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iPad 3 Profit Margin?

appleguy123

appleguy123

macrumors 604
Original poster
Apr 1, 2009
6,873
2,589
15 minutes in the future
Last year Apple added:
Dual Core processor
New Design
Smart cover magnets
Cameras

None of these things(beside R&D with the A5) seem like very expensive parts.

This year:
Retina Display(The cost of this must be huge. AFAIK no such screen is currently shipping in any product.)
Quad Core or improved dual core A6( I dont see how this won't be at least as expensive as the A5)
Massively improved graphics(implied by the retina display)
Significantly better cameras
4G LTE likely
Double capacity? (big IF, but with huge apps made for the display, it would seem user friendly.)

If Apple retains the $499 price point for the iPad 3, what do you predict their margins will be? Do you think they'll cut cost in some other obvious way(The iPhone 3G had the dock sold separately).

I get that Apple has a lot of buying power, but this seems excessive. What are your thoughts?
 
appleguy123 said:
Last year Apple added:
Dual Core processor
New Design
Smart cover magnets
Cameras

None of these things(beside R&D with the A5) seem like very expensive parts.

This year:
Retina Display(The cost of this must be huge. AFAIK no such screen is currently shipping in any product.)
Quad Core or improved dual core A6( I dont see how this won't be at least as expensive as the A5)
Massively improved graphics(implied by the retina display)
Significantly better cameras
4G LTE likely
Double capacity? (big IF, but with huge apps made for the display, it would seem user friendly.)

If Apple retains the $499 price point for the iPad 3, what do you predict their margins will be? Do you think they'll cut cost in some other obvious way(The iPhone 3G had the dock sold separately).

I get that Apple has a lot of buying power, but this seems excessive. What are your thoughts?
Click to expand...

Are you concerned about your investment in AAPL stock?:) I have a feeling that low end iPad 3 might not get a "retina" display since margins are tighter on the 16GB model compared to 32/64GB.
 
If the iPad 3 display rumored is real, its cost is around three times the current iPad 2 display cost.
SSDs are cheaper now though. Also we don't know if the A5X will be the next iPad's CPU (and GPU), so it's impossible to make an estimation.
 
doboy said:
Are you concerned about your investment in AAPL stock?:) I have a feeling that low end iPad 3 might not get a "retina" display since margins are tighter on the 16GB model compared to 32/64GB.
Click to expand...

I think that this is pretty unlikely. Apple's done well because the iPad isn't like a PC where you have to ask yourself if you want to pay more for this or that. The iPad is made for the masses.

When I go around and tell people about the iPad 3's screen, they don't really get it.

Androids are about pay x for this cool feature, Apple's about simplicity.

Plus it would really shock competitor's when Apple announces such a thing for $499. It might even be worth the temporary margin hit just to shock competitors out of the market.
 
I reckon they'll make up some of the cost in shipping. The iPad packaging could be half the size, so they could ship twice as many per container...
 
appleguy123 said:
Plus it would really shock competitor's when Apple announces such a thing for $499. It might even be worth the temporary margin hit just to shock competitors out of the market.
Click to expand...

Don't think they need to "shock" the competition since they are already doing well against the competition when competition already uses slightly higher resolution than the current iPad. Also iPad is one of the lowest margin devices that Apple sells and they hate to take a hit on margins.
 
With over $100 Billion in the bank, who cares if they have to lower their profit margin some?
I sure don't have a problem with it. With Apple controlling more and more of the market, it will put them in the position of getting the lowest prices. So if they have to lower their margins for one generation of the iPad, it would be worth it to maintain market domination.
By next year, with the iPad 4, the prices for everything should be even cheaper, so they can get back their ludicrously high profit margin.
 
As a side note, an increased pricing point would make sense.
R&D for the display and CPU/GPU have probably been expensive.

If the rumored increased price is reality, Apple could have been forced to raise it, probably holding an even lower profit per product.

The other option is, Apple knows its fanboys. And knows they'll just do everything to buy the new device.
This too, makes a lot of sense.
 
Awfisch said:
With over $100 Billion in the bank, who cares if they have to lower their profit margin some?
I sure don't have a problem with it. With Apple controlling more and more of the market, it will put them in the position of getting the lowest prices. So if they have to lower their margins for one generation of the iPad, it would be worth it to maintain market domination.
By next year, with the iPad 4, the prices for everything should be even cheaper, so they can get back their ludicrously high profit margin.
Click to expand...

