Analyst: iPad Costs Apple $270.50 to Manufacture

Page 3 - Seeking answers? Join the Tom's Hardware community: where nearly two million members share solutions and discuss the latest tech.
Status
Not open for further replies.

fulle

Distinguished
May 31, 2008
968
0
19,010
Interesting. This means that competing devices should be able to release with slightly superior specifications and still undercut Apple by $50-100. Could give Google an opportunity at a marketshare grab...

On that thought, the Vega was rumored to be out in the first half of 2010, based on Android and with Nvidia's Tegra powering the graphics. Various other Android devices from companies like HTC are soon on the way too, AND Google's just released the Chrome OS tablet demo, suggesting that they want to release more powerful devices. Microsoft is working on a device... that seems pretty interesting from the initial screenshots I've seen.

Apple won't be able to abuse prices for too long.
 

gmcboot

Distinguished
Jul 27, 2009
64
0
18,630
Most of us could careless about the profit Apple makes. If people want to pay that premium go for it. But this idea that mainstream PC and Laptops are all crap is just CRAP. I have owned Dells, HP, Lenovo, Gateways.. all of them, and none of them just fell apart. What makes PC users pissed is the hyperbole that Apple fanboys use about anything not Apple. The elitism crap wears thin real quick.

The iPad is a joke. It may sell and sell well, but it is a joke for $800+. If it had a real subset of OS X, I would say, pretty freaking smart. But it a freaking iPod Touch on HGH. However, if people want to buy it they should be free too. And more power to Apple if they can fool people into shelling out the dough for it. But when you try to piss down my leg and tell me it raining, I have to say something... before I punch you in the face.
 

fball922

Distinguished
Feb 23, 2008
179
24
18,695
Ok, so the profit margin itself is not ridiculous, but I think Apple is missing a huuuuuge opportunity with this one...

Why did they choose to tie this thing to the iPod os? To keep it operating as closely as possible with the iTunes store!!

If they lowered the price and maybe even took a slight loss, they could grab a huge market share and reap the benefits from iTunes purchases. It is the same philosophy console companies use with their hardware... Take a loss on the hardware, profit big on the software.
 

necronic

Distinguished
May 22, 2009
109
0
18,680
This is like the 4th article on Tom's where manufacturing costs are listed and assumed to be the only part of the pie. For as much as I love Tom's for its good and in depth reviews of hardware the level of knowledge on business models displayed in the news reports is often pathetically low, like it is here.

And of course, I'm not the only one to mention it, but of course, a large percentage of the readers either don't read the comments or ignore the ones that point out the gaping fallacy in this argument.

and OF COURSE, most people use this to feed their anti apple guns. I have nothing against people having a problem with apple (I don't particularly like their products,) but if you are going to have a problem with it don't use poorly thought out arguments like this.

Just in case someone actually read this comment, here are some other costs not listed:

R&D, hardware and software, both before and ongoing
Legal (as we have seen this may be a REALLY large expense)
Advertising/Marketing
General Shrinkage due to warranties/failures/theft
Shipping/warehousing/logistics

Without a link that I could find(from computerworld)its hard to guess what their number included, what their estimates were, and how they got them (which matters for highly unique products which will have a price to volume relationship).

In their own article they have someone who specializes in these estimates say that he had no real idea what the processor/system on a chip even was, so HE COULDN'T MAKE AN ESTIMATE!

Anyways, Tom, this is total bushleague reporting. I don't care if the other article that you pulled this from made the same mistake. You should be more interested in doing a real analysis of the facts (like you do with hardware reviews) than simply going for infotainment garbage pieces like this.

UHG!




 

wildwell

Distinguished
Sep 19, 2009
658
0
19,060
[citation][nom]JohnnyLucky[/nom]Manufacturing cost is only part of the total cost.[/citation]
That's right. This article is very misleading regarding Apple's profit margin. In addition to manufacturing costs, you also have to figure import fees such as taxes and tariffs, transportation costs, distribution costs, overhead (such as employees, insurance, etc.), marketing, and of course R&D. Anybody who works in technology sales can tell you that there aren't high margins on electronics. Nobody is making anywhere near 100%. I work in international technology sales & marketing; the cost that really matters is from door to door.

