Apple’s iPad components worth half of retail price

Jacqueline DiOrio 7 Apr, 2010 at 3:37pm ET Article published in Tech

According to analysis by research firm ISuppli, Apple’s iPad is being sold for double what it’s worth.

The 16GB wireless version’s components are worth $259.60, ISuppli claims, while it’s being sold for $499. The 32GB wireless iPad is worth $289.10 and retails for $599, while the biggest device, the 64GB model, is worth $348.10 and sells for $699.

The iPad’s costs begin with a custom touchscreen display that runs $95, and is the most expensive part of the device. It has a special design that makes it about twice as expensive as similarly-sized netbook screens. The screen was made by Samsung and Seiko Epson.

Flash memory chips cost $29.50 for 16GB, $59 for 32GB and $118 for the 64GB iPad. The chips were acquired from a variety of manufacturers, including Samsung.

The processor in the iPad appears to have been designed by Apple-owned PA Semi and crafted by Samsung for $26.80 each.

The wireless chip in the iPad was created by Broadcom Corp. and is worth $8.05, along with two other chips worth $3.70. Additional chips created to control the touch screen and an audio chip were supplied by Texas Instruments and Cirrus Logic Inc., and cost $1.80 and $1.20, respectively.

ISuppli said that the cost to price ratio for the iPad is similar to that of other Apple products, including the iPhone 3GS.

Finally, ISuppli noted that their research only details the prices of the physical components, not the cost of development, advertising, patent licensing or shipping.

Apple declined to comment on ISuppli’s findings.

Comments

7 Apr 2010 ~ 3:41pm mas0n So they did all their R&D for free? Awesome!
7 Apr 2010 ~ 4:21pm Grimnoc It's always neat to see what some of the costs for a product are.
7 Apr 2010 ~ 4:24pm Bandrik I'd like to hope that they're making a decent profit on their hardware. It's not like some typical computer where you just throw it all together -- it has to be careful engineered to all fit in the slim case.
7 Apr 2010 ~ 4:35pm Grimnoc See, it's very simple in the end; Apple offers a product at a certain price point, we make a value judgement on whether we believe it to be worth our time/money/whatever, a transaction between two parties occurs or does not occur.

It would be no different were Apple charging $5,000 or $5,000,000 for a product which costs them $0.05 to manufacture.
7 Apr 2010 ~ 4:37pm Thrax Or you just pick the parts that would fit in that case without much shoe horning.
7 Apr 2010 ~ 5:10pm Basil I don't think anyone expected apple's latest hunk of mediocrity to be hugely expensive to manufacture (I mean, the $130 extra for a 3G module bears no resemblance to the actual cost).

Thrax wrote:

Or you just pick the parts that would fit in that case without much shoe horning.

Seems to be exactly what apple thought, the A4 looks to be something of a let down, the GPU benches the same as the iPhone 3GS's SGX535 and if the CPU turns out to be a Cortex A8 rather than a single core A9 the iPad is just a phat, overclocked, iPhone (with minimal development costs).

Honestly doubt any of that matters to the potential iPad customers, for better or for worse the moment Steve Jobs held it aloft they were already sold.
7 Apr 2010 ~ 5:17pm coldalarm

Basil wrote:

Honestly doubt any of that matters to the potential iPad customers, for better or for worse the moment Steve Jobs held it aloft they were already sold.

Not to mention if you point out its flaws and so forth, they just ignore you and herald it as the second coming.
Like they do with all Apple products.
7 Apr 2010 ~ 5:20pm Basil Might be stereotyping just a tad there. :P

I'm sure there are non-fanboys interesting in the iPad despite it's flaws.
7 Apr 2010 ~ 5:21pm coldalarm Yeah, but he's a fool and we both know it :P
7 Apr 2010 ~ 6:23pm BuddyJ I don't know what's worse, the fanboys or the happy hate train that follows them.
7 Apr 2010 ~ 6:37pm fatcat

Buddy J wrote:

I don't know what's worse, the fanboys or the happy hate train that follows them.
7 Apr 2010 ~ 7:36pm coldalarm I'd dislike the iPad less if it was a decent price or was better for its price.
I don't hate it as such, I just feel Apple have really missed the mark. The hardware, as Basil has said, is not that good. There's been roughly equivalent products out for years now, and Apple just haven't seemed to try at all with the iPad.
It looks like an iPhone that's been expanded, right down to the UI.
There's a lot of features it's missing that are generally standard (Flash support for one) and, to me, it really limits its capabilities.
7 Apr 2010 ~ 11:37pm Canti A couple things, 1. The chemicals that make up the average human body are only worth a few dollars and 2. My brother-in-law paid $3,000 for a USED laptop that sells for around $500 at the store and is a complete idiot. With that in mind you have to remember that you can't simply break down the product to the value of it's parts and sell it for that price. You have to sell it for more to make a profit. The trick is to convince my brother-in-law that the shiny bag of chemicals from a melted down baby isn't JUST worth the sum of it's parts and he should be lucky they're willing to sell it at all, especially at such a "reasonable" price. Something Apple has been very good at.

