Wondering how much does Apple make for every unit of the new iPad sold? It’s not much, according to a detailed teardown analysis by IHS iSuppli.
The teardown revealed that Apple just gets by, profit-wise, with its third-generation tablet sold at $499 or more, given that the total cost of production is at the very least, $375.10. From this total cost, we take out the bill of materials which is about $364.35 for the 32-gigabyte 4G LTE-capable iPad, and the manufacture cost which is at $10.75.
The total production cost is more than half of the retail price of the said version, which is at $729.00. The teardown does not include anything beyond hardware, like software and licensing fees.
Breakdown of Production Costs
What makes the new iPad’s hardware more costly? For one, the super retina display is 53 percent more costly ($87 screen) than the previous generations’ screen costs. This high-resolution display is one of the standout features of the new iPad, offering users a much sharper and more vibrant visual experience. The display alone significantly drives up the cost of production.
Additionally, the baseband processor for the 4G LTE capability is expensive, accounting for 11.4 percent of the new iPad’s bill of materials. This advanced connectivity feature allows users to experience faster internet speeds and better overall performance when using cellular data, making it a crucial component for many users.
Other components contributing to the cost include the A5X processor, which is designed to handle the increased graphical demands of the retina display, and the improved battery, which ensures that the device maintains a decent battery life despite the more power-hungry components.
Additional Costs and Considerations
It’s important to note that the teardown analysis focuses solely on the hardware costs. Apple also incurs significant expenses related to software development, licensing fees, marketing, research and development, and distribution. These additional costs are not reflected in the teardown but are crucial to the overall profitability of the product.
For example, Apple’s iOS operating system, which powers the iPad, requires continuous updates and improvements. This involves a team of software engineers and developers working to enhance the user experience, fix bugs, and introduce new features. Licensing fees for various technologies and patents also add to the overall cost.
Marketing is another substantial expense. Apple is known for its high-profile product launches and extensive advertising campaigns, which help to build brand awareness and drive sales. These marketing efforts are essential for maintaining Apple’s position as a market leader but come at a significant cost.
Research and development (R&D) is another area where Apple invests heavily. The company is constantly working on new technologies and innovations to stay ahead of the competition. This investment in R&D ensures that Apple can continue to produce cutting-edge products, but it also adds to the overall cost structure.
Finally, distribution costs, including shipping and logistics, are also a factor. Apple needs to ensure that its products are available in various markets around the world, which involves a complex and costly distribution network.
In conclusion, while the teardown analysis by IHS iSuppli provides valuable insight into the hardware costs of the new iPad, it’s essential to consider the broader picture. Apple’s profitability on each unit sold is influenced by a range of factors beyond just the cost of materials and manufacturing. The company’s investment in software, licensing, marketing, R&D, and distribution all play a crucial role in the overall cost structure and profitability of the new iPad.
via VentureBeat
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