This article should just state the facts, $270.50 to manufacture, and not interject uninformed opinions on profit margins.
 

necronic

Distinguished
May 22, 2009
109
0
18,680
I mean, is labor or factory overhead even listed in their analysis? Who knows? Maybe. And how could you even estimate factory overhead? Being able to guess that within even 25% would require a pretty intimate understanding of their equipment life cycles, their QA process...

Man, this is actually making me way more angry than it should.
 

dheadley

Distinguished
Mar 31, 2006
171
0
18,680
gmcboot

I already said you could build a cheaper computer yourself, so you are saying nothing in your statement. I chose the most expensive product they offered and matched it one to one with the only options on the Dell and HP sites that you could build to the same specs to show they are not off on their prices compared to the PC makers. I listed the model numbers and specs, you can do it yourself and see for yourself.

And typical PC blowhard fanboy showing through on the whole case being the whole difference. I never said that at all. What I said was some of the things they do like the cases on the Mac Pro would set you back a great deal of money if you built a computer yoursel. It most certainly would, for the materials used, the niceties that it offers such as the way the memory is accessable and it does offer value over a $29 dollar riveted case the competion offers.

If it makes me an Apple fan to respect their design aspects, then so be it. As someone that works in Industrial Automation and see's a lot of manufacturing equipment. There are some great designs and there are not so great designs. Some engineers build stuff with no thought to working on it later, much to the dismay of maintenance technicians, some don't give any thought to materials or ergonomics. I for one can see the difference between a plastic cased $799 laptop and uni-body Macbook and appreciate the craftmanship that went into it.

Sometimes the value of an object is more than a spreadsheet tally of the costs added up.
 

abowlofsoda

Distinguished
Feb 3, 2010
29
0
18,530
The iPad looks amazing. Will sell my laptop and get one. My family only uses laptop for web surfing (for homework), facebook, and email. Nobody ever watches movies on it.. but I can see them watching movies on this.

And my toddler can use his learning apps on it and I can get my iphone back in my pocket.

I'm excited by the fact that I can lay down on the couch and surf the forums while my wife hogs the TV with her cop shows.
Hell even surfing while on the pot should be a hell of alot easier now!

And 10 hours of battery life! My laptop can't even come close to that- not to mention its life is gettin shorter all the time. It barely holds a charge for an hour now.
 
[citation][nom]JohnnyLucky[/nom]Manufacturing cost is only part of the total cost.[/citation]

So true. And even if the parts inside cost $270.50, that does not include the overhead for the factory and it's employees who actually make these things. So obviously they have to "cost" Apple more than the $270.50. Plus you have to figure, Apple has to sell them to retailers for less than $499, otherwise there's no ability for retailers to make a dime (unless they just hope to sell you bloated accessory garbage).
 

eccentric909

Distinguished
Oct 4, 2006
388
0
18,780
[citation][nom]dheadley[/nom]Why don't you get this upset with Microsoft then? They do the exact same thing with the Xbox 360 and the Zune. Hell when the 360 came out you weren't even allowed to publish games anymore for the 25 million xbox consoles out there in the users homes. The same closed eco system goes for Sony and Nintendo products. You pay allot for the devices and way too much for the games to put on them. The examples are all through the retail market, in every kind of product imaginable, but for some reason Apple has earned the place as the sole target of everyones hatred. This I do not understand in the least.[/citation]

Although unlike Apple, when MS released the XBox 360, they were actually losing money on the hardware (which was mostly off-the-shelf PC components) and not because of RRoD. /shrug
 

rooket

Distinguished
Feb 3, 2009
1,097
0
19,280
dheadley, mainly because of the noob mentality and how stubborn and obnoxiously arrogant Apple users tend to be has earned most people's hatred of the Apple branding. And Steve Jobs is none different. Plus the end users claiming that Apple computers never freeze or crash is blatantly ignorant on their behalf, as in it purely is not true at all.
 

loomis86

Distinguished
Dec 5, 2009
402
0
18,780
If it costs $270.50 to manufacture, and sells for $499...I don't see any way in Hades apple can earn a $208 profit on each unit. There's the initial prototype built, tested, troubleshooted, and refined. Then there's advertising. Then there's shipping, warehousing, customer service, warrantee, and retail costs. If prototyping, advertising, shipping, warehousing, customer service, warrantee, and retail all add up to only twenty bucks per 500 dollar unit i would say apple just might be the most efficient company ever to exist.

