Researchers rip iPad apart to reveal Apple's profits Apple stands to make a profit of up to $483 per unit on its iPad according to a very literal breakdown by industry analysts iSuppli. The research firm said the total cost of materials and manufacture for Apple's big iPhone ranged from $229.35 for the 3G-less, 16GB version, which sells for $499 to $346.5 for the top of the …
Until you've actually used an iPhone/ iPod Touch, you can't fully understand the user experience. I think that once people start getting hands-on demos of the iPad, they might decide that it is in fact exactly the kind of thing they'd find useful / enjoyable to have around the house.
Logical criticisms can sometimes evaporate once you try a device in real life. The lack of app multitasking for example, becomes a non-issue for most people, especially when each app occupies the entire screen area when it has focus.
Pint, because you have to drink it to appreciate it fully.
Yes you have to drink the pint to appreciate it fully, however do you drink pint A at your local boozer at a max price of £2.50 or do you drink pint B made by the same brewer and may even be from the same batch, it tastes the same and has the same effect but costs £5 at the 'trendy' bar because it's all about 'the experience'?
I'll be at the boozer spending half as much and wilI have cash left over for a kebab and taxi home. Plus the boozer keeps me away from those irritating twats who think 'image' is everything and throwing money away on a product that is inferior to other offerings but costs twice as much is a sensible thing to do.
In this office, the multi-tasking is a major issue.
We're all HTC or Nokia users, and (to a man) we hate our office iPhone. It's very, very shiny and swish and it it makes everyone go 'ooooo...' But then when people use it, they have all hated it.
It's the keyboard. And the layouts. And the lack of multi-tasking (hell, my WinMob 6.1 had that). And the control. And iTunes. It even refuses to let you turn it on unless it thinks it has enough battery - ignoring the fact that it's on charge.
The only saving grace is the multi-touch, and non-US androids do that...
Every one knows, that when you buy an apple product its not just a product, it's a way of life. So why not make 50% profit on it? The iPas is 'magical', so that probably accounts for half the cost. It can't be cheap to install magic.
Still, its nothing new. Every thing apple sells costs more for less. Just look at the archos 9, it's more or less the same price but does so much more. I don't get it, why do people actually want apple to tell them what they can do with their machine? I like the choice, weather its MY choice of media player, or browser... it's still my choice and thats what you get with windows, the choice.
You can never have 100% profit unless you magic stuff out of thin air and sell it on the spot.
Selling something for £2 that cost you £1 including your overheads means you generated 50% profit off a 100% markup.
Also, according to the article, iSuppli include manufacturing costs in their calculations.
Windows 7 on an ATOM Z510 at 1.1GHz with a very limited Poulsbo U515W graphics chip and only 1GB of RAM is not that fast, even with all the bells and whistles turned off. In my experience, even XP Home is very slow on this combination.
I have a nano ITX Board with this CPU and chipset but 2GB RAM and tried it with XP.
They will not be making any profit from me. Having experienced one apple product (iPhone) thats enough to put me off for life. Its not the device - it's the level of control over it's usage etc that grates. With apple that will only get worse.
It's win or linux slates for me and an android based phone..........
"Having experienced one apple product (iPhone) thats enough to put me off for life. Its not the device - it's the level of control over it's usage etc that grates"
What didn't you like about it? Couldn't make phone calls? Couldn't send texts? Couldn't browse the internet? Apple don't have any control over any of these things, once it's in your hands, you control how it's used...
I can tell you havent used a windows slate. Awful things with dire battery life. And android phones? Dont make me laugh, try using it in a modern car (ours wont sync properly in the BMW 530 or the mondeo convers+) . Have you been able to use an authenticated proxy over wifi yet - which sort of makes it useless in any normal business environment?
Its horses for courses, if the ipad works then great, but simply saying "its apple, trash it" is silly. No-one seems to have the perfect solution yet.
I don't know where to begin with the pointlessness of this story.
iSupply did not rip apart an iPad. They've speculated on the parts involved, and the typical price for these to come up with a Bill of Materials (BoM).
