Register FAQ / Rules Forum Spy Search Today's Posts Mark Forums Read
Go Back   MacRumors Forums > iPhone, iPod and iPad > iPad

Reply
 
Thread Tools Search this Thread Display Modes
Old Nov 4, 2012, 09:34 AM   #1
nfl46
macrumors 601
 
nfl46's Avatar
 
Join Date: Oct 2008
iPad Mini cost $188 to make!

Well, this is the reason for the $329 price tag and why retina isn't in the device. Apple would barely make any money back. So, the $199-249 wasn't even possible.

http://www.idownloadblog.com/2012/11...-188-to-build/

This article explains a lot.
__________________
| 32GB Apple iPhone 5S | 13" MacBook Pro | 2nd Generation Apple TV |

Last edited by nfl46; Nov 4, 2012 at 09:47 AM.
nfl46 is offline   3 Reply With Quote
Old Nov 4, 2012, 09:38 AM   #2
AdonisSMU
macrumors 68000
 
Join Date: Oct 2010
Quote:
Originally Posted by nfl46 View Post
Well, this is the reason for the $329 price tag and why retina isn't in the device. Apple would barely make any money back. So, the $199-249 wasn't even possible.
Keep in mind they spend a billion more on R&D. I know thats a sunk cost but it is something to also consider.
AdonisSMU is offline   2 Reply With Quote
Old Nov 4, 2012, 09:41 AM   #3
HarryWarden
macrumors 6502
 
Join Date: Oct 2012
Apple still could have sold it for $249 if they went the Amazon Kindle Fire route and planned on making money via their percentage of every iTunes purchase. Of course, that's not the Apple way so they charged more.
HarryWarden is offline   2 Reply With Quote
Old Nov 4, 2012, 09:42 AM   #4
palpatine
macrumors 68040
 
Join Date: May 2011
Quote:
Originally Posted by nfl46 View Post
Well, this is the reason for the $329 price tag and why retina isn't in the device. Apple would barely make any money back. So, the $199-249 wasn't even possible.

Yeah. They're only making about $141 off of each one. It must be tough. I shed a tear every time I think about it. So, the question is, why go into a market that has better devices (better displays, processors, and more RAM) for about $130 less than the price of your product? It seems like a bad idea to me. Now, if they could take that nearly 50% profit, lower it a bit, and put a Retina display into the device, then we are talking about a competitive product (in my opinion). I wonder how much more an A6x processor, 1GB RAM, and a Retina display would have cost?
palpatine is offline   13 Reply With Quote
Old Nov 4, 2012, 09:42 AM   #5
joshwithachance
macrumors 65816
 
joshwithachance's Avatar
 
Join Date: Dec 2009
Well that sure explains the $329 price point. All these uber cheap tablets hardly make any profit on the sale of the device itself, so it was kind of a given that Apple's 7 inch tablet would be more expensive.
joshwithachance is online now   1 Reply With Quote
Old Nov 4, 2012, 09:47 AM   #6
nfl46
Thread Starter
macrumors 601
 
nfl46's Avatar
 
Join Date: Oct 2008
Keep in mind, the iPhone 5 cost $207 and its starting price is $649 without contract. Add in manufacturing cost,etc., $249 would still be a lost.

----------

Quote:
Originally Posted by palpatine View Post
Yeah. They're only making about $141 off of each one. It must be tough. I shed a tear every time I think about it. So, the question is, why go into a market that has better devices (better displays, processors, and more RAM) for about $130 less than the price of your product? It seems like a bad idea to me. Now, if they could take that nearly 50% profit, lower it a bit, and put a Retina display into the device, then we are talking about a competitive product (in my opinion). I wonder how much more an A6x processor, 1GB RAM, and a Retina display would have cost?
Apparently the retina screen cost around $80.
__________________
| 32GB Apple iPhone 5S | 13" MacBook Pro | 2nd Generation Apple TV |
nfl46 is offline   3 Reply With Quote
Old Nov 4, 2012, 09:49 AM   #7
Rodster
macrumors 68030
 
Join Date: May 2007
From an objective POV, let's not forget advertising cost and free shipping, no hassle returns. That's all built into the price. Where Apple makes a killing is when you spend an additional $100 for storage and it costs them about $16 dollars for the upgrade.
Rodster is offline   4 Reply With Quote
Old Nov 4, 2012, 09:54 AM   #8
AdonisSMU
macrumors 68000
 
Join Date: Oct 2010
Quote:
Originally Posted by Rodster View Post
From an objective POV, let's not forget advertising cost and free shipping, no hassle returns. That's all built into the price. Where Apple makes a killing is when you spend an additional $100 for storage and it costs them about $16 dollars for the upgrade.
People always think the price is just about the cost of materials. There is so much more factored into the cost of the device...marketing, research and development, they had to not only pay suppliers to manufacture their products but also upgrade their facilities as well. Other companies are breaking even and taking a loss in some cases hoping people will buy content and advertising to make up the difference.
AdonisSMU is offline   6 Reply With Quote
Old Nov 4, 2012, 09:54 AM   #9
jedolley
macrumors 68000
 
Join Date: Sep 2009
Several of you are missing some of the important parts of the article.

