To try and put it as simply as possible, you are looking at it as if the lowest tiered product is an ideally priced to meet Apple'd profit margin. If you consider it's an introductory price to hopefully upsell you to a higher capacity that balances out the loss in aveage profit
You mention Apple buying in bulk but prices are static. If they buy comsiderably more of the lower priced NAND they likely get even better pricing.
There are other factors besides those. Do anyone sell you and 48GB more for an extra $6?
I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.
That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.
You make that sound reasonable but one glance at rival tablets shows this up as false.
The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.
I don't want the Xoom - I think it's grotesque - but it shows my point.
You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.
You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.
You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?
Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.
You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?
Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.
All iPads are equal in cost. The ONLY difference between a 16GB iPad and a 64GB one is the cost of the NAND flash inside it.
I don't assume the Xoom costs as much, but its memory is bought from the same place Apple buys theirs. So are its other components. Apple brags about the price point it can reach and understandably so, but if a competitor can offer twice the memory in a device that at least on paper is comparable and only costs $15 more, it suggests the memory is the not the reason Apple hits the lower price point. It's moot anyway as we can all see the costs of the memory.
Contract prices for NAND flash -- the solid-state memory found in devices like the iPhone and iPad -- is said to have fallen "rapidly" in May following lackluster demand from major purchasers like Apple.
Chip prices for NAND declined more than 15 percent, and about 20 percent in the spot market, in May following "lackluster demand," according to Taiwanese industry publication DigiTimes. Apple remains the largest buyer of NAND flash, but demand did not pick up "as aggressively as usual in the second quarter," the report said.
...
The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected.
It seems pretty obvious to me.
The normal surge of NAND purchasing in May did not happen because Apple has delayed the launch of its next iPhone by a few months. Thus, there is no manufacturing ramp in May for a June/early July iPhone launch.
When the NAND industry sees a surge in sales, it will be indicative of the imminent launch of a new iPhone.
How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.
It's a good point. You may be right but I think the truth lies somewhere in between. Are there really so many people buying the 64GB model to offset the millions buying the 16GB one? It's an enormous premium and I can't help feel Apple sets it to put people off the higher storage to conserve their supplies of the memory. Perhaps that's understandable.
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!
As you were told, the cost for 64 GB is 8 times that number - about $50.
PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.
Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.
Quote:
Originally Posted by Jonamac
That's not taking into account the savings Apple makes by pre-buying in bulk.
And your evidence for that is....?
In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.
You make that sound reasonable but one glance at rival tablets shows this up as false.
The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.
I don't want the Xoom - I think it's grotesque - but it shows my point.
How does that show your point? There are many other differences between the 2 devices that could account for that.
What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.
That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.
Maybe the analogy isn't correct.
But the point is that Apple prices their products to earn a certain margin. The Apple strategy is to usually price the cheapest products below that margin, and earn a higher margin on the more expensive products, so that the weighted margin of the mix bought by consumers will meet that target.
The correct way to look at this is that Apple is giving you a steep discount if you buy the $500 iPad.
Now, someone mentioned "greed", and I really don't know how to respond to that since capitalism is fundamentally based on "greed". If people weren't greedy, then communism would be perfect.
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!/QUOTE]
As you were told, the cost for 64 GB is 8 times that number - about $50.
PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.
Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.
And your evidence for that is....?
In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.
I'm going to be kind and assume English isn't your first language as you're misread some of the comments here. Nobody said the 64GB module costs 8 times more than the 16GB module. That comment was not aimed at me, it was pointing out that some of us had been writing Gb instead of GB and a byte is 8 times greater than a bit. It has nothing to do with this argument. In truth, the 64GB modules costs $9.39, about 3 times the $3.12 of the 16GB module. This was clearly stated in the article.
You may be right that Apple didn't make a saving in the deal itself, but they didn't do the deal to lose money did they? They did it because they knew in the long term it would make them money to not be hit by the shortages that hit their competitors and drive their prices up. Ultimately they make more money for having done these deals, so in the bigger picture they effectively make a saving.
EDIT: My apologies, it appears I misread the article originally or it has since been updated. You are quite correct.
How does that show your point? There are many other differences between the 2 devices that could account for that.
What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.
Fair point.
My point was just that Motorola have released their base model with 32GB at nearly the same price point.
How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.
400%? We're talking about 3090% here. Not extraordinary?
EDIT: Apologies, I read the article before it had been made clearer that the units were Gigabits not Gigabytes.
But the point is that Apple prices their products to earn a certain margin. The Apple strategy is to usually price the cheapest products below that margin, and earn a higher margin on the more expensive products, so that the weighted margin of the mix bought by consumers will meet that target.
The correct way to look at this is that Apple is giving you a steep discount if you buy the $500 iPad.
Now, someone mentioned "greed", and I really don't know how to respond to that since capitalism is fundamentally based on "greed". If people weren't greedy, then communism would be perfect.
lol you're arguing against me but that was well put
Comments
Because it should be Gb not GB. That is b for bits and B for Bytes. That is 8 times different.
@ AI : This is not the first time you got it wrong.
I wondered about that since we're talking about components.
Either way it doesnt change Jonamac's argument as it's now 8x$6.27 and charging $200.
