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back to article Apple spent just ONE DOLLAR beefing up the latest iPad Air 2

New iPad Air 2 components cost Apple just one dollar more than the previous model, according to the teardown bods at IHS. The no-frills 16 gigabyte Wi-Fi flavour of fruity fondleslab reportedly costs Apple about $275 (about £167), compared to $274 for the first iPad Air. Seeing as the iPad sells for just under £400, this …

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  1. Steve Davies 3 Silver badge

    Pah!

    What about the new CPU then?

    Seems to knock the spots off the competition according a number of benchmarks but that ain't news is it.

    More RAM as well.

    We know you can't seem to write anything positive about Apple so why not give it a rest for a while there's a good chap?

    Now if you were to write something about the lack of upgradeability of the new Mac Mini then that would be fine because that is a source of much angst in the FanBoi world.

    23 11 Reply
    1. Mike Bell
      Reply Icon

      Re: Pah!

      "In plain terms, all this indicates that Apple is pretty much selling us the same bloody thing as last year, with a few minor tweaks."

      Ignoring for a moment the additional core and doubling of RAM, I'd really like to see trial by combat between Jasper and Richard Brenner. That would be entertaining journalism.

      8 2 Reply
      1. Frankee Llonnygog
        Reply Icon

        Re: Pah!

        And, in the red corner, Mr Brenner, armed with insight, measurements and reasoned argument!

        Hiding in the dressing room, Mr Hammill, who is still trying for his Wolf Cubs badge in Sarcasm

        3 0 Reply
    2. Ribblethrop
      Reply Icon

      Re: Pah!

      Most likely they upgraded the CPU and RAM because the old junk they used to slap in just are not made any more, like the old HDDs that were so popular in the iPod, when everyone else had moved to flash. If asbestos was still available they would probably use that instead of aluminium.

      12 16 Reply
      1. Anonymous Coward
        Reply Icon
        Anonymous Coward

        Re: Pah!

        Yeah, or those old 5K screens they use in the latest iMacs! Oh wait....

        3 0 Reply
  2. gnasher729 Silver badge

    That looks like a typical misleading headline as we expect it from some people writing articles for the register.

    Apple didn't "spend one dollar". The cost of building the iPad Air 2 is one dollar higher than the cost of building the first iPad Air, even taking into account that all the original parts are probably cheaper now, a year later or so. So the cost of using improved parts was one dollar more than the cost savings due to price drops of components since the previous model was introduced.

    And please, do you seriously claim that the difference between retail price and cost of parts is profits? Let's just start with the fact that of the £400 retail price about £67 are VAT, which Apple sends straight to the government. Then the fact that you pay for running a store, and the employees want salary. The fact that occasionally a device breaks and needs to be repaired or replaced under warranty. Advertisements, development of the product, and so on. You must be thinking the readers are idiots.

    27 11 Reply
    1. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Does the article mention profits? No. Does it mention Apple's average gross margin. Yes.

      Try harder, fanbois.

      8 13 Reply
      1. death&taxes
        Reply Icon

        Does it (incorrectly) mention Apple 'raking in' the diffference between retail price and cost?

        Oh, yes it does.

        Try harder, trollboi.

        13 5 Reply
      2. Velv
        Reply Icon

        @Credas

        The article states " this would mean Apple is raking in £230 on the sale of every slab."

        "Raking in" is common slang for profit, but leaving that aside, as has been pointed out Apple aren't the only retailer, so they aren't even turning over the retail price of each slab. And the Gross Profit Margin is an estimate by an external company quoted to two decimal places, something I doubt even Apple knows internally. Lies, damned lies and journalism that belongs in The Sun.

        9 1 Reply
        1. Handy Plough
          Reply Icon

          "Lies, damned lies and journalism that belongs in The Sun."

          Have you not noticed the red masthead?

          0 0 Reply
        2. Preston Munchensonton
          Reply Icon
          Facepalm

          @Velv

          As Apple is a publicly-traded company in the US, they are required to publish reports of their operations that include calculations such as gross profit margin. No external company. No estimate. And Apple definitely knows the calculation internally.

          Please take a deep breath before trolling so hard in the future. It's like you trolls don't even bother to rub two neurons together before you start typing.