"Ludicrously high" or not, Apple doesn't operate a charity. They've established pricing strategies that they, and more importantly, the financial markets, can live with. They can't really decide to take a quarter off and give stuff away just because they have a stockpile of cash. The market expects them to maintain sales and profits quarter-by-quarter, so they have to follow those expectations.
 
The current rumor is that all iPad 3 models will carry an $80 premium over the current pricing model.

Assuming what we think we know is true (retina, A5x/A6, larger battery, better cameras, etc), I don't think $80 is too much to ask for all of that.
 
Patriot24 said:
The current rumor is that all iPad 3 models will carry an $80 premium over the current pricing model.

Assuming what we think we know is true (retina, A5x/A6, larger battery, better cameras, etc), I don't think $80 is too much to ask for all of that.
Click to expand...

It's not THAT crazy but why would Apple continue to sell the iPad 2 at the same prices? No decrease in price at all. That's crazy and why I don't think that rumor is viable.
 
maclook said:
It's not THAT crazy but why would Apple continue to sell the iPad 2 at the same prices? No decrease in price at all. That's crazy and why I don't think that rumor is viable.
Click to expand...

I hadn't seen it suggested anywhere that iPad 2s would continue to be sold at the current price points and didn't mean to insinuate it if I did. I agree that doing so wouldn't make any sense. If anything, iPad 2 will simply become the lower cost option (maybe drop the price by $100 going forward).
 
Patriot24 said:
I hadn't seen it suggested anywhere that iPad 2s would continue to be sold at the current price points and didn't mean to insinuate it if I did. I agree that doing so wouldn't make any sense. If anything, iPad 2 will simply become the lower cost option (maybe drop the price by $100 going forward).
Click to expand...

I was referring to the chart which shows the iPad 2 price staying the same. But now that I look at it again, it may just be showing the iPad 2 price for comparison. I don't know, can't read it.

ipad-price-hike.jpg
 
maclook said:
I was referring to the chart which shows the iPad 2 price staying the same. But now that I look at it again, it may just be showing the iPad 2 price for comparison. I don't know, can't read it.
Click to expand...

Got it. I think we can safely assume it is just showing iPad 2 prices for comparison.
 
poloponies said:
"Ludicrously high" or not, Apple doesn't operate a charity. They've established pricing strategies that they, and more importantly, the financial markets, can live with. They can't really decide to take a quarter off and give stuff away just because they have a stockpile of cash. The market expects them to maintain sales and profits quarter-by-quarter, so they have to follow those expectations.
Click to expand...

It wouldn't be taking a quarter off. It would be a move to keep their hold on the market. If they raised the price of the iPad even for one generation, it would be harmful on sales, giving way to more of the cheaper android options. While I don't think that they would lose their dominance, I do think that a price increase could hurt sales. As I said before, the more control that they have on the market, Apple is able to get the cheapest prices for hardware. So I think that if they need to lower their profit margin for one generation, then it is worth it in the long run to remain profitable. Increase in demand and competition will drive prices down not up.

So when March 7th rolls around, I fully expect to see the same prices even with all the new hardware.
 
Awfisch said:
It wouldn't be taking a quarter off. It would be a move to keep their hold on the market. If they raised the price of the iPad even for one generation, it would be harmful on sales, giving way to more of the cheaper android options. While I don't think that they would lose their dominance, I do think that a price increase could hurt sales. As I said before, the more control that they have on the market, Apple is able to get the cheapest prices for hardware. So I think that if they need to lower their profit margin for one generation, then it is worth it in the long run to remain profitable. Increase in demand and competition will drive prices down not up.

So when March 7th rolls around, I fully expect to see the same prices even with all the new hardware.
Click to expand...

As a consumer I hope they would keep the prices comparable to the iPad 2. I think Apple would maintain their dominance by lowering the entry point with $350-399 iPad 2(s). Remember Asus also raised their prices by $100 with the Prime model so it is more costly to add better CPU/GPU and display.
 
32GB base model

I think a 32gb base model could explain/excuse the possible price hike. A $579 base model iPad would help offset loss of profit and it would actually lower the cost for the consumer of the current 32gb option by $20.
 
translation

maclook said:
don't know, can't read it...
Click to expand...

The characters translations are as you probably assumed. It reads in english from left to right...

Apple iPad #?, iPad 2 American dollar price, iPad 3 American price, iPad 3 RMB converted price.
 
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