Now, unless Apple can get all their R&D done for free, marketing for free, everyone works for free. Free electricity, water and rent. Indeed, free everything else; the margin between the BoM and selling price is not profit.
As for Bill Gates? Why can't he just let it rest? His concept of touch, pen and keyboard tablets have been around for nearly 10 years now. And hardly anyone wants one. Bill, you concept failed. Get over it. Let's see what happens to Apple's take on the tablet...
"As for Bill Gates? Why can't he just let it rest? "
Do you really think he called a journalist to bitch about the iPad? Or do you think he was asked in passing what he thought by the blog writer? He gave a response of general indifference, but also said "It’s a nice reader". What more do you want? Not to mention he was a fan of the iPhone.
They cannot comment on R&D etc. as they would need direct access to the company details etc.
Besides, it's just a big iPhone, how much R&D do you need? Seriously! how about "Let's make a big one".
Apple make more money because iCustomers will pay it, I could be cruel and say iSuckers, but to be fair, it's their money and if they think they are getting value then it's worth what they are willing to pay, Apple have a higher proffit margin because people are willing to pay it, my girlfriend bought a Balenciaga handbag for some obscene amount of money, used if for a year and sold it for more than she paid, cost is absolute, value is not.
Apple's business model depends on charging a premium for their products, simple as that, to some people an Aston Martin DB9 will be worth the extra £50k over a Jaguar XKR, most of us wouldn't have to struggle with that particular choice, but people will often find an extra £150 to have the Apple logo on their gizmo of choice, me? I don't need it, I don't consider it worth the extra cash but some people do, I bought a Creative Zen for the same price an iPod Video because it had better features, I'll probably never own an iPhone as I prefer a small phone in my pocket and a large archos 705 in my rucksack, but that's just me.
Not all the gap between the cost of materials to the sales price is profit. First of all, assembly does cost something. Even of it is automated, the machines that do the assembly and the buildings that house these machines must be paid for. Secondly, development costs must be paid over the price of the sold units. Apple designed their own SoC for the iPad, which is not cheap. And there are lots of other such costs that need to be recovered through the sales price.
That said, the incremental cost of producing one more iPad is fairly low, so when Apple have recouped the fixed expenses, the price of the iPad is likely to fall.
"so when Apple have recouped the fixed expenses, the price of the iPad is likely to fall."... no chance of that, look at the mac book. The price hasn't really come down, yet apples profits jumped up 50% in the last quater. Given the global enconomy you have to wonder why?
Answer? They are selling the same old c**p for the same price, even though as every one knows the price of the PC parts inside is falling like a lead brick.
That glowing apple on the front is what your paying for, and its got nothing at all to do with the costs of making the damn thing.
I wasn't talking about 2 years ago, more like 6 months ago.
The MAC book is a cheap, low spec dell in a white plastic case, infact at one point they where made by asus. They are PCs, there is NOTHING in there other then basic, low end kit. Right down to the gpu, what is it? a Nvidia 9400? my £400 acer has a better spec...
Every one else in PC (and apple do make pc's) drops their prices all the time. Apple only did that to turn the old model in to a 'budget' model when the new one came out.
Trurth of the matter is apple sell a comodity, their brand and the image that goes with it. I'm clearly not a fan boi, I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do.
"I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do."
I want something to read books, papers, feeds and web pages on the sofa; and listen to music and watch videos when travelling. I want it to be an easy and enjoyable experience (i.e. not a big heavy, hot thing, not something that'll run out of batteries straight away, and take time to 'wake up'), and I want it at a price which I feel is good value for money. Show me an alternative to the iPad for what I want it for.
Functional design costs money, just as does aesthetic design. Making it a few grams lighter, a few mm thinner, last a few minutes longer etc: all of these things take design time, which costs money. Any fool can throw some components into the form factor flavour of the month; it takes a lot of time and effort to really design something.
I just don't get what's wrong with something that does most of what you need/want and not a lot more? I really don't care that I can't run an exchange server off it or use it for programming in C#...