          3 2 Reply
          1. Anonymous Coward
            Reply Icon
            Anonymous Coward

            Apple's gross margin has been running in the mid to high 30s the last few years. The majority of their sales are iPhones, which cost around $200 to build and sell for $600 and up, which would be a gross margin exceeding 70% if that were their only product and they had no costs for it other than manufacturing.

            So clearly there are a lot of expenses against those margins that aren't accounted for in Jesper's naive assessment. But that's all we expect from him, he's not a journalist, he's just a fanboy who somehow got a job writing for The Reg.

            1 0 Reply
      3. jonathanb Silver badge
        Reply Icon

        Yes, and the sales, support and marketing costs go below the gross profit line to come up with net profit. Net margin is 21.6%, which is still pretty decent.

        0 0 Reply
    2. Goldmember
      Reply Icon

      "of the £400 retail price about £67 are VAT, which Apple sends straight to the government"

      No, it bloody doesn't. Is your memory unable to retain Apple's registration in Ireland, deals with the government and creative accounting? All of these are well publicized. Apple (not unlike other megacorps, I might add) certainly does NOT pay its fair share of tax.

      However, your comments about marketing are correct.

      1 2 Reply
      1. jonathanb Silver badge
        Reply Icon

        They do pay VAT, there is no avoiding that. They do however manage to avoid Corporation Tax and Corporate Income Tax.

        5 0 Reply
  3. returnmyjedi

    The working conditions at Fruity HQ must be truly diabolical if the r&d costs in getting the latest iPad so thin and such only amounts to a single buck per unit. All those long unpaid hours being whipped by Messrs Cook, Ive et al. Disgraceful.

    5 1 Reply
  4. Anonymous Coward
    Anonymous Coward

    What about the VAT?

    "Seeing as the iPad sells for just under £400, this would mean Apple is raking in £230 on the sale of every slab."

    Err, no. A retail price of £399 means £332.50 to Apple and the rest to HMRC. So for direct sales, the profit is £165 (excluding cost of sales). For channel sales, the channel markup has to come out of this too.

    Not saying this isn't a very good markup - just not as much as the article suggests.

    7 2 Reply
    1. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Re: What about the VAT?

      No idea how VAT works, do you?

      Apple Ireland will sell the iPad to Apple UK for the equivalent of £399 and Apple UK will offset the VAT element of that against the £399 it sells to you. Net effect, Apple UK pays no VAT to HMRC and no Corporation Tax either, as it made no profit.

      A few more loopholes exploited and a tiny amount of VAT will be paid to some tax haven somewhere, at a fraction of the rate that HMRC would have got.

      8 11 Reply
      1. Steve Todd
        Reply Icon
        FAIL

        Re: What about the VAT?

        Just who is it who has no idea how VAT works?

        VAT is pan-european. All EU states charge it, it's part of how the EU is funded. It is charged at the local rate for the seller, the seller being Apple UK in this case, on the full cost price of the item in question (clever tax tricks on transfer pricing have no effect on the end user price).

        7 3 Reply
      2. Velv
        Reply Icon

        Re: What about the VAT?

        Nothing mentioned about Import Duty, that has different rules again and will be factored into the retail price. Then there's Import VAT to the EU since the goods aren't made inside the EU (and that is different from the retail VAT the consumer has paid)

        0 0 Reply
      3. jonathanb Silver badge
        Reply Icon

        Re: What about the VAT?

        When Apple Ireland sells to Apple UK, or to any other customer that has a VAT registration number in a country other than Ireland, Apple Ireland doesn't charge VAT on the sale.

        Apple UK has to pay UK VAT on the products it imports from Apple Ireland based on wholesale price, which will be the same as the price Apple Ireland sells to other retailers such as Dixons Carphone. It can then simultaneously claim that VAT back, so the net effect is no payment due, and no refund receivable.

        When Apple UK sells to retail customers in the UK, or to UK based businesses, it has to charge VAT on the sale, and pay that over to HMRC. If it sells to retail customers in other EU countries, it has to charge the VAT rate applicable in that country and pay it over to the local tax authorities there.

        1 0 Reply
    2. captain veg Silver badge
      Reply Icon

      Re: What about the VAT?

      Err, no indeed. The clue is in the name: VAT is a tax upon value added. Not retail price.

      -A.

      0 3 Reply
      1. DavCrav
        Reply Icon

        Re: What about the VAT?

