Why Wi-Fi only tablets are rare: Brilliant iPad pricing

[RockdaMan]

When Apple launched the iPad last year many were surprised at the aggressive pricing. This pricing strategy has proven to be brilliant, and forced competitors to look to carrier subsidies to get pricing low enough to generate sales. This is why we don’t see too many Wi-Fi only tablets hitting store shelves even though most companies announce them at launch. The reality is they cannot sell them cheaply enough to both compete with the iPad and make a profit.

Take away the carrier subsidy and these things are hundreds of dollars too high to generate a sales volume necessary to make a product successful. Tablet makers are between a rock and hard place, and they have been put there by a brilliant strategy by Apple.

http://www.zdnet.com/blog/mobile-new...ad-pricing/968

[tubemonkey]

Originally Posted by RockdaMan

http://www.zdnet.com/blog/mobile-new...ad-pricing/968

Are parts really that expensive? At launch last year, a 16GB WiFi iPad cost Apple $230 to manufacture. B&N sells their Android tablet - Nook Color - for only $249.

Something's amiss.

[HarryT]

Originally Posted by tubemonkey

Are parts really that expensive? At launch last year, a 16GB WiFi iPad cost Apple $230 to manufacture. B&N sells their Android tablet - Nook Color - for only $249.

Something's amiss.

I suspect that Apple have more R&D costs to recoup than do B&N. The Nook Color is a pretty standard off-the-shelf Android tablet; there's a lot of custom development in the iPad.

[tubemonkey]

Originally Posted by HarryT

I suspect that Apple have more R&D costs to recoup than do B&N. The Nook Color is a pretty standard off-the-shelf Android tablet; there's a lot of custom development in the iPad.

That doesn't explain other Android tablets selling for iPad prices and higher. After all, the tablet format is established, so how much R&D does it take to buy the parts and throw them inside a case?

[athlonkmf]

Originally Posted by tubemonkey

That doesn't explain other Android tablets selling for iPad prices and higher. After all, the tablet format is established, so how much R&D does it take to buy the parts and throw them inside a case?

The $230 is as you said, only for the parts themselves.

You need to add shipment costs for the parts, the final product, assembly costs, packaging costs, storage costs, marketing costs, quality control, disqualified end products, rma, etc.

Add all that and tell us how much it'd cost to make such product?

[tubemonkey]

Originally Posted by athlonkmf

The $230 is as you said, only for the parts themselves.

You need to add shipment costs for the parts, the final product, assembly costs, packaging costs, storage costs, marketing costs, quality control, disqualified end products, rma, etc.

Add all that and tell us how much it'd cost to make such product?

That figure included manufacturing costs.

So B&N is taking a loss on each Nook Color they produce?

[karunaji]

Why would anyone think that the carrier subsidies are good? First of all, the networks will want to recoup the subsidies and will keep wireless data costs artificially high. For all users, not only those device owners. It severely hampers the growth of wireless data services. See the thread about the real costs of Kindle content delivery.

And second, it stifles competition. If I don't like my carrier it is very hard to switch to another when I am locked in a long term contract.

In fact, such subsidies should be illegal as they distort the free market.

[athlonkmf]

Originally Posted by tubemonkey

That figure included manufacturing costs.

So B&N is taking a loss on each Nook Color they produce?

I don't know where you're reading that, but every site is stating that the PARTS are 260 together.
They still need to put it together.

example:
http://lmgtfy.com/?q=price+ipad+parts

http://www.tomshardware.com/news/ipa...nts,10102.html

[tubemonkey]

Originally Posted by athlonkmf

I don't know where you're reading that, but every site is stating that the PARTS are 260 together.
They still need to put it together.

example:
http://lmgtfy.com/?q=price+ipad+parts

http://www.tomshardware.com/news/ipa...nts,10102.html

I was basing it on iSuppli's Feb 2010 estimate. I didn't see their actual teardown that added an additional $30 to the overall cost.

Tom's got their info from BusinessWeek, which got it from iSuppli.

