Why do you think 3G is an extra $130? Is installing the 3G radio that expensive?

Luba

macrumors 65816
Original poster
Apr 22, 2009
1,206
174
I would have guessed an extra $50. An extra $130 seems like an odd number, perhaps $30 goes to at&t for not imposing a contract?? Even though it's unlocked, I read we can't use T-mobile's 3G because their 3G is on another frequency (1700 Ghz?).

Europe and Asia have already 4G, and I think it's as fast as Wifi, wonder why there won't be a 4G version available for them?
 

SnowLeopard2008

macrumors 604
Jul 4, 2008
6,772
8
Silicon Valley
I would have liked that. There would be the 3g accessory for $130 or whatever.

@topic:
Also the 3g model has A-GPS, so that might add a bit. :confused:
That would have terrible aesthetics. It'll be so easy to accidentally snap off. I think the reason it's $129 more is because of 1) AT&T 2) 3G hardware is ~$100 3) 3G model has A-GPS.

One question, what's the difference between a normal GPS chip and the A-GPS I keep hearing about in newer netbooks (Nokia Booklet)?
 

wikoogle

macrumors 6502a
Jun 12, 2009
929
0
3G hardware is NO WHERE NEAR $130. Anyone that thinks it is doesn't have a clue.

You can purchase 3G enabled phones overseas for the equivalent of $10 pretty much anywhere.

Yes, a premium USB 3G stick will cost you $100 from Bestbuy.

But guess what, bestbuy gets a $20-30 cut off of that price. The wholesaler who sold the product to bestbuy gets another $10 or so off of the price. The manufacturers gets another $20-30 dollars off of the price. The packaging costs, the shipping costs, the marketing costs for the USB sticks all that takes up the most of the rest of the costs. The actual 3G antenna itself costs a few dollars at most.

The fact is, apple would be buying 3G antennas in bulk, millions of them directly from the factory, which means they would be getting them for probably less than a dollar each. The royalties might cost another dollar or so. To apple, a 3G iPad costs them no more than $4 more compared to an otherwise similarly equipped iPad.

This is why 3G phones with those antennas inside them can be bought in Asia for $10.

There is one reason and only one reason Apple is charging $130 for the 3G upgrade, because they want to milk the high end users with massive amounts of disposable income.

Apple will only be making a $200 or so off of off each $499 iPad sold. This is no where near the profit margin Apple gets off of many of their other products. Apple probably gets close to a thousand dollars in profit for each $2000 Macbook Pro sold. Competing laptops will identical hardware sells for well under a $1000 (hell, I just picked up today a i5 processor laptop, with a hdmi port, a bluray player/drive and dvd burner, 4 Gigs of DDR ram, built in sd card reader, USB ports, wifi N, a dedicated graphics card, a 15.6 inch high res screen, a built-in webcam and a 320GB HDD (basically everything that people wanted the iPad to have and a crap ton more) for $499 from Best Buy) so saying that Apple only makes a $1000 off of each $2000 Macbook Pro they sell with far cheaper hardware inside is probably a significant low ball.

Given that, the margins of a $200 they get from the $499 iPad is chump change. So how they make more margins? They offer a premium 3G version of the iPad for people with large amounts of disposable income who can afford another $30 per month for 3G data on top of what they already pay for 3G on their cellphone and mark that up by $130, and they offer a premium 64 gb version and mark that up another $200. Then a few months from now, they'll release a iPad Pro version with usb ports, a webcam, an sd reader, a hdmi out, double the ram to 512 mbs and charge $1500 for it, though it costs them no more than a few dollars to manufacture over a standard $499 iPad. And all the high end users who already bought the $829 iPad will throw those out and upgrade to the $1500 iPad.

That's just how business works, makes the most money you possibly can, charge as much as you possibly can for your products, and mark up every upgrade as much as you can no matter how cheap it is for you to implement.
 

hugodrax

macrumors 6502a
Jul 15, 2007
890
133
The hardware is probably 15 bucks.

What apple is doing is subsidizing the 499 model with the 3G profits.


I suspect the 499 model is profit neutral since just the IPS LCD and components + software, distribution/packaging costs brings it up there.

so they charge 130 bucks to make profits.

I plan on getting the 64GB + 3G model though since I do not like carrying a laptop with me and I do not have a smartphone.
 

Gav2k

macrumors G3
Jul 24, 2009
9,218
1,584
Your forgetting the remanufactured case factors in somewhat.
 

bozzykid

macrumors 68020
Aug 11, 2009
2,176
232
The hardware is probably 15 bucks.

What apple is doing is subsidizing the 499 model with the 3G profits.