Quote:
But we know it’s even less than that because the $188 doesn’t include any of the costs for things like manufacturing and shipping.
jedolley is offline   3 Reply With Quote
Old Nov 4, 2012, 09:58 AM   #10
palpatine
macrumors 68040
 
Join Date: May 2011
R+D, marketing, human resources, etc. We don't know about that stuff and we can't even really speculate on it. All we know is how much the parts cost, and it is clear that Apple is making a killing on the device. Remember, most of this device dates back years. The screen is from 2007 and the processor is from 2011. The only major difference here is the shell.

More importantly, how do you calculate the benefit of getting someone into the Apple ecosystem so that they start with an iPod Touch (me) and end up with several iPods, Apple computers, an Apple TV, an iPhone, etc., etc.?

In the end, what we are seeing are two competing business models: one dependent on hardware and the other dependent on ecosystems (Google, Amazon, etc.). Apple doesn't (apparently) make much money off of the apps, books, and music. If the hardware one has worse specs than the ecosystem one, and it costs more, the business model is looking pretty bad to me.
palpatine is offline   1 Reply With Quote
Old Nov 4, 2012, 09:59 AM   #11
nfl46
Thread Starter
macrumors 601
 
nfl46's Avatar
 
Join Date: Oct 2008
Isn't Amazon and Google losing money on their devices from undercharging for them?
__________________
| 32GB Apple iPhone 5S | 13" MacBook Pro | 2nd Generation Apple TV |
nfl46 is offline   3 Reply With Quote
Old Nov 4, 2012, 09:59 AM   #12
AdonisSMU
macrumors 68000
 
Join Date: Oct 2010
Quote:
Originally Posted by jedolley View Post
Several of you are missing some of the important parts of the article.
You may want to include the sentence preceeding the one you quoted as well to give it the right context.
AdonisSMU is offline   0 Reply With Quote
Old Nov 4, 2012, 10:02 AM   #13
Rodster
macrumors 68030
 
Join Date: May 2007
Quote:
Originally Posted by nfl46 View Post
Isn't Amazon and Google losing money on their devices from undercharging for them?
Amazon and Google according to what's been reported sell at "break even" cost. They make money when you buy content or in Google's case ad revenue.
Rodster is offline   0 Reply With Quote
Old Nov 4, 2012, 10:08 AM   #14
nuckinfutz
macrumors 603
 
nuckinfutz's Avatar
 
Join Date: Jul 2002
Location: Middle Earth
Quote:
Originally Posted by palpatine View Post
Yeah. They're only making about $141 off of each one. It must be tough. I shed a tear every time I think about it. So, the question is, why go into a market that has better devices (better displays, processors, and more RAM) for about $130 less than the price of your product? It seems like a bad idea to me. Now, if they could take that nearly 50% profit, lower it a bit, and put a Retina display into the device, then we are talking about a competitive product (in my opinion). I wonder how much more an A6x processor, 1GB RAM, and a Retina display would have cost?
Because they know people will pay more for a superior user experience and they have. Despite being more money the iPad mini has sold out in most stores so while Google and Amazon have such little faith in their product (witnessed by selling them at or near cost) Apple can profit and fund future development.

Quote:
Originally Posted by nfl46 View Post
Isn't Amazon and Google losing money on their devices from undercharging for them?
Yes. Both Google and Amazon reported poor numbers. Amazon took a temporary bath because of their LivingSocial deal but even without that the Kindle tablets didn't help the bottom line.
nuckinfutz is offline   0 Reply With Quote
Old Nov 4, 2012, 10:16 AM   #15
children
macrumors regular
 
Join Date: Dec 2008
why is this a surprise to anyone?
did anyone actually think they will sell it at or even close to cost price?
__________________
(r)MBP 15
(r)iPhone 5
(m)iPad
children is offline   2 Reply With Quote
Old Nov 4, 2012, 10:23 AM   #16
palpatine
macrumors 68040
 
Join Date: May 2011
Quote:
Originally Posted by nuckinfutz View Post
Because they know people will pay more for a superior user experience and they have. Despite being more money the iPad mini has sold out in most stores so while Google and Amazon have such little faith in their product (witnessed by selling them at or near cost) Apple can profit and fund future development.
A million a month for the Nexus 7 doesn't sound bad to me. It's not about faith. It's about a different business model. As for the experience, each operating system / device has their pros and cons, and I actually enjoy using both Android and iOS.