Apple's (AAPL) iPad tablet computer costs as little as $259.60 to build, according to analysis by the research firm iSuppli.

[athlonkmf]

Originally Posted by tubemonkey

I was basing it on iSuppli's Feb 2010 estimate. I didn't see their actual teardown that added an additional $30 to the overall cost.

Tom's got their info from BusinessWeek, which got it from iSuppli.

In the same article there are discrepancies.

A midpriced 32 GB version of the iPad that sells for $599 contains $289.10 worth of materials. A high-end 64 GB version, which retails for $699, contains components that cost $348.10, according to iSuppli.

That's material only. What's the $259.60 then? for the cheapest ipad? including 30 dollar to build? That's $220 parts only?

30 dollar to build.... that's cheap.

But then... where are the bad batches, rma, packaging, shipping, store rent, promotion etc that accounts for a shelf price?

[wallcraft]

Apple was much more aggressive about pricing on the iPad than they have been on other new products in the past. This has made it harder for other vendors to undercut Apple on price. However, I don't think B&N is actually loosing money on the Nook Color so it is clear that a 7" android tablet with good hardware need not be very expensive. What seems to be distorting the price of "high end" Android tablets is the carriers. They like high off-contract list prices so that their on-contract deals sound better than they really are. They also don't like WiFi-only competitors. Unfortunately, all the major manufacturers (except Apple) have to listen to the carriers to some extent. B&N did not have this problem, and they have their own stores to sell the devices. I am hoping Samsung, or perhaps Sony, will break from the pack and sell tablets with more reasonable price margins soon.

[RockdaMan]

Apple reportedly has 60 percent of touch panel components under contract, potentially resulting in a “tight supply” for rivals of the Cupertino, Calif. firm’s iPad. As a result, companies such as HP, Research in Motion and HP are muscling out “second-tier” tech firms and prompting a potential 2011 shortage of glass capacitive touch panels for the tablet PC industry.

Hoping to not repeat slow iPad sales due to tight supplies, Apple is taking a new strategy to guarantee the parts are available to meet demand. “In 2011, Apple’s strategy of taking up most of the capacity should help the company quickly expand its sales, while reducing its competitors’ shipment growth,” writes industry publication DigiTimes.
-
This would not be the first time Apple has been accused of prompting a component crunch. In 2005, the Cupertino, Calif. firm prepaid for flash memory supplies destined for devices such as the iPhone and MacBook Air.

http://www.cultofmac.com/report-appl...s-supply/82480

[brbubba]

Originally Posted by tubemonkey

That figure included manufacturing costs.

So B&N is taking a loss on each Nook Color they produce?

Those figures typically don't include cost of machines, factory, engineers, etc. Apple has some incredibly complex manufacturing that no one else is doing and I know that they placed the worlds largest order for CNC machines about a year ago. I don't know about the iPad, but the macbooks are machined from a solid block of aluminum, which is just insane.

[jhempel24]

Originally Posted by brbubba

Those figures typically don't include cost of machines, factory, engineers, etc. Apple has some incredibly complex manufacturing that no one else is doing and I know that they placed the worlds largest order for CNC machines about a year ago. I don't know about the iPad, but the macbooks are machined from a solid block of aluminum, which is just insane.

All game systems are sold for a loss, they male it up in the sale of softwate, I bet the nooks recoup the loss in book sales if they indeed do sell them for a loss.

[snipenekkid]

kinda funny [surprising] the Apple camp has not begun saying Apple is selling Touches and iPads at a loss in order to justify the 30% tax in the iTunes Store. I mean they are only marking up the iPad 200%-250%.

BTW, the mfg costs from places like iSuppli do in fact consider the physical plant overhead because pretty much none of the actual brands directly own the producing factories. They buy production capacity from the actual owner of the facility. It is up to the facility to cover their own nut.

And in the cases where a company, say Samsung, is using production facilities, those function as independent divisions charging say, the Galaxy Tab group within Samsung a price and requiring that group to compete for production time just like any outside organization. So the costs and such are already factored in to iSuppli tear down estimates.