iPad mini iPad Mini cost $188 to make!

nfl46 said:

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.

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Keep in mind they spend a billion more on R&D. I know thats a sunk cost but it is something to also consider.

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.

nfl46 said:

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.

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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?

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.

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 said:

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.

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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.

Several of you are missing some of the important parts of the article.

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.

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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.

jedolley said:

Several of you are missing some of the important parts of the article.

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You may want to include the sentence preceeding the one you quoted as well to give it the right context.

nfl46 said:

Isn't Amazon and Google losing money on their devices from undercharging for them?

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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.

palpatine said:

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?

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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.

nfl46 said:

Isn't Amazon and Google losing money on their devices from undercharging for them?

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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.

why is this a surprise to anyone?
did anyone actually think they will sell it at or even close to cost price?

nuckinfutz said:

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.

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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.

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.

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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 said:

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?

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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.

palpatine said:

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.

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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.

What the individual parts costs add up to. Classic irrelevant information.

Spungoflex said:

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.

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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.

nuckinfutz said:

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.

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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.

They make more than enough in app sales to make it plenty profitable.

palpatine said:

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.

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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.

h00ligan said:

They make more than enough in app sales to make it plenty profitable.

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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.

nuckinfutz said:

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.

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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.

h00ligan said:

They make more than enough in app sales to make it plenty profitable.

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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.

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.