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.
FYI, we hope to be able to post a teardown in the next week or so, which will spotlight the packaging and assembly issues, much like we did for the iPad 2, http://www.designnews.com/document.asp?doc_id=234074
When Apple issued their last quarterly earnings update, news reports indicated that the product margins for the iPad were much better than many expected. Of course when the volume for the fourth quarter of 2011 totalled over 15 million unit, it makes controlling costs a bit easier.
I don't know what the profit margins tend to be for handheld electronic products, but I think most product manufacturers would be very pleased with a 53% profit margin on their products, especially considering the volume involved here.
When apple release the I Pad 1/ 2, the competitions are merely less. Now the situations are entirely changed due to the presence of much talked free OS Android and its different flavors. So obliviously competitions are more and this forced Apple to shot cut its margins. Moreover according to one of the latest marketing survey, the market share of Android based Smartphone and tablets are increased by 37% percent in last 3 Quarters.
Just wait until Window 8 hits the scene. There will most definitely be two big competitors to the iPad, soon. Integration with other Microsoft products will be superb and with over 80% market penetration in the work PC world, this can be only a good thing. I look forward to this new software's arrival.
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