One of the unacknowledged perks of Apple’s new iPad is that pre-launch gossip turned out to be dead wrong about alleged higher prices. “Sources” claimed we were in for sticker shock, but as they say, the fundamental things still apply: The new basic-model iPad costs the same as the old basic-model iPad did until last week (that is, $499) if all you need is 16GB of storage and don’t care about 4G LTE data speeds.
That said, it seems Apple may have had justification to raise the price, according to some educated margin-guessing based on component analysis. Teardown authority iSuppli pulled the new iPad into its component parts and found — no surprise — that the component price jumped from $236.95 on the 16GB iPad 2 with Wi-Fi to $306.05 on the new model. Manufacturing costs increased, too, though marginally — up from $8.15 on the 16GB iPad 2 to $10 on the new iPad.
If you compare Wi-Fi + 4G models, the disparity is even greater (again, no surprise). Where the component cost of the 16GB iPad 2 with Wi-Fi + 3G was $262.55, the cost for the 16GB new iPad with Wi-Fi + 4G leaps to $347.55.
Interestingly, the component cost of the Wi-Fi + 4G models is about 50% of the retail price Apple’s charging for all three sizes (16GB, 32GB and 64GB), with the difference skewing least on the lowest-end models and the most on the highest-end ones. That jibes with conventional economies-of-scale wisdom: Companies usually give the biggest price break on the entry-level models, which they expect to sell the most of, while charging a premium for the slower-moving “boutique” versions.
iSuppli notes that its breakdowns should be viewed as “preliminary in nature,” and that they “account only for hardware and manufacturing costs and do not include additional expenses such as software, licensing, royalties or other expenditures.”
But the takeaway is clear: The new iPad looks to be considerably more expensive to manufacture across the board than the iPad 2, and thus Apple’s probably making less money on each sale. Not that it’s likely losing anything with those kinds of still impressive hardware margins.
What’s the most expensive component in the tablet? The new even-higher-definition display, of course, which iSuppli says costs $87 per model, versus $57 in the iPad 2. While Apple probably has multiple suppliers for the display, iSuppli believes Samsung’s currently handling “volume shipments.” Since Samsung also makes the “applications processor,” estimated to cost $23, that makes it the big winner, says iSuppli, giving it a greater than 30% share of the iPad component pie.