I suspect the 499 model is profit neutral since just the IPS LCD and components + software, distribution/packaging costs brings it up there.

so they charge 130 bucks to make profits.

I plan on getting the 64GB + 3G model though since I do not like carrying a laptop with me and I do not have a smartphone.
It has already been shown that the $499 iPad will profit Apple with close to $200. IPS is a lot more inexpensive than OLED, btw. They certainly aren't subsidizing the cheapest version.
 

hugodrax

macrumors 6502a
Jul 15, 2007
890
133
It has already been shown that the $499 iPad will profit Apple with close to $200. IPS is a lot more inexpensive than OLED, btw. They certainly aren't subsidizing the cheapest version.
Where did you get the numbers? The R&D costs etc... do factor in the cost of hardware.
 

Luba

macrumors 65816
Original poster
Apr 22, 2009
1,206
174
Which version do you think we would get the most value? Maybe the 64GB version with no 3G?

It has already been shown that the $499 iPad will profit Apple with close to $200. IPS is a lot more inexpensive than OLED, btw. They certainly aren't subsidizing the cheapest version.
 

MikeyTree

macrumors 6502
Jan 5, 2007
298
0
The 3G version also has a GPS built in. 3G +GPS seems like enough added value to justify $130.
 

jb1280

macrumors 6502a
Jan 13, 2009
813
25
It's probably been mentioned elsewhere since Wednesday, but if you want mobile connectivity in a Dell Mini it's an additional $125...
 

MikeyTree

macrumors 6502
Jan 5, 2007
298
0
Where did you get the numbers? The R&D costs etc... do factor in the cost of hardware.
I'm curious about those numbers too. What does "$499 iPad will profit Apple with close to $200" mean? Does it mean that the manufacturing cost is $200 less than the sale price? If so, then Apple's costs will be much less than $200, especially if they sell through a retailer.
 

samcraig

macrumors P6
Jun 22, 2009
16,610
35,455
USA
Well here's a thought.

Maybe Apple's deal with ATT is that in exchange for getting a no contract data plan - Apple is forking over XX per 3G device sold.

So maybe ATT is getting $100 or even $50 per unit
 

dukebound85

macrumors P6
Jul 17, 2005
18,059
1,187
5045 feet above sea level
same reason that the mechanic charged me 400 on a part he paid 239 for....because they can

Unfortunately, Apple will not negotiate the price like I did with my mechanic to get it cheaper
 

ugp

macrumors 65816
Jan 7, 2008
1,222
3
Inverness, Florida
I would rather pay the extra and have it the way they are doing the prepaid type service. I won't need to use the 3G all the time.
 

Luba

macrumors 65816
Original poster
Apr 22, 2009
1,206
174
I was thinking it's $29 they pay to att. $129 extra seems like an odd number when most of the time Apple charges in increments of $100 for upgraded features.

Well here's a thought.

Maybe Apple's deal with ATT is that in exchange for getting a no contract data plan - Apple is forking over XX per 3G device sold.

So maybe ATT is getting $100 or even $50 per unit
 

colmaclean

macrumors 68000
Jan 6, 2004
1,644
181
Berlin
I can imagine there will be some subsidised offers for the 3G model. Maybe not in the US, but Europe is used to this dynamic.
 

colmaclean

macrumors 68000
Jan 6, 2004
1,644
181
Berlin
I think both models have GPS according to the Tech Spec page:

"Location
Wi-Fi
Digital compass
Assisted GPS (Wi-Fi + 3G model)
Cellular (Wi-Fi + 3G model)"
Nope. There are two models...

Wi-Fi
Wi-Fi + 3G

Only the Wi-Fi + 3G will have the last two features.
 

paduck

macrumors 6502
Jul 5, 2007
425
0
Apple's gross margins (the cost of manufacturing a product compared with what they sell it for) is close to 40%. This is VERY good for the business they are in and something Apple has always striven for. They have lower gross margins on lower cost products and higher gross margins on higher cost products. Assume that they are hitting close to 45%-50% on the high-end iPad and about 30% or 25% on the low-end. They may even go lower since they are trying to drive this product's numbers.

The $130 3G is probably something like $30-$50 up front to AT&T to get the good deal on product, plus chips, antenna, etc for another $40-$50 (installed) with the remaining $30 profit.

Out of their profit, they fund overhead, admin, R&D, advertising, etc.

The profit on the $499 iPad is probably no more than about $150 per unit. They may save some money since they are using their own processors. Which isn't too bad a deal for you, since Apple had to develop the thing and its software. I'm sure we'll see when the breakdowns inevitably come.