iPad Air Component Costs Estimated to Begin at $274, Roughly 13% Cheaper Than iPad 3

[everything-i]

What innovation and research. It's the same device since the first iPad. Only thing change is it's speed, and the CPU costs seem to stay the same every year. Still, the cellular versions are WAYYY overpriced. Don't get me started on the extra $100 every time I want to double my capacity for something that costs them $15.

Yeh because processors design themselves and making it lighter and smaller took Jony Ive all of 5 minutes with a couple of sketches on the back of a cigarette packet which he sent to Foxconn and they said ok mate how many you want.
Oh and providing all the services and new software versions for free also costs Apple nothing. And they get to use all the cellular patents for free as well. Get real.

 

[Rogifan]

Development of iOS? Sure it's added a few features and giving some overly colorful gloss, but come one. I figure $250 for parts & labor, $100 for R&D and overhead, and the rest is profit between Apple and the retailers.

You figure. Ok let's tell Tim Cook to go with what you figure. And if the stock tanks because profits and margins fall so be it. We'll just ignore the tiny, pesky little detail that AAPL is the most widely held stock in employee 401K's.

 

[BornAgainApple]

So according to this report, 16GB of memory is approx $9 and 128GB is $60, a difference of $51. Apple has the gall to charge a $249 markup, and most gladly pay it. We are indeed sheep for the slaughter.

 

[acslater017]

I wish a journalist would ask Tim Cook why they charge so much for iphone/iPad storage and LTE. Apple - and every profitable company - deserve a profit, but those components get like a 10x markup.

They charge $100 for 16 GB and $129 for LTE. Google charges about half that. I think the iPad starting prices are fair, but those upgrades are just sky high. It's as if they're saying "cuz we can". Unfortunately for consumers, there's not much tablet competition at the high end. No downward pressure.

 

[AppleScruff1]

R&D does cost money. But remember it is spread out over 100 million devices, and in the case of iOS, even more than that. Ditto for shipping, packaging, etc. This is all done on a huge scale, but it does add to the cost of each product. How much? I think it would be interesting to see.

 

[Rogifan]

I wish a journalist would ask Tim Cook why they charge so much for iphone/iPad storage and LTE. Apple - and every profitable company - deserve a profit, but those components get like a 10x markup.

They charge $100 for 16 GB and $129 for LTE. Google charges about half that. I think the iPad starting prices are fair, but those upgrades are just sky high. It's as if they're saying "cuz we can". Unfortunately for consumers, there's not much tablet competition at the high end. No downward pressure.

And yet Apple has been hammered the past few quarters because margins have declined. Apple's business model is to make money off hardware. Google's is not. You can't really compare the two.

 

[RMo]

$130 extra for a cellular capable model is really ridiculous. [...]

My thoughts exactly. The components cost $32, and yet the markup on any model is $129?! That's over four times the component cost. I understand needing to pay for R&D and everything else, but this in particular seems like a bit much.

 

[AppleScruff1]

I wish a journalist would ask Tim Cook why they charge so much for iphone/iPad storage and LTE. Apple - and every profitable company - deserve a profit, but those components get like a 10x markup.

They charge $100 for 16 GB and $129 for LTE. Google charges about half that. I think the iPad starting prices are fair, but those upgrades are just sky high. It's as if they're saying "cuz we can". Unfortunately for consumers, there's not much tablet competition at the high end. No downward pressure.

Apple's upgrade prices have always been high for RAM, hard drives, and processors. And it is the same thing with the storage on its mobile devices.

 

[Fanaticalism]

Woohoo, more margin better reflect in an increasing stock price!

Lol! +1

Profit is good. I'm willing to pay for these awesome devices to ensure they continue improving.

That's the problem, everything thus far have been lateral moves. I bought the Air because I'm an electronics junky, but the experience is no different from any other iPad I've ever used/owned.

 

[Motawa]

10 freakin dollar for ram and we have to pay +100 for upgrade

 

[bossxii]

$274 in, $499 out is not a huge margin at all. Considering Apple is not selling the majority of their iPads at $499. They sell to their partners such as Best Buy, Walmart and every wireless carrier at a discounted price. If you think Walmart is buying iPads at $450 and selling them at $499 your simply clueless about the wholesale aspects of any business. Apple is probably moving wholesale prices in the mid to upper $300 range at best. Then as others have talked about there is that small little expense of actually running a business. Paying employee's, paying for buildings, transportation costs etc... etc... etc...

People keep buying them because there is value in the product. Thankfully a company can still make money here in America without the government taking over the industry and giving **** away. Well at least most industries, they already killed healthcare. Which by the way, for all you young healthy men under 30, get ready to bend over and pay out the wazoo in the coming years. The socialist plan of "FREE" is going to cost you more a month than the base iPad. So enjoy that FREE, let's help everyone concept.