And the thing that interests me even further is this: People keep talking about the ipad only being for 'consumption' and never creation, but look at the apps for the iphone - despite the small screen with so-so resolution, there's all kinds of little painting and graphics apps etc. I'm not that impressed with the ipad so far, but the crucial thing isn't the device itself; it's what the app devs will do with that bigger screen. I reckon the naysayers have jumped too early.
you don't like Apple! Well done! Do you want a fucking medal now?!
Right. First. Its Mac; a contraction of Macintosh. MAC would be Media Access Control when discussing computers, or if you have a girlfriend , you'll know it's also a popular brand of make-up. We are all aware that Macs are 'just PC's', they always have been 'just PC's', when discussing computers its quicker to type Mac vs PC then Macintosh vs Windows.
"...cheap low spec dell in a white plastic case." Really? A similar spec'd Dell (Studio XPS 13) is £36 cheaper. Not really a lot in it, is there? In fact if you choose Win 7 ultimate, it becomes £54 MORE expensive! Once the Inspiron 13z spec'd to match it is £200 cheaper, but then the GFX card isn't as good and the processor is shite (an Intel SU7300 1.3GHz). Similary, the Vostro 13 was significantly cheaper, but also had a significantly inferior spec. The Latitude E4300 is £143 more and that is after a £139 discount BEFORE VAT! I'll concede that this model is more inline with the MBP 13", which is £50 cheaper after VAT has been added! the point? To show you that you are talking BOLLOCKS! Apple just aren't overpriced. QED. So what if ASUS, who used to make Dell motherboards and other parts BTW, made Macs? It's irrelevant. The NVidia M9400 is an excellent mobile graphics card. Sure, there are more powerful ones out there, but so what?! Unless you are a gamer or 3D designer/modellor it doesn't matter! Even then the 9400 performs well enough.
"Trurth of the matter is apple sell a comodity, their brand and the image that goes with it." What is so bad about that? Many, in fact ALL businesses do that, it how you SELL!
"I'm clearly not a fan boi" No, you clearly are! Just not of Apple...
"I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do." Funny, that is EXACTLY what everybody else does. Value for money != cheap. I use Windows, Mac and Linux based PC's 'cause I'm a geek and I like to play with computers. I'm a professional web designer and developer, my weapon of choice is the Mac, because IMHO it has the best apps available for that job and therefore as a platform it offers the best value for money TO ME!!!
"Right down to the gpu, what is it? a Nvidia 9400? my £400 acer has a better spec..."
And how long your Acer will function? 3 years? If you are lucky, yes.
I bet that £400 don't include any OS, while Apple is selling it bundled.
Basically you are comparing apples and oranges and then whine because the others are so expensive.
I've been using Apple's products (family support, my parents have MacBook Pro) and I know that support calls to me have dropped to 1/10 since they changed to Apple (3 years ago) from earlier machine (generic XP laptop). You can bet your ass that I'd put a couple hundred more to that Apple machine,again, just to save my own trouble during the years.
You learn to think ahead when you get old enough.
I've got a G4 Power Mac sitting upstairs. It has a blown PSU. My desktop machine has a 500w PSU in it that's about the same age and has been chugging away happily for years.
If my PC's PSU blows, I spend maybe £50 at most and get a new one.
A new G4 PSU? That'll be between £150 and £200 please. Same shape, same size, same basic construction, same cheap Chinese manufacturer, but it has a different pin-out for the motherboard plug and a 28v line. "Think Different" my arse.
Answer? They are selling the same old c**p for the same price, even though as every one knows the price of the PC parts inside is falling like a lead brick.
Let's have a look.
White Macbook September 2007, 2.1GHz C2D, Intel GMA 950, 160GB IDE Harddisk, double layer 6x DVD, 2GB DDR II RAM and VGA Adapter
Total 1308 Euro
White Macbook February 2010, 2.25GHz C2D, Nvidia 9400, 250GB S-ATA2 Harddisk. double layer 8x DVD, 2GB DDR III RAM and VGA Adapter
Total 928 Euro
Besides the faster CPU, faster GPU, faster RAM, faster and bigger Harddisk and faster DVD drive it's only 380 Euros cheaper than 2.5 years ago. What a rip off!
