Apple will cut into its profit margins -- but only slightly -- with its latest iPad and discounts on the iPad 2, according to estimates from UBM TechInsights. The iPad model announced March 6 has no numerical designation; it's referred to as "the new iPad" by Apple on its store.
The new iPad, in the configuration with 16GB of memory and WiFi plus 4G connectivity, will have an estimated bill of materials cost of $310, up from $270.86 on the original iPad and $276.27 on the iPad 2 based on versions at launch using 16GB of memory (see tables below). By selling all three at the same $629 price, Apple is cutting its profit margins about five points from 56-57 percent on the first two generations of products to 51 percent on the new iPad, UBM TechInsights projected.
Note that the TechInsight comparisons are based on iPads with cellular data services (3G in the case of the original and the iPad 2, 4G LTE for the new iPad). The base model of the new iPad has 16GB of memory and WiFi but no 4G. It sells for $499.
Apple’s profit margin on the 3G version of the iPad 2 will dip to an estimated 53 percent when it is discounted to $529 at the release of the new model. The iPad 2 sustains less of a hit because prices of its components are projected to have come down since its launch last year, resulting in a current bill of materials cost of $248.07 for the 2012 version of the iPad 2, it said.
Most of the new iPad’s higher costs are split fairly equally among four major components. The new higher-resolution display is expected to cost about $12 more, the new A5X processor adds about $8, and the LTE modem and expanded battery add about $7 each to the new iPad’s cost, UBM TechInsights estimated.