 

[wiz329]

Coca-Cola is just sugar, flavoring and water.

It costs about 5 cents in materials to make a 2-liter. They sell it for between $1 and $2.

That's a 1,000-2,000% markup. Where are the articles on this?

Not to take away from your very valid point ...

But they don't sell it at that price. Retailers do.

----------

10 freakin dollar for ram and we have to pay +100 for upgrade

Nope. You can't upgrade the RAM.

 

[gnasher729]

I was just about to write a post similar to this. Labor, R&D and advertising would consume quite a bit of the perceived profit. Your last sentence sums it up bet nicely.

Setting up stores. Hiring employees to sell the goods. Doing warranty repairs. Handling returns from customers who change their minds. And so on and so on.

Every time iSuppli publishes these estimates, people without the slightest idea of how a business works come out and complain because they think the difference between retail price and the price of a bunch of parts in China is profit.

 

[Tubamajuba]

What did they put us through? Before I join you on the victim bandwagon, I'd like to know how I've been victimized.

Every single bug in every piece of Apple software and every production issue with every Apple device affects every owner of any Apple product.

And therefore, Apple is doomed.

That's the logic around these forums.

 

[gnasher729]

My thoughts exactly. The components cost $32, and yet the markup on any model is $129?! That's over four times the component cost. I understand needing to pay for R&D and everything else, but this in particular seems like a bit much.

Please, never start running a business.

 

[Eidorian]

I wonder why they still spend money on marketing.

 

[AppleScruff1]

Setting up stores. Hiring employees to sell the goods. Doing warranty repairs. Handling returns from customers who change their minds. And so on and so on.

Every time iSuppli publishes these estimates, people without the slightest idea of how a business works come out and complain because they think the difference between retail price and the price of a bunch of parts in China is profit.

This is true, but Apple does make an overall profit in the 35% range.

 

[age234]

What innovation and research. It's the same device since the first iPad. Only thing change is it's speed, and the CPU costs seem to stay the same every year. Still, the cellular versions are WAYYY overpriced. Don't get me started on the extra $100 every time I want to double my capacity for something that costs them $15.

Do you know how much it costs to design and build the machines that build the iPads? Watch the Mac Pro behind-the-scenes video; they have millions of dollars into that aspect alone. They have to make that money back too.

The cost of the components is just the starting point. And if people will pay it, Apple will charge it.

 

[spb3]

I guess that's excluded the costs of innovation & research etc. etc...

Correct. Just to manufacture a product you need to account for
+Material cost
+Direct Labor cost
+Manufacturing Overhead cost (utilities, equipment depreciation, plant supervisors, etc).
And all of this only gets you the manufacturing cost.

And then there are
+R&D and New Product Development
+people who keep the company running
+marketing dept
+legal dept
+HR
+company stores
+purchasing dept
+service/warranty dept
+website support
The list goes on.

Parts cost is important. Companies of large scales fight for every penny of each component. But to be profitable, other departments and aspects of the business have to be very efficient.

 

[Patriot24]

Aaaaaaand we're all still buying them anyway.

 

[age234]

I wish a journalist would ask Tim Cook why they charge so much for iphone/iPad storage and LTE.

Because people will pay for it. The value of owning an Apple product outweighs the insane markups on storage. What's wrong with that?

 

[rei101]

Are you just pulling these numbers out of thin air? Don't you know how much free cash flow Apple generates on quarterly basis? The last quarter's corporate profit margin was 37%....

What you need is to know how that 37% is divided. If you divide 37% x the amount of devices sold, you would get a number way about of the final earnings. 37% can be total income but then you would have to divide into marketing and everything else.

 

[applesith]

Not to take away from your very valid point ...

But they don't sell it at that price. Retailers do.

Best Buy, Target, Wal-Mart, Amazon and everyone else sells it too. So I don't see your point.

 

[bdavis89]

I guess that's excluded the costs of innovation & research etc. etc...

The estimates from IHS iSuppli cover only the cost of the various components that make up the device and do not include other costs involved in product development, manufacturing, and sales, such as research and development, software, patent licenses, marketing, and distribution expenditures.

 

[Fanaticalism]

$130 extra for a cellular capable model is really ridiculous. For the iPad Mini that represents a 43% price bump (299 to 429).

The cellular enabled models should be $50 to $100 more, not $130, and it would help with adoption rates.

And this is why I don't purchase the embedded models. I have T-Mobile prepaid hotspot that when I need the service, I can choose to light it up for $35 and get 3.5 GB of data, and the entire family can be connected.