Why is iPad cheaper than iPhone?

[TheGenerous]

Smaller parts are most expensive. iPhone gets better research apparently and the iPad is a follower. The iPad follows the success of the phone and so the phone gets more attention.

Is like a spoiled member of the family, it just happens

 

[sentinelsx]

Because after you buy the iPhone you only got a little bit to spend on a tablet lol.

In seriousness, at least it is affordable

 

[Geckotek]

As I already said, I read your post. Your subsequent posts contradicted it if you consider it to be the same point that I was making.



And this post contradicts my point as well. The value is determined by the market. Evidently the market disagrees with your claim. The cost to manufacture is irrelevant to the market price.

I disagree. People can maintain this sentiment, yet still decide to make the purchase....as did I.

 

[BaldiMac]

I disagree. People can maintain this sentiment, yet still decide to make the purchase....as did I.

Why would you decide to spend more money for the exact same thing?

 

[Geckotek]

Why would you decide to spend more money for the exact same thing?

Why ask dumb questions? Nobody said it was the exact same thing.

 

[profets]

Because it's a smartphone. All smartphones have inflated off-contract pricing to push the customers towards signing a contract.

This is exactly why. For too long cell phones and more often now smartphones have been badly inflated in price in order to make that on-contract price look like a crazy discount.

Other smartphones/high end phones used to be in the $600-800 range and even more sometimes, but they're slowly coming down.

Another good comparison: iPhone vs iPod touch (32GB for example). I know there is some difference with the iPod missing the cellular radio + gps and having cheaper camera, but most of the materials are the same. Retail price of $300 vs $750. There's no way some extra parts cause that kind of difference in price, especially when the iPhone's BOM is $200ish.

 

[kdarling]

That doesn't consider non-material cost. Such as labor to put it together, testing, R&D, etc. On labor alone the iPhone probably costs more due to needing higher levels of precision and lack of room.

The iPad figure includes manufacturing costs of $9. That particular iPhone BOM does not, but does include packaging. Normally iPhone build labor is only about $3.50, if I recall correctly. Search the web. Easy to find.

As for other costs, all phone makers have to do R&D, build and ship the item, plus pay patent license fees (radios, camera, visual voice mail, power conservation, etc) of $20-$40 per phone. R&D itself is actually a pretty small part of a phone's cost.

All that fun stuff aside, it's not necessary to know the cost down to the penny.

There is no dispute whatsoever (as in zero, zilch, none) that Apple has the highest margins on mass market smartphones. Their growing cash hoard is ample proof, as well as reports every month announcing it. Most analysts put Apple's margin at around 50%, RIM's at 40%, and most everyone else around 30%.

The original question was comparing the iPad and iPhone. The iPhone is usually subsidized by the carrier, so that helps Apple go for more profit as the carrier is willing to pay to get the subscribers.

 

[BaldiMac]

Why ask dumb questions? Nobody said it was the exact same thing.

Please don't be obtuse. We are talking about products of equivalent value. I was using "exact same thing" as a metaphor for "exact same value." You said that you pay more for one product (for example, an Apple product) than another product with the exact same value. Why would you do that? Wouldn't that imply that the Apple product is actually more valuable to you?

 

[Geckotek]

Please don't be obtuse. We are talking about products of equivalent value. I was using "exact same thing" as a metaphor for "exact same value." You said that you pay more for one product (for example, an Apple product) than another product with the exact same value. Why would you do that? Wouldn't that imply that the Apple product is actually more valuable to you?

Did I ever say they had the exact same value to me? Once again, why are you asking question based on statements I never made?

Once again, go back and read my posts. I've never said they had the same value. I clearly implied that the Apple product had more value, but that the price reflected an even higher expense than the increase in value....what I see as the "Apple tax".

 

[Tarzanman]

As I already said, I read your post. Your subsequent posts contradicted it if you consider it to be the same point that I was making.