Lets say that these ar assmebled by hand, and that a worker is paid $20 an hour to assemble them. Lets say it takes a whole hour to assemble one device. That gives you an assembly cost of $20. In reality, they will be made on a construction line in an existing factory, so the cost will be a tiny fraction of that.
In terms of R&D costs, the software is essentially the same as that on the iPhone, the R&D for which has already been done, and presumably paid for several times over in profits. I calculate the cost of this to be approximately zero.
I don't know how much the magic pixie juice they fill them up with costs though.
It's all a trade off, and you hit the nail right on the head. LABOUR and ASSESMBLY does cost money, and for the people constantly harping about how much cheaper it is to maintain a PC = better product, they obviously equate their time to a fairly low dollar figure.
It's not like apple is the only company to mark up a product after all, I don't see why this is surprising when just about every retail product you purchase is upped about 300%.
I can only comment on my own experience but when I had a PC, I seemed to spend a lot of time repairing things, reinstalling the OS and gernally fannying about instead of getting things done...
Say I was normally paid £10 an hour, the amount of time I spent "fixing" the PC would have been worth about £500 or more. Since my last PC cost £1500 and the last Mac I bought was £750, I feel like I've saved a LOT of money....
parts cost + manufacturing cost certainly is not equal to actual cost. This is something the press keeps running with that no one gets, and iSuppli doens't help the matter.
This cost doers not include R&D, which likely cost Apple over 200m, if not a lot more considering this thing's been in development for more than a decade in multiple revisions and iterations. It does not account for logistics and supply concerns, warehouse storage, nor any FACILITIES costs for assembly (only labor estimates and component costs from 3rd parties are considdered). How about what apple spent on that A4 processor as well?
Then there's the fact that Apple's retail price has to account for them still making a profit when they sell these through 3rd parties, like BestBuy, MacMall, and Authorized resellers, who themselves would like to clear a fairly standard 10-20%. When apple sells direct, they've got people to pay that make that sale too, and that washes most of the difference between retail and wholesale prices.
Finally, there's warranty support costs. The people that answer apple's phones (or more regularly call you at a scheduled, convenient time so you don't have to wait on hold), also cost money.
If Apple clears, end over end, $50 per device, they'll be doing GREAT. Yes, the high end will reap a lot of profit, especially if that $130 3G connector price holds (I think that will drop to $79 real fast, and $50-100 come off the base model within 6 months).
I did wonder how much the costs could really vary when I saw the options. A 3G chip, GPS and a bit of extra flash memory could never have explained the price difference between the models. What is amazing is the folks that think Apple have done them a favour by introducing a "budget" option.
Assuming iSupply have factored in the other direct costs, such as labour and machine hours, this still only gives you a gross profit margin.
I'm a management accountant. I used to work for an accoutnancy practice that specialised in the licenced trade. Your typical pub would make a gross profit of about 35% on drinks, and 65% on food. But look... pubs are shutting down at a ridiculous rate, because they can't make a profit. How can this be if they make an average gross profit of around 55%? Well... because they have to pay all their staff, their accountant, advertising, rent, rates, gas, electricity... etc.
Claiming that Apple is ripping everyone off because they sell their brand new consumer electronics at a high initial markup is just ridiculous. Everyone knows that consumer electronics are always pitched at a high price at first to soak up the early adopters money. This is a common marketing strategy. Anyone who doesnt understand this should look up the Product Life Cycle. It explains the way this works quite well.
In the real world, profits (actual profits) are as low in the early stages as they are when the product is out of date and the market is in decline. Profits peak before the market reaches maturity, and then start to fall again.
I'm thinking of product development, factory tooling, packaging, marketing, etc, etc.
Really, I can see how this kind of stuff might be relevant on a mature product, but for one that isn't even on sale yet?
Maybe these guys could just buy all the bits and make their own.
Might want to start by reading a "Dummy's" book about business basics first, though.