        "Err, no indeed. The clue is in the name: VAT is a tax upon value added. Not retail price."

        OK, everyone needs to shut up unless they *actually know how VAT works*. It varies depending on the goods and services, but for most things, 20% is added onto the retail cost and then this is the price you pay. One sixth of the price you pay in a shop is VAT, that goes straight to the government. That's it. It's value added tax because it's added to the value of the goods, not it's a tax on the added value. Jesus wept.

        3 3 Reply
        1. death&taxes
          Reply Icon

          Re: What about the VAT?

          Sorry but you really have got the wrong end of the stick.

          Value added tax is -precisely- a tax on the value added at each stage of a vatable sale or service.

          Each supplier charges 20% extra on their price to the next stage. These tax receipts are then netted off against the VAT the supplier has paid to their own suppliers and any excess is passed on to, or deficit is claimed back from, the government through their VAT return.

          Actually quite an elegant way of ensuring a tax chunk out of every stage in a given economic activity, reflecting where the margins are being generated.

          1 1 Reply
        2. captain veg Silver badge
          Reply Icon

          Re: What about the VAT?

          > That's it. It's value added tax because it's added to the value of the goods, not it's a tax on the added value. Jesus wept.

          I care not for your deity's tears, and they don't change the fact that the government only receives nett tax on the value added. Sure, the retailer simply collects 20% but at each stage of supply (except the last one to the consumer) the recipient claims back the VAT that they paid to *their* supplier. So the final cut to Apple is more than 80% and the final cut to government is less than 20%.

          -A.

          2 4 Reply
          1. Steve Todd
            Reply Icon
            FAIL

            Re: What about the VAT?

            If one VAT registered company, within the same country, sells to another, then they can reclaim the input VAT (i.e. the VAT they paid for it), meaning that the company personally only pays VAT on their markup rather than double or tripple charging the tax. Ordinary members of the public pay the full amount.

            Between two EU states companies EXPORTING goods don't charge VAT (and can reclaim any VAT paid), while the IMPORTING company pays local rate VAT on the goods when they arrive. Whichever way you look at it, the local government gets its full VAT amount paid on the final retail price, but that amount may have been paid by several companies in the sales chain.

            2 0 Reply
          2. Anonymous Coward
            Reply Icon
            Anonymous Coward

            Re: What about the VAT?

            Not sure I follow your argument captain.

            Consider the following:-

            Manufacturer 1 makes a widget which he sells to manufacturer 2 for £1.00

            His invoice price with VAT is £1.20

            Net VAT to taxman = £0.20

            Manufacturer 2 claims back his VAT portion.

            Therefore net VAT to taxman + £0.00

            Manufacturer 2 incorporates said widget and sells finished item to Distributor for £2.00

            His invoice price with VAT is £2.40

            Net VAT to taxman = £0.40

            Distributor claims back his VAT portion.

            Therefore net VAT to taxman + £0.00

            Distributor sells on to wholesaler for £3.00

            His invoice price with VAT is £3.60

            Net VAT to taxman = £0.60

            Wolesaler claims back his VAT portion.

            Therefore net VAT to taxman = £0.00

            Wholesaler sells on to retail for £4.00

            His invoice price with VAT is £4.80

            Net VAT to taxman = £0.80

            Retailer claims back his VAT portion.

            Therefore net VAT to taxman = £0.00

            Retailer sells on to End User for £5.00

            His invoice price with VAT is £6.00

            Net VAT to taxman = £1.00

            End User cannot reclaim his VAT

            Therefore Net VAT to taxman = £1.00

            I know that's fairly simplified but basically that is how it works. There are profits all the way, but the end user ends up paying all the VAT. If you substitute Apple in the various stages it makles no difference. 20% of the final selling price goes to the taxman.

            The retailer claims his outgoing VAT on whatever it is that he's buying in, be it services or goods , but he still has to pay that final 20% on the ultimate invoice.

            5 0 Reply
  5. Anonymous Coward
    Anonymous Coward

    What?

    "In plain terms, all this indicates that Apple is pretty much selling us the same bloody thing as last year"

    Bollocks.

    What it tells us is that Apple can buy twice the amount of memory, twice the amount of RAM, a faster wifi chip, a much more powerful CPU and a much more powerful GPU wholesale than it could a year ago.

