iPad mini iPad Mini cost $188 to make!

[zephyrnoid]

On other forums (HD DSLR Video for example) the talk is about how Panasonic is bleeding from losses on DSLR investments that haven't paid off as well as projections. If iPad Mini margin is as high as $140.00/ea; Apple's doing very well indeed! Personally, I feel it's overly fine build for what I consider to be a nearly disposable device.
Before you all get mad, please understand that I am not a flamer or troll. I write on tech and have been for years. Your benefit.
I checked out the iPad Mini at the Apple store yesterday and loved the thinness but not its width dimension ( no go for me) . I also loved the finesse of it's build quality and materials ( Thanks Mr. Ive!).
BUT
knowing that it's a 'thin client' with no memory or CPU upgradability and taking into consideration the six month refresh cycle this year, my guess it will be disposed of once it has devalued by 75%. Based on iPad history, you should see that in about 1.5 years.
SO...
why bother making it out of such high class materials? ( other than to keep winning design awards Mr. Ive)
Answer- Because the Apple Customer will pay for the thinness/slickness even if it's going to be obsolete in a year and half.
Truth is, having gotten the ipad mini width wrong by .6", Apple deferred to thin and sexy and that spec'd out Aluminum vs. Plastic, hence the cost differential compared to it's competitors in the 7" arena.
DISCLAIMER : I HATE plastic but I hate materials overkill even more, preferring to pay for functionality over build quality

 

[rockyroad55]

Also, since the mini uses the same iPad apps as the current ones, many people may not need to buy new apps and just install past purchased ones.

 

[zephyrnoid]

On other forums (HD DSLR Video for example) the talk is about how Panasonic is bleeding from losses on DSLR investments that haven't paid off as well as projections. If iPad Mini margin is as high as $140.00/ea; Apple's doing very well indeed! Personally, I feel it's overly fine build for what I consider to be a nearly disposable device.
Before you all get mad, please understand that I am not a flamer or troll. I write on tech and have been for years. Your benefit.
I checked out the iPad Mini at the Apple store yesterday and loved the thinness but not its width dimension ( no go for me) . I also loved the finesse of it's build quality and materials ( Thanks Mr. Ive!).
BUT
knowing that it's a 'thin client' with no memory or CPU upgradability and taking into consideration the six month refresh cycle this year, my guess it will be disposed of once it has devalued by 75%. Based on iPad history, you should see that in about 1.5 years.
SO...
why bother making it out of such high class materials? ( other than to keep winning design awards Mr. Ive)
Answer- Because the Apple Customer will pay for the thinness/slickness even if it's going to be obsolete in a year and half.
Truth is, having gotten the ipad mini width wrong by .6", Apple deferred to thin and sexy and that spec'd out Aluminum vs. Plastic, hence the cost differential compared to it's competitors in the 7" arena.
DISCLAIMER : I HATE plastic but I hate materials overkill even more, preferring to pay for functionality over build quality

Oh and yes... the nice young man that helped me at the Apple store was a tad ticked off at my "See you in Spring of 2013" quip

 

[palpatine]

Less screen, less attention to detail, less access to great applications, and a whole lot less fun. Sounds like the N7 to me.

Interesting. In some ways I think the N7 is more enjoyable than my iPad. Overall, I prefer the iPad for various reasons, but I think the N7 is a well-built, solid tablet. I actually think the smaller size is also a plus, because any larger and I think I'd just prefer the full experience with the iPad. I haven't tried a Mini yet, though, so I cannot say for sure yet.

 

[zephyrnoid]

Interesting. In some ways I think the N7 is more enjoyable than my iPad. Overall, I prefer the iPad for various reasons, but I think the N7 is a well-built, solid tablet. I actually think the smaller size is also a plus, because any larger and I think I'd just prefer the full experience with the iPad. I haven't tried a Mini yet, though, so I cannot say for sure yet.

There's a term in Behavioral Psychology- Leveling. It refers to the perceptual system's ability to accommodate variances in the experience, the leveling function being to maintain equilibrium.
Large screen, tiny screen, it really doesn't matter as long as your eye prescription is spot on. I recall when millions of Japanese youth had only tiny NTT DoCoMo cell phone screens and microscopic keypads for WAP/SMS access!
I tried the iPad Mini last night and loved it, It's what I'd hoped Apple would have announced when they rolled out the iPad V1.0
As more people report that they can do what the regular iPad couldn't do, it will seem almost redundant to go with the bigger tablet. Which begs the question. Why IS Google releasing a big Nexus10, when it's ALL WRONG???

