apple did not have use the new toshi chip that's already in mass production since 4 months ago, they could have used two 64gb modules, which with their mega deals they get cheaper than anyone, and which by now, more than 2 years after iPad one, are considerably cheaper for the obvious scale manufacturing and refinement reasons.

Apple has elected to maintain their very generous profit margins and cripple the entry models of the iPad in terms of storage. 16 and 32gbs are by anyone's standards, anyone who isnt an apple slf appointed apologist very constricting for the intents and purposes of the iPad, especially so an iPad with retina display. If they were hardly sufficient on a non retina display iPad, on an iPad with no textbooks, 1080p camera, and 1080p videos to download, then on an iPad with all these features they are indeed crippling to the usage of the device. A device that unlike the macs does not lend itself to user upgradable storage. It also lowers the usage horizon of the iPad to a time span that is much more limited, and much more limited than any mac currently on the market.

Like I said I am going to buy the 64gb iPad as soon as I can and as soon as they tweak the first teething issues in production, namely the concern about heat in the lower left corner. Even if they can't address this, I am still going to purchase one. But I will not be happy with apple and the storage they offer me at this price, and I will Not be persuaded by anyone that I should be. I also hope both windows 8 and androids finally make themselves felt to apple because that's the only way they will start offering more to me as a customer.

Originally Posted by Relic

Why can't we have a miniSD card and be done with it?

Originally Posted by Relic

Why can't we have a miniSD card and be done with it?

Originally Posted by jragosta

Simple. Because Apple doesn't offer it.

You are still playing the game of expecting Apple to do what you want. That's not their job. They have designed the industry leading tablet and keep making it better. Lack of a mini-SD card has not interfered with their success.

They may have lots of different reasons:
- They may have determined that the reliability doesn't meet their standards.
- Adding an SD slot may interfere with the physical integrity of the iPad
- It may allow water and dirt to more easily enter
- It may require more battery power
- It may lead to greater tech support problems.
Any number of reasons. In the end, it doesn't matter what the reason is. It's not an option, so stop whining.

If you want a tablet with mini-SD, you can buy one. Just not from Apple. The fact that the iPad is the runaway leader suggests that mini-SD just isn't that important.

Originally Posted by jragosta


If you want a tablet with mini-SD, you can buy one. Just not from Apple. The fact that the iPad is the runaway leader suggests that mini-SD just isn't that important.

Originally Posted by Relic

Oh no I have bought a tablet with miniSD support and many more features that were missing from the iPad and absolutely love it. I like my iPad 3 to however it makes a great music creation, recording unit and gaming platform. When it's available I'll Jail Break this new one to get all the capabilities I need that I had on the iPad 2 after it was Jail Broken. If it wasn't for the great work of the hacking community the iPad I'm sorry to say would be just way to crippled for this person to use, that is without throwing it against the wall in frustration.

I really don't how people live without access to the command line on a iPad so I could have things like a file manager and full access to a SD card. It must be ignorant bliss or something, "oh well this is all they give me so it must be." However their are those who know that Apple should have all these things and then make excuses for them that blows me away. They are a multi billion dollar company who will do everything to separate you from your wallet, they don't care about you. They lock it down to make it as hard as possible to not allow media content except their own onto the iPad, that's it. Structural concerns, oh my god.

Originally Posted by Relic


I really don't how people live without access to the command line on a iPad so I could have things like a file manager and full access to a SD card. It must be ignorant bliss or something, "oh well this is all they give me so it must be."

Originally Posted by Michael Scrip

Do you hear yourself? Command line?

Apple is one the most successful consumer electronics companies in the world. Keyword: consumer.

If you want a "hacker tablet" go buy one from any other manufacturer.

But Apple knows what they're doing...

Originally Posted by Technarchy

If it was important than Android tablets would actually sell well. But they don't, because they are crap.

The market has already spoken on this issue. Some people are in denial or just not bright enough to concede this battle has already been fought, and their side lost overwhelmingly.

Originally Posted by SolipsismX

This is certainly far from certain but this is what I suspected would be the result from this iPad. It's just too much of a jump at once, IMO.

Originally Posted by sleepy3

Thank yu. exactly what i was trying to say.

On the other hand you have companies like motorolla and Samsung who excl at making the backbone for things to work. Hence their huge number of FRAND patents. Maybe if they spend less time on researching how to make cellphones talk better to each other, and make 3g better and 4g better and make further the technology of organic LEDs and so on/ Maybe if they spend less time on that stuff and focus on design, they may be able to compete.