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Why does an apple unlocke iPhone cost more than an iPad 3G?

N

nickn

macrumors 6502
Original poster
Jun 17, 2011
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Wirelessly posted

Apple is selling the unlocked 16gb iPhone 4S for $649. The new 3rd generation iPad 3G 16 gb goes for $629. How can the iPhone cost more? The iPad has a bigger and better screen, much larger battery, better GPU, and uses more raw materials such as plastic and some sort of metal, but yet is cheaper? Is apple just trying to rip people off with the unlocked iPhone?
 
The primary reason is that price is based on market forces (such as supply and demand), not component costs.

(And I don't think carriers would be too happy if Apple charged less for an unlocked iPhone than Apple charges the carriers for a subsidized iPhone.)
 
I thought the same thing when the original iPad came out. The iPhone is just horribly overpriced. Apple doesn’t care too much, because the vast majority of iPhones are sold on subsidized contracts, so it’s the carrier who is footing the bill.

The actual cost of an iPhone 4S is estimated to be about $188.
http://news.cnet.com/8301-13506_3-20123112-17/iphone-4s-parts-cost-$188-study-finds/

The iPad costs about $375 in parts.
http://www.pcmag.com/article2/0,2817,2401725,00.asp

Of course this doesn’t take into account things like R&D and marketing.

As you can see, the iPad costs more in parts, but sells for a lower price than the iPhone.
 
nickn said:
Apple is selling the unlocked 16gb iPhone 4S for $649. The new 3rd generation iPad 3G 16 gb goes for $629. How can the iPhone cost more? The iPad has a bigger and better screen, much larger battery, better GPU, and uses more raw materials such as plastic and some sort of metal, but yet is cheaper? Is apple just trying to rip people off with the unlocked iPhone?
Click to expand...
Carriers like AT&T, Verizon and Sprint buy iPhones from Apple at the $600+ price, then turn around and resell them to their customers for $199+ price.

In other words, when Apple sells an iPhone through a carrier, Apple makes a large chunk of change on it.

If you want to buy an unlocked iPhone directly through Apple, why the heck would you expect them to sell it to you for anything less than what they sell it to the carriers for?
 
Yep. Carrier subsidies cloud the entire picture.

Look at original iPhone. It sold "ok" for $600 no subsidy.

Than sold much "better" when prices dropped to $400.

Than sold like hot cakes at $199 subsidized pricing.

Market forces determine prices. Carriers make money on phone contracts and willing to take an initial hit. Unfortunately carriers compete with each other and Apple plays all of them against each other in terms of pricing.

Consumers want iPhones. A carrier would be at a disadvantage not carrying not carrying iPhone. They can complain all they want about the $600 price. But at the end of the day they still make money also.
 
Madmic23 said:
I thought the same thing when the original iPad came out. The iPhone is just horribly overpriced. Apple doesn’t care too much, because the vast majority of iPhones are sold on subsidized contracts, so it’s the carrier who is footing the bill.

The actual cost of an iPhone 4S is estimated to be about $188.
http://news.cnet.com/8301-13506_3-20123112-17/iphone-4s-parts-cost-$188-study-finds/

The iPad costs about $375 in parts.
http://www.pcmag.com/article2/0,2817,2401725,00.asp

Of course this doesn’t take into account things like R&D and marketing.

As you can see, the iPad costs more in parts, but sells for a lower price than the iPhone.
Click to expand...

It's a joke to say that the iPhone is "horribly overpriced" when Apple is selling 37 million in a quarter. Whether something is actually overpriced has almost nothing to do with it's component costs. Professional software can cost thousands of dollars and ships on a CD that costs a few pennies. Doesn't mean it's overpriced.
 
All smart phones are horribly priced because of these subsidy schemes. To the consumer, of course, because the plan is the same price whether they get a subsided phone or not, so they would feel that they get the iphone for $199 rather than $649. I am just wondering why those carriers do not offer an option to give discount on plan to people who don't subsides phones.
 
BaldiMac said:
It's a joke to say that the iPhone is "horribly overpriced" when Apple is selling 37 million in a quarter. Whether something is actually overpriced has almost nothing to do with it's component costs. Professional software can cost thousands of dollars and ships on a CD that costs a few pennies. Doesn't mean it's overpriced.
Click to expand...

It's pretty overpriced when you look at the price of an iPad. They're selling millions of iPhones because they're being sold on contract for $199.
 
riveting said:
All smart phones are horribly priced because of these subsidy schemes. To the consumer, of course, because the plan is the same price whether they get a subsided phone or not, so they would feel that they get the iphone for $199 rather than $649. I am just wondering why those carriers do not offer an option to give discount on plan to people who don't subsides phones.
Click to expand...

This only happens in the USA. In other countries they give you better monthly voice/data prices if you pay full price for the phone.

Tmobile USA has tried giving consumers lower voice/data for full phone purchases but Americans are dumb when it comes to figuring out the total cost of the 24 mo the contract.
 
Madmic23 said:
It's pretty overpriced when you look at the price of an iPad.
Click to expand...

And it's pretty underpriced when you look at the price of a Ferrari. In reality, that's not how prices are determined.

They're selling millions of iPhones because they're being sold on contract for $199.
Click to expand...

No, the iPhone is being sold for around $600 on contract. The price is simply split between the carrier and the consumer.
 
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