 

[armandxp]

Sometimes I feel like I'm totally ignored on this forum for the absolutely true statements I make. Really????

 

[supremeMilo]

LOL the IPad cost $316 to build but apple charges $499, the iPhone 5 cost 188 but apple charges $650, while the Ipad Mini cost 188 and apple charges $329.

Only apple could get way with such prices.

How much do you think it costs to make a washing machine or a tv?

How much do they charge for these things?

 

[palpatine]

There's a term in Behavioral Psychology- Leveling. It refers to the perceptual system's ability to accommodate variances in the experience, the leveling function being to maintain equilibrium.
Large screen, tiny screen, it really doesn't matter as long as your eye prescription is spot on. I recall when millions of Japanese youth had only tiny NTT DoCoMo cell phone screens and microscopic keypads for WAP/SMS access!
I tried the iPad Mini last night and loved it, It's what I'd hoped Apple would have announced when they rolled out the iPad V1.0
As more people report that they can do what the regular iPad couldn't do, it will seem almost redundant to go with the bigger tablet. Which begs the question. Why IS Google releasing a big Nexus10, when it's ALL WRONG???

LOL. Sure. I've got one of those DoCoMo phones in my drawer here. Different stuff for different times and different use cases. The Nexus 10 is brilliant (all right in my opinion), but they had sure better do something with the apps. Google Drive is not good enough yet for all the stuff I want to do.

 

[haruhiko]

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/2012/11/04/ipad-mini-188-to-build/

This article explains a lot.

Given the lower margin now I'm a bit tempted to buy a mini despite its lack of retina display...

 

[zhenya]

On other forums (HD DSLR Video for example) the talk is about how Panasonic is bleeding from losses on DSLR investments that haven't paid off as well as projections. If iPad Mini margin is as high as $140.00/ea; Apple's doing very well indeed! Personally, I feel it's overly fine build for what I consider to be a nearly disposable device.
Before you all get mad, please understand that I am not a flamer or troll. I write on tech and have been for years. Your benefit.
I checked out the iPad Mini at the Apple store yesterday and loved the thinness but not its width dimension ( no go for me) . I also loved the finesse of it's build quality and materials ( Thanks Mr. Ive!).
BUT
knowing that it's a 'thin client' with no memory or CPU upgradability and taking into consideration the six month refresh cycle this year, my guess it will be disposed of once it has devalued by 75%. Based on iPad history, you should see that in about 1.5 years.
SO...
why bother making it out of such high class materials? ( other than to keep winning design awards Mr. Ive)
Answer- Because the Apple Customer will pay for the thinness/slickness even if it's going to be obsolete in a year and half.
Truth is, having gotten the ipad mini width wrong by .6", Apple deferred to thin and sexy and that spec'd out Aluminum vs. Plastic, hence the cost differential compared to it's competitors in the 7" arena.
DISCLAIMER : I HATE plastic but I hate materials overkill even more, preferring to pay for functionality over build quality

I think your calculations are a little off.

Even the iPad 1 is worth about 40% of its purchase value after 2.5 years. Even those are not being disposed of, but rather being sold easily on the secondhand market or being repurposed as second devices or handed on to kids or family. The build quality is almost the exclusive reason for that longevity and high resale.

You may think that Apple got the width wrong, but many of us feel just the 7" 16:9 devices are too narrow; there is almost nothing visible in widescreen views, and the non-retina screens render blurry text in the tiny font sizes in portrait. It's the worst of both worlds.

 

[xofruitcake]

That's a lot of helpful information. Thanks!

I still don't see the iPad Mini as a "value," speaking from a consumer's perspective, but if this is the best they can do, then it's the best they can do. In the end, I consider the screen to be one of the most important elements, and without a retina screen (or at least something better than the N7), I don't see any point in buying the Mini. Maybe they spent too much on the case and too little on the screen then.

In the end, this is the downside of Apple's strategy. Getting profits out of hardware on the front end means they need to hit it out of the park every time, but for Amazon, they can afford a bad quarter or two with Kindle sales, because the Kindle app is everywhere (along with movies and everything else). I don't know which approach is better, but I think I'd bet on Amazon (maybe Google) going forward.

At the end, customer will decide what is the best value for them. so it is fair that you will make that choice for yourselves. But my bet is that Ipad mini will outsell everything including Ipad 3/4, Nexus 7 in this, and Kindle Fire HD in this Christmas session. A big part is the marketing position that Apple is in now. It has biggest distribution network throughout the world (Nexus 7 is not going to be able to sell in China for a long long time while Apple is rumored to start selling in China in Dec) will help. The bigger tablet apps catalogs will help. The better apps experience will help. The 4:3 vs 16:9 for web surfing and reading books will help. The bigger screen area will help. And at $329, it is one of the cheaper Apple device for the developing world.