They haven't shown Apple's profit margin at all, they've just shown that Apple won't be likely to be selling each unit as a loss leader for other services (like Kindle might have been) and they have a large scope for price reductions to stimulate the market or allow carriers to offer discounts with data contracts if necessary.
Don't forget that anyone buying one of these who previously owned an iPhone or one of the various iPod models may well have a library of media and applications that can just be used to fill the thing up without spending any additional cash - how often do you encounter that?
"Don't forget that anyone buying one of these who previously owned an iPhone or one of the various iPod models may well have a library of media and applications that can just be used to fill the thing up without spending any additional cash - how often do you encounter that?"
Now I wonder how the people that wrote the apps feel about apple giving away their liecense? Sure you paid for a licesen for one device, but you didn't pay to use it on as many as you like. Thats called Piracy? Or maybe iPad owners will throw away their iPod or iPhone?
Oh, and lets not forget, as every one seem to be doing.... that any one with a PC also has a library of apps and media they can use on a windows slate..... pirated or not...
As I understand it, by default, when you purchase an app (even free apps are counted as zero cost purchases), the licence is assigned to the itunes store account. As such, it can be installed on as many devices as use the account. The App Publisher can request that the licences be restricted to one machine.
I haven't looked too deeply into this so could be wrong.
"Now I wonder how the people that wrote the apps feel about apple giving away their liecense? Sure you paid for a licesen for one device, but you didn't pay to use it on as many as you like. Thats called Piracy? Or maybe iPad owners will throw away their iPod or iPhone?"
Well, no, that's no the way iTunes licensing works. Unless specifically restricted anything you buy through iTunes is licensed against the account and the account can be registered for use on up to five machines at any one time (*not* five devices). Each of those computers can sync a number of devices (I don't know if there is a limit, but I haven't encountered one) and transfer any compatable stuff to the device.
So, you can own an iPod, iPhone and iPad and sync all of them with one machine (or each with seperate machines using the same account) and use all movies, TV programmes, applications, etc. with whichever devices support them.
So, *no*, this would not be piracy.
"Oh, and lets not forget, as every one seem to be doing.... that any one with a PC also has a library of apps and media they can use on a windows slate..... pirated or not..."
But that *would* be piracy (well, breach of licensing terms anyway) unless the license for the software specifically allows the use on more than one machine, which most commercial PC software does not allow by default in my experience. Granted, in practice most manufacturers don't make any serious attempt to restrict you from doing that and probably wouldn't persue you anyway, but if you're going to suggest that one system has an advantage over another you probably want to make sure which way around they are first.
That said, you appear to have missed my point anyway, here it is in a plainer form:
Apple make money from every sale though the iTunes store (apps, movies, music, etc.). People who buy the iPad will almost certainly already have an iPod and/or an iPhone, so may well not purchase as much content for the iPad as they will already own it, thus reducing the after-sale revenue stream.
It's a bit like the VHS->DVD->Bluray thing. When people moved from VHS to DVD they bought DVD copies of stuff they already owned on VHS, but it's unlikely they will buy Bluray copies of anything they already own on DVD. If the hardware manufacturers were getting a cut of every disc sold you can bet your life that either they wouldn't be compatable or the hardware would be more expensive (probably both, in fact).
How can Bill Gates lecture anyone about pricing when he rolls out a new version of office every few years with the same old crap and a few more buttons tacked on with a subtle colour change thrown in for good measure?
Yes,the iPad is expensive. So are BMWs. Yes I'm a (trying to be realistic) fan boy. No I can't afford one! :-(
Any analysis of the cost of producing a high-value technological product that considers simply the raw material and manufacturing costs is naive and insulting. Still, no doubt it will attract comment from those who are under the delude impression that the purpose of a company in a capitalist market is to make as many items they can for as many people as possible at the cheapest price.
The suggestion that large profits are a bad bad thing is valid, but is rather out of the scope of any discussion about a single product or company. We live in a capitalist society which Apple is obliged to operate in like anyone else. Why shouldn't they strive to maximize their profits like anyone else? The price they sell the iPad at is dictated by the market. Customers have other options if Apple have misread the price their intended market will bear.
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