Apple's iPad could cost the company as little as $229 (£147) to make. Not a bad margin, that, for a machine that will retail for $499 (£320). That, at least, is what market watcher iSuppli estimates. It hasn't had its hands on one, of course, but iSuppli takes apart most if not all of the key mobile gadgets that go on sale, so …
It's just the parts
Really, What do the contents of a bottle of coke cost?
Apple has decent margins but it's not as easy as it looks.
The clue is in the article.....
>>Of course, iSuppli's estimates ignore marketing and other costs, such as distribution and dealer margin, but together these aren't going to dent Apple's iPad profit too far.
Apple has a margin typically of 30% so if they are selling it for £531 and parts and assembly cost £222 that means £159 for margin leaving £150 for marketing, distribution, dealer margin etc. per unit, even for a new product ths is high, therefore they are realistically making more than their usual 30%
Apple survives because of it's unusually high margins, for example Nokia has 35% of the phone market against Apples 2.5%, last year Apple made $1.1 billion in one quarter last year from the iPhone, but Nokia "only" made $1.6 billion in the same quarter if Apple has 25% of the market these numbers would make sense, but they have 2(point)5% this means Apple has ten times the margins that Nokia has, and Apple customers are happy with this, they don;t care that they are paying a premium for this, no doubt people who fly first class believe in it for similar reasons, they basically believe it's worth the extra.
The same is true in the PC/Mac market, although the gap is not as wide, they basically have between twice and four times the margin of a "typical" home computer manufacturer.
Apple are not ripping off their customers, because their customers are happy to pay over the odds, besides it keeps the company alive, the iPad will be bought by Apple fans and they will pay over the odds.
If people made a completely pragmatic cost v's features, bang for your buck decisions we'd all be driving sensible cars, recycle more, not smoke and consume less, but we don't do we? we still pretend a single malt is always better than a blend and a VW is better than a Skoda, things cost what they cost, but they are worth what people are willing to pay.
free bandwidth and developers
I'm extemely happy with my new ipod touch- purchased last Sunday and the first Apple product I've ever bought. I do think macs are a rip off but will still be interested to see what Apple make next that is as revolutionary as the original ipod. My touch is being used as an ebook reader and games player- I have a sony walkman which is a better mp3 player.
Would it be better if Apple sold the units at a loss and then recovered the money with a royalty on all software and media sold? Would this be less of a 'rip off' as the true cost is hidden? This is the model other large device manufacturers have used and I would rather pay this chunk of profit upfront than gradually over the life of the device. Do we expect companies to provide goods and services for free now?
It's not just the software developers and bandwidth that cost, what about the chip designers, electronic engineers, research fab lines etc. These things cost a lot of money to get right and its only after all this is perfect that they can hammer them out for decent margins due to scale of production.