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Third-generation iPad costs lowers Apple margin slightly

updated 09:00 pm EST, Fri March 9, 2012

Excluding other costs, iPad has 51 percent margin

A study analyzing just the hardware costs of the 2012 iPad shows a basic Bill of Materials (BOM) cost of $310 in components, up $34 from the BOM of the previous iPad. The estimate, which does not account for other costs such as software, distribution and marketing, shows that Apple's "margin" on the iPad when the hardware cost is subtracted stands at about 51 percent, down from the 57 percent of the first two models.

The analysis was done by UBM TechInsights, and shows that just four of the components contributed to the majority of the increase in costs: the higher-resolution display, the newer A5X processor, the LTE radio modem and the expanded battery. The display costs rose by $12 per unit, the processor increased costs by $8 and the battery and LTE modem added about $7 each.

The 2011 iPad's margin has dipped to an estimated 53 percent, less than might be expected now that it has been discounted by $100 but the difference is made up for in lower component costs since the unit launched a year ago. The iPad 2's original BOM was $276.27 at launch but has now lowered to $248.07. The company estimates that margins may be higher on models with more storage capacity, but is awaiting a full teardown of all six models of the third-generation iPad before confirming the idea.

The margin is likely to be considerably higher than most Android tablet makers, whose failure to find an audience and competition with the iPad has put downward pressure on retail prices. Android tablets have consistently shown that they can sell in quantity only if they are priced substantially lower than the iPad, as demonstrated by Amazon's Kindle Fire hybrid e-reader tablet.

Amazon takes a small loss on every Fire sold, despite it not having many of the features of the iPad, because component costs make it impossible to price tablets of any size much lower than the iPad 2's new $400 entry-level price. [via EE Times]







By Electronista Staff
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Comments

  1. Bobfozz

    Fresh-Faced Recruit

    Joined: Jul 2008

    +7

    HOW DOES THIS FIRM KNOW WHAT

    Apple paid for these components? Apple's ability to purchase in such large quantities gives them advantages others don't/won't have. I doubt if Apple is leaking the information, so who is?

  1. chas_m

    Moderator

    Joined: Aug 2001

    +3

    IT'S GUESSING

    probably based on large-quantity wholesale part prices from the price sheets of the component makers.

  1. legacyb4

    Mac Elite

    Joined: May 2001

    -1

    The sky is falling!

    the new iPad only yields 51% profit on each unit sold!!! I bet most hardware makers would love to be able to still claim over 50% profit after taking a 6% hit on their products...

  1. studentrights

    Fresh-Faced Recruit

    Joined: Dec 2010

    0

    WOT?

    Maybe Apple picked up operating efficiencies elsewhere.

    The material cost is only only aspect of the total cost.

  1. Grendelmon

    Dedicated MacNNer

    Joined: Dec 2007

    0

    Yet,

    You all laugh at what Amazon's cost "might" be because they are essentially subsidizing their own Kindle, since it's claimed they sell at a loss.

    *rolls eyes*

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