I think we will need to have this play out longer to see who will win at the end. Right now both Google and Amazon contract out their design and manufacturing of their respective tablet. No one can make money in this space now given that Fire HD and Nexus 7 set a very low price point. If every Android major maker leave the tablet space, who is going to design and manufacture the next tablet for Google and Amazon??? Look around and see which major Android manufacturer announce new tablet for the future?? and for that matter which other Android tablet is available for Christmas season? Only the small Android players is left in the tablet space. It is an unintended consequence of the war between Apple, Amazon and Google and all the other Android tablet maker get caught. Samsung has a really nice Nexus 10..But I seriously doubt that they can make much money out of them now given Google price Nexus 10 at $400. Samsung can sell the uplevel Nexus 10 under their own name (e.g. 64G version).. But not at a price that they want to.. And the next Samsung tablet will have to match the Nexus 10 also..

Microsoft take a different path for Surface. They price it as high as Ipad and it will leave room for their hardware partners to make some money if W8 catch on (If W8 does not catch on, it really doesn't matter anyway, there will be no W8 tablet if W8 crash and burn in the market place) and guarantee a new wave of W8 tablet to come in the next year.

 

[Southernboyj]

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?

I'm not making excuses for them but you must also consider, it's $188 in raw materials. That doesn't factor in R&D, marketing the device,manufacturing cost, then finally the cut that third party retails like Best Buy takes.

 

[kmj2318]

It looks like a lot of commenters are assuming that the OP is complaining about the cost of materials, when really he's giving credence to why it could never been the $249 price point. Just hoping this clarifies.

But yes, I will join in with others and say how ridiculous it is for people to complain about the gross margins on Apple products, the figure is almost irrelevant. The gross margins (that is the product prices vs the materials cost) is always higher on premium products. It has to be for the company to have better customer services, lower tolerances in design, etc.

 

[CWallace]

I don't know how it is going to turn out, but my guess is that Apple's approach to the Mini (under-spec'd and over-priced) won't yield very impressive results.

That has been Apple's approach to music players - and they own that market.

It has been Apple's approach to desktop and laptop computers - and the iMac is the best-selling desktop PC model and the MacBook Pro is the best-selling portable PC model. Yes, Windows PC's as an aggregate handily outsell Macintoshes, but almost all of those units are well below $1000 in price and have margins in the very low single digits so Apple makes more money on the millions of units they ship then the rest of the PC industry makes on the hundreds of millions of units they ship.

It has been Apple's approach on smartphones - and they continue to have strong marketshare in terms of units sold and each of those units generates significant profits.

It has been Apple's approach on large-format tablets - and they have both strong marketshare in terms of units sold and each of those units generates significant profits.

It has been Apple's approach on small-format tablets (the iPod Touch) - and they pretty much own that market, I believe.

I see no reason why this approach with medium-format tablets will not be equally successful.

The other thing that is not mention is part of the reasons why the loses are so high is because Amazon invests their profits into R & D and cloud infrastructure.

Apple has been investing a mint in new data centers in North Carolina, Texas and Oregon.

 

[unagimiyagi]

If Apple's raw cost is $188 just for materials, then $329 is not a large profit margin. I'd say that R&D, marketing, paying salaries, etc, won't make that profit margin more than $50 per unit after all is said and done. That's acceptable to me b/c the mini is made better, and it is designed better, and it works better at what it does. iOS is missing some newer features, but the ones that work, well very well. (Except maps)

Few people are asking Apple to lose money to sell us more finely crafted hardware.

Now the iphone 5, that's a total ripoff.

So for those who were not buying the mini on principle, they can go ahead and buy knowing that the $329 is what a tablet costs in late 2012, and $199 is just ridiculously low. People have forgotten that $99 cell phones are an odd entity in that something so complicated and advanced should not cost less than a fancy alarm clock. Yet they do.

Apple is still making a killing for those who want a 64 gb mini though, or even a 32 gb one.

The buying decision for me just comes down to whether I want a mini given its current specs, or if I want to wait another year. I still think I should, but knowing that if I want a high quality 7 incher, this is just the going rate in 2012. I had been worried that I'd be paying $100 more for no good reason other than corporate greed.

 

[palpatine]

That has been Apple's approach to music players - and they own that market.

Yes.

It has been Apple's approach to desktop and laptop computers - and the iMac is the best-selling desktop PC model and the MacBook Pro is the best-selling portable PC model.