Quote:
Yes. Both Google and Amazon reported poor numbers. Amazon took a temporary bath because of their LivingSocial deal but even without that the Kindle tablets didn't help the bottom line.
Again, it is about different business models. Five years ago ebooks were almost nonexistent. Now, they are dominating the market, and most of them are being sold by Amazon.
palpatine is offline   0 Reply With Quote
Old Nov 4, 2012, 10:28 AM   #17
Spungoflex
macrumors regular
 
Join Date: Oct 2012
Quote:
Originally Posted by palpatine View Post
Yeah. They're only making about $141 off of each one. It must be tough. I shed a tear every time I think about it. So, the question is, why go into a market that has better devices (better displays, processors, and more RAM) for about $130 less than the price of your product? It seems like a bad idea to me. Now, if they could take that nearly 50% profit, lower it a bit, and put a Retina display into the device, then we are talking about a competitive product (in my opinion). I wonder how much more an A6x processor, 1GB RAM, and a Retina display would have cost?
Hey, you get what you pay for. If you want cheap plastic with a tiny screen, you're gonna get cheap plastic with a tiny screen.
Spungoflex is offline   0 Reply With Quote
Old Nov 4, 2012, 10:33 AM   #18
nuckinfutz
macrumors 603
 
nuckinfutz's Avatar
 
Join Date: Jul 2002
Location: Middle Earth
Quote:
Originally Posted by palpatine View Post
A million a month for the Nexus 7 doesn't sound bad to me. It's not about faith. It's about a different business model. As for the experience, each operating system / device has their pros and cons, and I actually enjoy using both Android and iOS.


Again, it is about different business models. Five years ago ebooks were almost nonexistent. Now, they are dominating the market, and most of them are being sold by Amazon.

Great but "it's a new economy" was the refrain used by the dot.com era folks that thought they could sustain a business without profits. Well that's easy when you're burning through Venture Capital money. Amazon's got the harder path IMO because I don't need a Kindle HD to shop at Amazon (I'm already a Prime user)

Google has a proven advertising platform so they simply need to bang out Android hardware and entice people to use more Google services.

Apple's approach is more serene. The desktop isn't for sale and advertising is kept at a minimum and the support is far better than Amazon or Google can provide.
nuckinfutz is offline   0 Reply With Quote
Old Nov 4, 2012, 10:47 AM   #19
TC25
Banned
 
Join Date: Mar 2011
What the individual parts costs add up to. Classic irrelevant information.
TC25 is offline   0 Reply With Quote
Old Nov 4, 2012, 11:06 AM   #20
palpatine
macrumors 68040
 
Join Date: May 2011
Quote:
Originally Posted by Spungoflex View Post
Hey, you get what you pay for. If you want cheap plastic with a tiny screen, you're gonna get cheap plastic with a tiny screen.
Indeed, and in its case it looks just as sturdy and well-built as any other tablet on the market, except the screen is superior to the iPad Mini's, so I guess I come out ahead here As for the screen size, I prefer the 7", but that is all about individual preference (in my opinion) once you've gone below the iPad size and can no longer read PDFs in portrait mode.

Quote:
Originally Posted by nuckinfutz View Post
Great but "it's a new economy" was the refrain used by the dot.com era folks that thought they could sustain a business without profits. Well that's easy when you're burning through Venture Capital money. Amazon's got the harder path IMO because I don't need a Kindle HD to shop at Amazon (I'm already a Prime user)

Google has a proven advertising platform so they simply need to bang out Android hardware and entice people to use more Google services.

Apple's approach is more serene. The desktop isn't for sale and advertising is kept at a minimum and the support is far better than Amazon or Google can provide.
There's nothing "new" about it. It's an innovative variation on an old method (called a "loss leader") of selling one product at cost or lower in order to make a profit with other related products, and it is something that can be done especially well in a company like Amazon that is so much more diversified than Apple. Google has far less to offer than Amazon in terms of ecosystem, in many respects, but it isn't making the devices, so its risk is very small

Apple is in a tough game here, and I don't think they brought their A-game with the Mini. If they had valued market share over profits (as I think they should have when entering this crowded niche), then they could have knocked out the competition. As it is, they left the Christmas season wide open to Amazon, Google, and their associated ecosystems. All of the little kiddies will grow up with Androids and Fires instead of Apples.
palpatine is offline   0 Reply With Quote
Old Nov 4, 2012, 11:08 AM   #21
h00ligan
macrumors 68030
 
Join Date: Apr 2003
They make more than enough in app sales to make it plenty profitable.
h00ligan is offline   0 Reply With Quote
Old Nov 4, 2012, 11:14 AM   #22
nuckinfutz
macrumors 603
 
nuckinfutz's Avatar
 
Join Date: Jul 2002
Location: Middle Earth
Quote:
Originally Posted by palpatine View Post

Apple is in a tough game here, and I don't think they brought their A-game with the Mini. If they had valued market share over profits (as I think they should have when entering this crowded niche), then they could have knocked out the competition. As it is, they left the Christmas season wide open to Amazon, Google, and their associated ecosystems. All of the little kiddies will grow up with Androids and Fires instead of Apples.
The mini is setting the table. They have announced that they will not race to the bottom and that their ecosystem of devices and stores will hold sway against "internet" companies like Google and Amazon and they will handle themselves nicely because people still value face to face communication and transactions.