I don't believe it. I say these numbers are BS.
 

back_by_demand

Splendid
BANNED
Jul 16, 2009
4,821
0
22,780
[citation][nom]loomis86[/nom]If it costs $270.50 to manufacture, and sells for $499...I don't see any way in Hades apple can earn a $208 profit on each unit. There's the initial prototype built, tested, troubleshooted, and refined. Then there's advertising. Then there's shipping, warehousing, customer service, warrantee, and retail costs. If prototyping, advertising, shipping, warehousing, customer service, warrantee, and retail all add up to only twenty bucks per 500 dollar unit i would say apple just might be the most efficient company ever to exist.I don't believe it. I say these numbers are BS.[/citation]
Most of the tech involved exists already and is relatively old, not all but most. The OS is exists, its the iPhone OS and any developments can be subsidised under the iPhone budget. The advertising budget is non-existant, until Jobs stood on stage with it there was no advertsing at all and since then most of the advertsining has been done by tech-site spreading viral marketing. As the device isn't even being sold yet then there are no shipping, customer service or warranty costs yet.
 

necronic

Distinguished
May 22, 2009
109
0
18,680
That's simply incorrect on many levels. I will now go through them.

1) Changing the OS isn't just a plug and play thing. Apple is known for optimizing their OS to specific hardware, therefore the large differences in hardware will mean a large difference in the OS. Don't judge a book by its cover.

2) Yes, the tech exists. Tech already exists for most of products that hit retail (military sees them first.) However just because tech exists doesn't mean its easy to implement. Gyroscopes, accelerometers, and GPSs have existed for decades/centuries, but only recently have we seen them in phones (N95 was the first to have them all I think).

3) Not sure where you are getting your advertising statement. Apple historically has spent oodles of money on advertising. Also, much of their advertising is brand oriented, not to a specific product, so no, the advertising budget isn't "non-existant"

4) The fact that the device hasn't hit the market doesn't mean that shipping, customer service, etc. doesn't enter the calculations. Chicken and the Egg ring a bell? Future costs are real costs.

Any business starting a new project/revenue stream will do very complicated analyses of the long term costs due to things like this and revalue it to current dollars. Look up "Time Value of Money". There is an entire field of engineering based around these things.

So, in the words of Dr Cox

wrong wrong wrong wrong
...
wrong wrong wrong wrong
 
G

Guest

Guest
On the first point, what large differences in hardware? All I can think to do is putting in some resolution scaling software (which, let's face it, was bound to happen regardless of the iPad), maybe touch screen recalibration, switching drivers and working out driver related bugs, CPU is still ARM IIRC, so I don't think that'd require much work, and adding a popup or something that shows up when something tries to access the camera.
 

dmcfc

Distinguished
Jun 25, 2009
295
0
18,810
You're basically paying for the brand, the same thing I think happens to any ipod, what do you relly get more on a ipod than a mp3?You're really paying for the brand or the name "ipod" "ipad" "iphone" "itouch", but really who would say I don't want one of those products because I want this other one from another random brand. Those products are cool, I would pay for them, xD, put they're very overpriced, you could by something similar for cheaper, but who would??
 

scannall

Distinguished
Jan 28, 2012
354
0
18,810
I'm not sure what the point is of stories like this, other than to be click bait. Apple's *NET* margins are just slightly less than Microsoft and Google. Parts cost doesn't include engineering and design. Nor does it cover customer service, and other overhead.

Just seems pointless, unless the point is to farm clicks.
 
Status
Not open for further replies.