To try and put it as simply as possible, you are looking at it as if the lowest tiered product is an ideally priced to meet Apple'd profit margin. If you consider it's an introductory price to hopefully upsell you to a higher capacity that balances out the loss in aveage profit
You mention Apple buying in bulk but prices are static. If they buy comsiderably more of the lower priced NAND they likely get even better pricing.
There are other factors besides those. Do anyone sell you and 48GB more for an extra $6?
I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.
That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.
Precisely.
You make that sound reasonable but one glance at rival tablets shows this up as false.
The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.
I don't want the Xoom - I think it's grotesque - but it shows my point.
You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.
You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.
You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?
Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!
That's not taking into account the savings Apple makes by pre-buying in bulk.
I love Apple's products but disgraces like this do leave a bad taste in the mouth.
buy some Apple stock and your views will change
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.
You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?
Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.
All iPads are equal in cost. The ONLY difference between a 16GB iPad and a 64GB one is the cost of the NAND flash inside it.
I don't assume the Xoom costs as much, but its memory is bought from the same place Apple buys theirs. So are its other components. Apple brags about the price point it can reach and understandably so, but if a competitor can offer twice the memory in a device that at least on paper is comparable and only costs $15 more, it suggests the memory is the not the reason Apple hits the lower price point. It's moot anyway as we can all see the costs of the memory.
buy some Apple stock and your views will change
Haha I'm sure they would!!
Contract prices for NAND flash -- the solid-state memory found in devices like the iPhone and iPad -- is said to have fallen "rapidly" in May following lackluster demand from major purchasers like Apple.
Chip prices for NAND declined more than 15 percent, and about 20 percent in the spot market, in May following "lackluster demand," according to Taiwanese industry publication DigiTimes. Apple remains the largest buyer of NAND flash, but demand did not pick up "as aggressively as usual in the second quarter," the report said.
...
The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected.
It seems pretty obvious to me.
The normal surge of NAND purchasing in May did not happen because Apple has delayed the launch of its next iPhone by a few months. Thus, there is no manufacturing ramp in May for a June/early July iPhone launch.
When the NAND industry sees a surge in sales, it will be indicative of the imminent launch of a new iPhone.
How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.
It's a good point. You may be right but I think the truth lies somewhere in between. Are there really so many people buying the 64GB model to offset the millions buying the 16GB one? It's an enormous premium and I can't help feel Apple sets it to put people off the higher storage to conserve their supplies of the memory. Perhaps that's understandable.
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!
As you were told, the cost for 64 GB is 8 times that number - about $50.
PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.
Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.
That's not taking into account the savings Apple makes by pre-buying in bulk.
And your evidence for that is....?
In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.
You make that sound reasonable but one glance at rival tablets shows this up as false.
The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.
I don't want the Xoom - I think it's grotesque - but it shows my point.
How does that show your point? There are many other differences between the 2 devices that could account for that.
What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.
I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.
That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.
Maybe the analogy isn't correct.
But the point is that Apple prices their products to earn a certain margin. The Apple strategy is to usually price the cheapest products below that margin, and earn a higher margin on the more expensive products, so that the weighted margin of the mix bought by consumers will meet that target.
The correct way to look at this is that Apple is giving you a steep discount if you buy the $500 iPad.
Now, someone mentioned "greed", and I really don't know how to respond to that since capitalism is fundamentally based on "greed". If people weren't greedy, then communism would be perfect.
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!/QUOTE]
As you were told, the cost for 64 GB is 8 times that number - about $50.
PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.
Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.
And your evidence for that is....?
In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.
I'm going to be kind and assume English isn't your first language as you're misread some of the comments here. Nobody said the 64GB module costs 8 times more than the 16GB module. That comment was not aimed at me, it was pointing out that some of us had been writing Gb instead of GB and a byte is 8 times greater than a bit. It has nothing to do with this argument. In truth, the 64GB modules costs $9.39, about 3 times the $3.12 of the 16GB module. This was clearly stated in the article.
You may be right that Apple didn't make a saving in the deal itself, but they didn't do the deal to lose money did they? They did it because they knew in the long term it would make them money to not be hit by the shortages that hit their competitors and drive their prices up. Ultimately they make more money for having done these deals, so in the bigger picture they effectively make a saving.
EDIT: My apologies, it appears I misread the article originally or it has since been updated. You are quite correct.
How does that show your point? There are many other differences between the 2 devices that could account for that.
What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.
Fair point.
My point was just that Motorola have released their base model with 32GB at nearly the same price point.
How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.
400%? We're talking about 3090% here. Not extraordinary?
EDIT: Apologies, I read the article before it had been made clearer that the units were Gigabits not Gigabytes.
Maybe the analogy isn't correct.
But the point is that Apple prices their products to earn a certain margin. The Apple strategy is to usually price the cheapest products below that margin, and earn a higher margin on the more expensive products, so that the weighted margin of the mix bought by consumers will meet that target.
The correct way to look at this is that Apple is giving you a steep discount if you buy the $500 iPad.
Now, someone mentioned "greed", and I really don't know how to respond to that since capitalism is fundamentally based on "greed". If people weren't greedy, then communism would be perfect.
lol you're arguing against me but that was well put