They haven't left anything open. Apple is moving product which means they've priced it at the correct price for their market.

Note: If you're a "I buy the cheapest product available and only download free apps" Apple is NOT looking for your business. Sure its elitist and I'm ok with that. The world need Walmart and Nordstroms. People are free to choose which level they want to buy in at.
nuckinfutz is offline   0 Reply With Quote
Old Nov 4, 2012, 11:15 AM   #23
palpatine
macrumors 68040
 
Join Date: May 2011
Quote:
Originally Posted by h00ligan View Post
They make more than enough in app sales to make it plenty profitable.
I don't know who you are talking about, but if it is Apple, I think you are wrong, because Apple claims they are only a little over the break-even point there. Of course, that may be several million (I've read as much as 200 million) in gross profits. I think most businesses would be quite pleased with that But, at Apple, that is small change.

Quote:
Originally Posted by nuckinfutz View Post
The mini is setting the table. They have announced that they will not race to the bottom and that their ecosystem of devices and stores will hold sway against "internet" companies like Google and Amazon and they will handle themselves nicely because people still value face to face communication and transactions.

They haven't left anything open. Apple is moving product which means they've priced it at the correct price for their market.

Note: If you're a "I buy the cheapest product available and only download free apps" Apple is NOT looking for your business. Sure its elitist and I'm ok with that. The world need Walmart and Nordstroms. People are free to choose which level they want to buy in at.
Sure. I get what they are doing. And, I think that is why we are seeing two business models facing off now, and not just an iPad Mini vs. Nexus 7 vs. Kindle Fire. The question here is whether Apple has managed to read the market well.

Will parents (for example) figure it is just easier to get the Kindle Fire, since they do everything through Amazon nowadays anyhow, the books are free (Prime lending), the movies are free (Prime movies are OK, but not great), and there are plenty of games for little Billie and Susie?

Or, will they be astute enough to see that the Nexus is far more flexible than the Fire, if not quite as well tied into a rich ecosystem? I love the N7, but I kind of doubt it will gain the popularity it deserves.

Or, will they spend the extra money and go with Apple, because... they don't mind spending more money for less? The specs are lower, and they are going to be in an unforgiving app system with no special deals.

Last edited by palpatine; Nov 4, 2012 at 11:24 AM.
palpatine is offline   0 Reply With Quote
Old Nov 4, 2012, 11:15 AM   #24
Stetrain
macrumors 68040
 
Join Date: Feb 2009
Quote:
Originally Posted by h00ligan View Post
They make more than enough in app sales to make it plenty profitable.
Pretty sure that Apple continues to show in their earnings reports that they run the entire "iTunes" business, which includes the app store, pretty close to break even.

That 30% cut isn't profit, there are costs associated with running the store.

The records show that they make the vast majority of their money from simple hardware profit.
Stetrain is offline   0 Reply With Quote
Old Nov 4, 2012, 11:22 AM   #25
fertilized-egg
macrumors 68020
 
Join Date: Dec 2009
Somehow we don't see the same thing with restaurants and people yelling out "A $20 meal costs $8 in ingredients for margin of 60%!!" but yet that's what we see with Apple specifically.
fertilized-egg is offline   4 Reply With Quote

Reply
MacRumors Forums > iPhone, iPod and iPad > iPad

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Similar Threads
thread Thread Starter Forum Replies Last Post
A7X-Based iPad and iPad Mini Expected to Launch in 4Q 2013, Lower-Cost A6 iPad Mini to Follow in 2014 MacRumors MacRumors.com News Discussion 178 Oct 11, 2013 07:52 AM
iPad Mini: cost of an ipad mini after tax? lokster iPad 10 Dec 4, 2012 11:11 PM
iPad Mini Component Costs Estimated to Begin at $188 MacRumors MacRumors.com News Discussion 106 Nov 6, 2012 01:30 PM
If price was NOT a factor, and both ipad and iPad mini cost the same. Millionaire2K iPad 2 Oct 23, 2012 08:03 PM

Forum Jump

All times are GMT -5. The time now is 11:36 PM.

Mac Rumors | Mac | iPhone | iPhone Game Reviews | iPhone Apps

Mobile Version | Fixed | Fluid | Fluid HD
Copyright 2002-2013, MacRumors.com, LLC