iSuppli has tallied up the cost in parts and manufacturing for the various new iPad models, and determined that the 32 GB new iPad with LTE costs $364.35 in materials ($375.10 after manufacturing costs). This is a pretty stark difference to the $729 retail pricetag, but that just goes to show you why Apple is so danged profitable. It's worth keeping in mind that Apple still has to pay to develop software, pay royalties, keep up their retail presence, among other miscellaneous costs, but even then, it's obvious that Apple is enjoying a healthy margin from all of their iPad models.
Of course, that's the what the production iPad costs, not the millions and potentially billions Apple has invested in research, development, prototyping, and in some cases inventing the manufacturing processes that allows these types of devices to be built. But that doesn't make for as provocative a headline, does it?
On the flip side, once Apple does ramp up production and economies of scale start kicking in, it may well be that Apple could afford to knock down the price a little bit, but the $500 has been the starting point for all upper-end tablets since the original iPad launched. Only now are we starting to see decent tablets like the Kindle Fire and BlackBerry PlayBook approach the $200 mark, though even there, older refurbished iPads are within reach. Assuming consumers are happy with the price point for the iPad, maybe Apple can turn over some of those extra profits to those working in Foxconn's factories, eh?
You can take a look at the full breakdown of material costs below.
Source: iSuppli, pic credit
Reader comments
New iPad (LTE 32GB) costs $364.35 in parts, sells for $729
That is alot of profit and apple is clever enough to influence people to buy it. I hate apple but I have to admit the marketing side of them is genius
That is really cheap! Modern Smartphones are sold for ~$600 and cost ~$200. So 50% for materials is a very good deal for customers (no, I'm not kidding).
The 4g wireless radio coast $41 but they charge us $129, dang. The 3g one was almost marked up by a complete $100.
I think there are extra FCC fees to pay too...
But not $100 worth...
Check's Apple's public finance disclosures to the SEC, their profit margin isn't anywhere near 50% and there are a number of expenses associated with manufacturing any device. Their margin's aren't much different from Home Depot or Microsoft and far lower than firms like Starbucks
Econ 101: Charge what the traffic will bear.
Econ 101: cost != profit
As TiPB and SCY already said, there are other costs associated with manufacturing not mentioned. Not only is there the R&D that they mentioned -- how about the other things like... wages, delivery, taxes and all the tons of other overhead they have to pay for? If you think that a low price tags in material automatically equals profit, you're a complete idiot.
Although... I find it somewhat humorous that even though TiPB pointed out the "other costs" that must be considered, people are still making comments about "markup" and -- in not so many words -- the evil of Apple doing business.
I agree! There are tons of other costs involved in the whole process. Don't forget about everyone who touches an iPad starting in China all the way to your hands has to get paid.
Apple is not doing well because of huge markup, they are doing well because they sell millions of units.
"The happiest customers are the ones who paid full price."
- Old Retail Saying
This is either just naive or link bait. Gee, did you know the cost of materials in a $24,000 car is only about $8,000? The horror!
Certainly Apple makes a healthy profit off their gear (though no more than the market will bear), but the bill of materials is only a fraction of the total design, development, production, shipping, warehousing, wholesaling, and retail overhead costs.
Apparently R&D, employee salaries, healthcare, etc are free.
You're right. Apparently, some might believe that Apple gets paid to have a commercial play during the superbowl as opposed to it being the other way around. R&D, advertisement and employee salary/benefits have to also be considered in the Cost of goods sold. Not just the actual price of the individual pieces of the end user product.
That price does not include the R&D and manufacturing cost, marketing, etc. Love the price or not, no one is making anybody buy the damn device.
Good job reading the article.
You say it does not cover "research, development, prototyping, and in some cases inventing the manufacturing processes that allows these types of devices to be built"
You forgot to mention that the people who work there actually get paid and are not volunteers. For most companies salaries and benefits is 30-50% of the cost of goods sold.
These parts cost numbers are just link baiting.
Oh my God! Not "LINK BAITING!!" The gall!! The horror!! The...ah well, that's enough.
Hey where can I get the parts so I can do it myself.
I don't know about link bait. I think it's interesting to know the cost of the parts. It's about the only part anyone outside Apple can figure out. Someone has done this analysis for just about every recent Apple product in the past 10 years. I don't see the bait... You're all just being jerks...
Most interesting thing in there to me is the $200 premium Apple charges for the 64gb model only cost Apple and additional $30.
As for the rest of the device, I'm amazed such a thing only cost consumers $500.
Or indeed that the $329 spread in price between the cheapest and most expensive iPad 3 is represent by less than $93 in parts. Obviously it makes sense from a marketing point of view to inflate the differences between models; and even the priciest IPad is an amazing value for today's consumer; but it is clear the cheapest iPad 3 is the best value of all.
What socialist moron put this article together? Is Apple not allowed to make a profit? Also, you left out a lot of other costs.
1. Assembly
2. Box
3. Paperwork
4. Accessories
5. Warranty
6. Shipping to retailers
7. Advertising
8. Free software that is included
9. Many other costs of doing business
So if that is the cost of the parts, it is still far away from the actual cost.