Really? My understanding is that PCs outsell Macs 16 to 1.

Yes, Windows PC's as an aggregate handily outsell Macintoshes, but almost all of those units are well below $1000 in price and have margins in the very low single digits so Apple makes more money on the millions of units they ship then the rest of the PC industry makes on the hundreds of millions of units they ship.

I don't know what their margins are, but on aggregate, I'd say they are doing better than Apple. Apple as a single company is impressive, of course, but it is in battle with legions of Androids and Windows competition.

It has been Apple's approach on smartphones - and they continue to have strong marketshare in terms of units sold and each of those units generates significant profits.

Android has more marketshare, and other companies like Samsung seem to be doing pretty well.

I see no reason why this approach with medium-format tablets will not be equally successful.

Because the Android platform has finally matured (I'd say Ice Cream Sandwich was the first decent competition to iOS), I think it is a different world. And, the Android tablets like the N7 and N10 are impressive. Not to mention, of course, Windows on the horizon. I still don't know what to think of Windows, but it is an entirely different ball game now.

 

[zhenya]

I don't know what their margins are, but on aggregate, I'd say they are doing better than Apple. Apple as a single company is impressive, of course, but it is in battle with legions of Androids and Windows competition.


Android has more marketshare, and other companies like Samsung seem to be doing pretty well.

Uh, not really.

Apple alone has a greater market cap than Dell, HP, Lenovo, Microsoft, and Google combined.

It's more than 3x that of Samsung, despite Samsung being a far larger company with an order of magnitude greater diversification.

 

[lianlua]

Yeah. They're only making about $141 off of each one.

No, they're not making anywhere near that.

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?

Are they better? Or just different? The iPad mini parts cost is $20 higher than those other tablets. That money obviously goes somewhere.

Now, if they could take that nearly 50% profit, lower it a bit, and put a Retina display into the device,

If it were that easy, it'd be done.

I wonder how much more an A6x processor, 1GB RAM, and a Retina display would have cost?

You don't really have to wonder. You take the cost of the bigger iPad ($316) and shave off a few bucks for the slightly smaller battery, deduct the $127 display, and add back in $160+ for the new retina display. $350+ in parts. $250+ for the standard margin on top of that. $600+ for a retina mini today. And that's with the fiction that someone has 7.9" retina panels ready to hand to Apple.

Those margins are for the base-model iPad mini. They make a lot more on 32GB and 64GB models for they freakin charge $100 for additional storage which costs them less than $20.

Which is how they compensate for the lower margin on the base model. Time-tested formula, used in televisions, cars, and appliances.

Only apple could get way with such prices.

Not really. These are pretty typical margins for consumer products. It's just unusual in the computer industry.

 

[iHeartsteve]

For clarification since some people may be confusing GROSS profit margin and their profit margin per device.

What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.

For example, if a company receives $25,000 in sales and its cost of goods sold were $20,000, the gross profit margin would be equal to $25,000 minus $20,000, divided by $25,000, or 20%. Basically, 20% gross profit margin means that for every dollar generated in sales, the company has 20 cents left over to cover basic operating costs and profit.

A company of their size can afford to take even an $80 hit on a device b/c they have MANY other ways of revenue besides ipad mini. Like someone else said, their bread and butter is the iPhone and of course itunes.

Since Apple makes far MORE than in sales than most large corporations, if their gross profit margins are only 30%, they are still making BILLIONS.

 

[lianlua]

For clarification since some people may be confusing GROSS profit margin and their profit margin per device.

Gross margin can be examined per device or at the corporate scale.

What people are neglecting is that gross margin is not profit, and that the BOM cost is not the total cost per unit. In addition to the components themselves and the labor of assembly, there are the in-box accessories, the packaging, and assorted other expenses. That result is the true gross margin. From there:

For example, if a company receives $25,000 in sales and its cost of goods sold were $20,000, the gross profit margin would be equal to $25,000 minus $20,000, divided by $25,000, or 20%. Basically, 20% gross profit margin means that for every dollar generated in sales, the company has 20 cents left over to cover basic operating costs and profit.

Correct. And out of the gross margin comes operating expenses, taxes, and other forms of corporate overhead, which at Apple currently amounts to about 19% amortized over their entire product line. In other words, about 60 cents of every dollar goes to the product/service cost, 20 cents to business costs, and 20 cents is left as profit.

A company of their size can afford to take even an $80 hit on a device b/c they have MANY other ways of revenue besides ipad mini.

An $80 hit on the mini would be a net loss. They have no reason to do that.