    And it sells these on to us for the same price as last year.

    This is the stupidest thing I have ever read in the Register.

    28 2 Reply
  6. Semtex451

    Jasp, mate, we all know there are many valid gripes about the Fruity Firm, but this constant 'creative jibing' just devalues our rational arguments.

    12 1 Reply
  7. JDX Gold badge

    Crappy reporting

    The cost of the components today in the Air2 is presumably about the same as the cost of the components in the Air1 when it went on sale.

    That's probably why the iPad prices haven't changed (I think?) - they refresh the spec to fit the desired price point.

    You get a lot more from your money in terms of components than you did before.

    11 0 Reply
    1. Anonymous Coward
      Reply Icon
      Anonymous Coward

      Re: Crappy reporting

      Even more of a ripoff for 128Gb SSD this year than last however - still charged as if its still 2011 when flash was more expensive to manufacture.

      PS to be fair, after the brilliant 2013 Nexus 7, the new Nexus 9 is totally hopeless with insufficient, yet expensive SSD provision.

      1 1 Reply
  8. Anonymous Coward
    Anonymous Coward

    I don't mind some Apple bashing, or Android bashing or any other bashing as its good fun, however.....

    What a load of crap this is. It's so bad that publishing it as news / facts should be criminal.

    18 0 Reply
  9. NogginTheNog
    FAIL

    Slave labour

    "Seeing as the iPad sells for just under £400, this would mean Apple is raking in £230 on the sale of every slab."

    So actually designing it, manufacturing it, and then shipping it around the world, all come for free then?

    8 0 Reply
  10. MatsSvensson

    That's still one dollar more that it cost to hire the writer for this article.

    7 0 Reply
  11. Quotes
    Mushroom

    An Embarrassment of Riches

    The spin on this article was a Moment of Inertia

    2 0 Reply
  12. Chad H.

    This article seems to be a textbook example of how to mislead through statistics. The "Cost" is about the same, therefore, it is argued, the device must be the same.

    Except of course we live in a world where Moore's law marches on, and has actually major improvements under the hood... As Ars Technica puts it:

    >>>>>It's good that in the face of all that, the iPad Air 2 really isn't a standard off-year release. It barely bends the external mold of its 2013 Air sibling, sharing most of the same dimensions and screen attributes, but it also takes the processing power and spec sheet we were happy to pay $500-plus for last year and jacks them up significantly. On top of everything, Apple reduces device thickness and weight even further for its latest iPad (and the company even improves the rear-facing camera, too).

    Thats not "basically the same device as last year".

    I don't expect objective journalism from The Register - its slant on trying to make things funny prevents this - but completely misleading journalism is another thing altogether.

    16 1 Reply
  13. Frankee Llonnygog

    Judging by the comments...

    I think MC Hammill has finally humped the shark

    5 0 Reply
  14. RyokuMas
    FAIL

    Same old chips???

    If this is par the course for Apple, no wonder code I wrote that runs fine on budget Windows Phone and Android is dog slow on an iPhone!

    0 2 Reply
    1. Frankee Llonnygog
      Reply Icon
      Facepalm

      Re: Same old chips???

      Yes I'm sure that must be the reason.

      1 0 Reply
  15. JeffyPoooh
    Pint

    Last Year's model is marked down in the shops...

    So if you think that they're the same, then you know what to do.

    2 0 Reply
    1. Sir Sham Cad
      Reply Icon

      RE: then you know what to do.

      Buy the 10.5 inch Galaxy Tab S and spend the rest of the dosh on beer.

      2 1 Reply
  16. Anonymous Coward
    Anonymous Coward

    Markup on storage

    "Apple spend about $9.20 on memory for the low-end 16GB devices but as much as $60 for the higher-end 128GB devices, but charges $300 more at retail for the higher memory."

    The price the iFan pays for storage lock-in and no external SSD provision.

    0 1 Reply
  17. Anonymous Coward
    Anonymous Coward

    It's a magical $1 though, right?

    0 0 Reply
  18. RudeUnion

    I'd have to agree with comments made. I come to the Register for news and not BS. I like the jokes inserted within the news and it's fine you guys hate Apple, but when you're not even trying to provide basic research information like system specs and benchmarks then you're turning into another website which I refuse to browse: the Inquirer.

    2 0 Reply

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