And this post contradicts my point as well. The value is determined by the market. Evidently the market disagrees with your claim. The cost to manufacture is irrelevant to the market price.

? No. Thats not true. I know what you're *trying* to say, but what you're trying to say would only be applicable in a perfect market, and smartphones are anything but perfect markets due to limited choice, contracts, and collusion.

 

[BaldiMac]

Did I ever say they had the exact same value to me? Once again, why are you asking question based on statements I never made?

Here you go:

And yes, I still believe, and I feel we've proven earlier in this thread when looking at the cost to manufacture, that there is a difference in the added value of an Apple product vs the amount paid for it.

I disagree. People can maintain this sentiment, yet still decide to make the purchase....as did I.

I don't see how these statements can be interpreted in any other way other than that you believe that there is a difference in the value of an Apple product and the price that is paid for it.

Maybe an example with made up numbers would help.

You are saying that an $2000 Mac is only worth say... $1800. So why would you buy an $2000 Mac over an $1800 PC? Remember, our assumption here is that they have the same value.

However, they fact that people are paying for the $2000 Mac means that it is worth more than the $1800 PC to them. By definition. At least $200 more to be precise.

 

[BaldiMac]

? No. Thats not true. I know what you're *trying* to say, but what you're trying to say would only be applicable in a perfect market, and smartphones are anything but perfect markets due to limited choice, contracts, and collusion.

What did I say that is not true?

I think that I can see where you are going with this reasoning, but it would only be significant if you were trying to come up with some sort of "absolute" value relative to all products in all markets.. But I think my comparison is valid within the market.

 

[Geckotek]

Here you go:

I don't see how these statements can be interpreted in any other way other than that you believe that there is a difference in the value of an Apple product and the price that is paid for it.

Maybe an example with made up numbers would help.

You are saying that an $2000 Mac is only worth say... $1800. So why would you buy an $2000 Mac over an $1800 PC? Remember, our assumption here is that they have the same value.

You are adding additional meaning to my statement by saying that the value of an Apple product and the value of the competing product are the same. I never said that. (you must be a w....nevermind)

OBVIOUSLY, I found enough additional value in the Apple product to purchase it. However, I am saying that the additional value doesn't exactly match the additional cost. But I made the deicision to do it anyway for my own reasons. No need to discuss further.

However, they fact that people are paying for the $2000 Mac means that it is worth more than the $1800 PC to them. By definition. At least $200 more to be precise.

That's not necessarily true. Perhaps it is for you...but I don't agree.

 

[BaldiMac]

You are adding additional meaning to my statement by saying that the value of an Apple product and the value of the competing product are the same. I never said that.

You didn't say that. I did. I was comparing the Apple product to a mythical product of the same value. The idea of having the same value being that there would be no reason to pick one product over the other at the same price.

OBVIOUSLY, I found enough additional value in the Apple product to purchase it. However, I am saying that the additional value doesn't exactly match the additional cost. But I made the deicision to do it anyway for my own reasons. No need to discuss further.

That's not necessarily true. Perhaps it is for you...but I don't agree.

Now I understand the reason for our disagreement. You think value is based on... some number that you think of. I think it's based on what people are willing to pay.

 

[Geckotek]

Now I understand the reason for our disagreement. You think value is based on... some number that you think of. I think it's based on what people are willing to pay.

Exactly. On a rare occasion I pay more for things I need or want, not because the value is really there, but because the other options available don't satisfy my requirements.

I don't think the iPad is worth $499 (I can get a cheap laptop that can do more for that much or less). But A) I'm heavily invested in iOS and B) I don't think there are any decent alternatives I'm willing to sacrifice for at this time. So I paid the $499....even if I don't agree that it was a correct value for that product.

 

[srxtr]

Even if it only costs $1 to make, Apple will still charge $800 as long as people are willing to buy.

Sad but it's the truth.