Since Apple makes far MORE than in sales than most large corporations, if their gross profit margins are only 30%, they are still making BILLIONS.

Gross margins aren't profit. A 30% gross margin for Apple at the corporate level would mean that their reported net profits would drop by more than half, from 22% to about 10-11%. They cannot afford that. Investors would riot.

 

[palpatine]

Uh, not really.

Apple alone has a greater market cap than Dell, HP, Lenovo, Microsoft, and Google combined.

It's more than 3x that of Samsung, despite Samsung being a far larger company with an order of magnitude greater diversification.

Asus, Windows, Acer, Samsung, etc., etc. are all competitors who seem to be doing quite well, with lots of market share. Apple isn't fighting a 2007 battle with virtually no competitors. It has steadily lost market share over the years, and it has even seen sales of the iPad miss their mark. Coming out with a weak and overpriced product in a mature market (a mini tablet) doesn't seem like a good idea to me. I guess we'll just have to wait and see what happens.

 

[bluedoggiant]

So? You guys know that these are still gonna sell like hot cakes right? People have come to expect premium prices from Apple, and in return greater products. Plus, they couldn't have priced it any cheaper, what about the iPod Touch?

 

[CWallace]

Really? My understanding is that PCs outsell Macs 16 to 1.

I specifically said model. So the MacBook Pro outsells the Dell Inspiron. Or the Lenovo ThinkPad. Or the HP EliteBook. Etc.

I don't know what their margins are, but on aggregate, I'd say they are doing better than Apple.

I would posit 10 PC companies each making $2 million dollars (for a total of $20 million) is not as desirable as one PC company making $18 million dollars.

Apple as a single company is impressive, of course, but it is in battle with legions of Androids and Windows competition.

Yes, and the vast majority of those Android phones are low-price, low-capability models given away for free on contract. And the cellular companies are paying nowhere near $650 to the vendors for each of them. They're probably not paying $65 for them.

So even with a 10:1 sales advantage, they're not "making it up on volume".

Windows Phone? Let's not even mention them, because even if they sold each phone for $650,000 the volumes are so low that there is no money to be made there.

Android has more marketshare, and other companies like Samsung seem to be doing pretty well.

And yet "Pretty well" is not "Apple well".

Because the Android platform has finally matured (I'd say Ice Cream Sandwich was the first decent competition to iOS), I think it is a different world. And, the Android tablets like the N7 and N10 are impressive.

Android has the same problem Windows Mobile does: fragmentation.

Yes, the latest and greatest Android phone or tablet with the latest and greatest version of Android is impressive. But every generation before that can't run the latest and greatest (without having to hack it) because the carriers and the vendors have no incentive to do so. They only make money when they sell you a new phone with a new contract.

Apple and the carriers do have an incentive to let existing models run the latest iOS version because that adds features that sells apps and consumes more cell data (so the carriers make more money as most of them now no longer offer unlimited data plans).

This is why each new version of iOS is adopted by the majority of the installed user base while each new version of Android is adopted by a small subset of the installed user base.

People complain about how iOS "chains you down", but if iOS was like Android, iOS6 would only run (with factory support) on the iPhone 5, iOS5 would only run on the 4S, the 4 would be locked into iOS4 and the 3/3GS would only run iOS3. And you'd be forced to jailbreak ("root") an older iPhone to get it to run a newer iOS version (assuming the phone had the hardware to do so - iOS hardware requirements across versions seem to be less-taxing than across Android versions).

 

[Maschil]

glad im a flandroid! haha... apple enjoys looting its customers..

just bought a nEXUS 7 WOOH

 

[cdmoore74]

Sold out stores will disagree with you. Because the reality here is that only the spec-obsessed nerds that frequent forums like this one care. For the average consumer, they want something easy to use and that they don't have to mess with. The Mini provides that at less cost than a full size iPad, hence the sales that we're seeing on it.

Apple sold out of the white Mini in 17 minutes. Apple stores ran out of stock within two hours on launch day, and saw lines larger than those for most product launches.

You're welcome to come back and eat crow once sales figures are announced though.

Sold out in stores? Apple is killing it's own iPad 4 sales because of the cheaper mini. Now people will see $499 as too expensive and will buy a crappier experience with the mini. There is no way Apple will make the mini better than it's more expensive brother at a $329 starting price. Expect the mini display to still carry that crappy resolution in mini part 2.

Mark my words. The iPad mini will be the worst decision Tim Cook has made. You will not see it today but in a year or two you will see the ramifications.

http://news.cnet.com/8301-13579_3-57544771-37/apples-vanishing-ipad/