I mean come on, that's a whole baby in there, A WHOLE BABY. (In this case baby = ipad) You don't think babies are really so unimportant and cheap do you? BABY HATER. No we didn't think so. Just make sure to buy all our cool Apps and baby docking station. -Apple Marketing Department
7 Apr 2010 ~ 11:40pm mas0n Canti wins. Thread over.
7 Apr 2010 ~ 11:59pm Chip-Dapper

Canti wrote:

A couple things, 1. The chemicals that make up the average human body are only worth a few dollars and 2. My brother-in-law paid $3,000 for a USED laptop that sells for around $500 at the store and is a complete idiot. With that in mind you have to remember that you can't simply break down the product to the value of it's parts and sell it for that price. You have to sell it for more to make a profit. The trick is to convince my brother-in-law that the shiny bag of chemicals from a melted down baby isn't JUST worth the sum of it's parts and he should be lucky they're willing to sell it at all, especially at such a "reasonable" price. Something Apple has been very good at.

I mean come on, that's a whole baby in there, A WHOLE BABY. (In this case baby = ipad) You don't think babies are really so unimportant and cheap do you? BABY HATER. No we didn't think so. Just make sure to buy all our cool Apps and baby docking station. -Apple Marketing Department

Well-played, sir. Apt response to an intersting article, and you even cleverly refer to the dynamics of the consumer-producer relationship grimnoc made a jack-hammer point of earlier. It's not what the product's parts are worth, or even the value of the final product itself that matters economically. The only aspect of a product offering that actually matters in the marketplace is perceived value.

On a side note, if there's one thing I love about apple (and come to think of it, I think there really is only one), it's that apple has an adept thumb to the pulse of its market. Well done apple.
8 Apr 2010 ~ 4:45am Snarkasm I don't know if that's fair either, though, Chip. I admire their marketing ability, but I don't think they have their thumb on the market's pulse - I think they TELL their market what the pulse should be, and that's how it is.

They have a magnificent marketing team that can sell anything to what is fairly widely regarded as a wildly loyal group of customers.
8 Apr 2010 ~ 6:49am photodude I doubt some of the numbers that ISuppli claims. Specifically the cost of the A9 processor and the custom touchscreen.

Even if they were correct in the pricing of individual components, they left out the cost of the case. even they poke a large hole in their claims by noting "their research only details the prices of the physical components, not the cost of development, advertising, patent licensing or shipping." Yet still leaving out manufacturing and assembly cost as additional cost factors.

I would not be surprised if the missing non-physical component items would make up an additional 25% of the cost of the iPad, leaving apple with a possible 25% markup.
8 Apr 2010 ~ 9:38am Thrax (Pssst, the point of every ISuppli teardown is to strictly assess the cost of the parts, which is easy to find out if you know what they are and give their manufacturers a ring. Additionally, the CPU in the iPad is nothing more than an ARM Cortex-A9 CPU, which you can already buy and get quotes on from half a dozen other ARM companies; it is not a special CPU.)
8 Apr 2010 ~ 10:00am Cliff_Forster Even if you consider development and marketing, any margin on hardware thats better than 10% in electronics is pretty fantastic, especially when you consider adoption furthers Apple's other more profitable revenue streams. Apple differentiates in marketing and superficial design, thats why they are successful in selling their hardware at an up front premium, and will continue to do so.

I'm not a big fan of the Ipad, but I can't complain too much about its cost. When you think about it, today its a fairly differentiated market offering. HP is looking to change that in a few months, but until then, there really is not a device that is quite like it.

$500 or so to be an early adopter for this type of gadget isn't so awful. I won't pay it, because I demand silly things like flash support, a non proprietary usb port, and a processor that can run more than one application at a time, but if you absolutely have to have a touchscreen internet tablet/pad today, this is as good as any. It does not surprise me that Apple may be making a 30+% profit margin on them.