 

[BaldiMac]

Exactly. On a rare occasion I pay more for things I need or want, not because the value is really there, but because the other options available don't satisfy my requirements.

The fact that the other options don't satisfy your requirements would seem to make the thing you paid more for more valuable, wouldn't it?

I don't think the iPad is worth $499 (I can get a cheap laptop that can do more for that much or less). But A) I'm heavily invested in iOS and B) I don't think there are any decent alternatives I'm willing to sacrifice for at this time. So I paid the $499....even if I don't agree that it was a correct value for that product.

How much do you think a $499 iPad is worth? And what do you base your answer on?

 

[awadeee]

Smaller parts are more expensive to make. So are the cell phone parts.

Now combine the two. Think about it.

 

[LIVEFRMNYC]

making things small costs money.

The best simplified answer.

Except that it's wrong.

An explanation would be nice.

 

[Givmeabrek]

Even if it only costs $1 to make, Apple will still charge $800 as long as people are willing to buy.

Sad but it's the truth.

Exactly!

Price is determined by what the market will bear (what people will pay). If you can't sell at a profit you don't sell it. The cost of manufacture has little to do with it.

 

[boss.king]

An explanation would be nice.

Based on one of the posts, an iPad costs more to manufacture than an iPhone, the the cost of making small things doesn't matter. More likely would be simple supply and demand. There is a high demand for the iPhone even at it's high price, enough for them to keep it at that price point.

 

[Geckotek]

The fact that the other options don't satisfy your requirements would seem to make the thing you paid more for more valuable, wouldn't it?

How is that even logical?

How much do you think a $499 iPad is worth? And what do you base your answer on?

My original target price was $299 based on the fact that it had less capability that most netbooks priced slightly higher. I eventually bought it as a birthday gift to myself. The additional cost was a splurge, not a justified value.

An explanation would be nice.

What boss.king said.

Smaller parts are more expensive to make. So are the cell phone parts.

Now combine the two. Think about it.

Except that the iPhone costs less to make. Why do people keep ignoring the rest of the thread and posting this?

 

[pyro008]

This is exactly why. For too long cell phones and more often now smartphones have been badly inflated in price in order to make that on-contract price look like a crazy discount.

Other smartphones/high end phones used to be in the $600-800 range and even more sometimes, but they're slowly coming down.

Another good comparison: iPhone vs iPod touch (32GB for example). I know there is some difference with the iPod missing the cellular radio + gps and having cheaper camera, but most of the materials are the same. Retail price of $300 vs $750. There's no way some extra parts cause that kind of difference in price, especially when the iPhone's BOM is $200ish.

Yeah, cell phone prices are out of control. I guess I'm just noticing now since its the first time I refuse to get back into a contract, but almost $300 for a phone that makes calls and sends texts (with a keyboard)? No thanks. I'll head on over to VM and get the Triumph for the same price.

 

[BaldiMac]

How is that even logical?

I'm not sure where logic comes into your argument. It's a pretty simple concept that when only one product meets your needs it is more valuable than products that don't.

My original target price was $299 based on the fact that it had less capability that most netbooks priced slightly higher.

It also has more capability than most netbooks priced slightly higher. You know. The capabilities that caused you to buy it instead of the cheaper netbook.

I eventually bought it as a birthday gift to myself. The additional cost was a splurge, not a justified value.

So, by your argument, a $299 netbook that you don't want is just as valuable to you as a $499 iPad that you do want. But the iPad isn't worth $499. Even though it was worth $499 of your money. But it's not worth $499. Even though you thought it was at the time of your purchase. Do you not see the gaps in your reasoning?

 

[quietstormSD]

It's all about the demand in the market. Most people feel that they need a phone or smartphone, many many fewer people feel they need a tablet. Therefore, they can't mark-up the iPad as much as the iPhone. You can call it greed or whatever you want.... but how much of a dud would the iPad would've been if it was marked up percentage wise as much as the iPhone.