According to market research firm ISuppli, the components required to build an iPad only cost $260. On a device that retails anywhere from $499 to $699, that’s a pretty nice profit Apple is making. ISuppli estimates the cost of the touchscreen on the iPad at $95 and the Apple-designed, Samsung manufactured processor at $26.80. Most interesting is the fact that most of the cost in putting together in iPad goes into the screen itself.
Much of the iPad’s component costs went toward making the device appealing to use, said ISuppli principal analyst Andrew Rassweiler, who supervised the “teardown” analysis of the product. More than 40 percent of the iPad’s cost is devoted to powering its touch-screen display and other components of the computer’s user interface — “what you see with your eyes and what you feel with your fingers,” he said. The distinctive aluminum casing on the back of the device contributed about $10.50 to cost of materials.
Not very surprising given the fact that most of Apple’s popularity comes from the user experience provided by their products rather than the products being ground-breaking or innovative in some way. It’s no secret that Apple did not invent the MP3 player, the touch-screen mobile device, or the tablet device. They just took these ideas, improved the user experience, had better marketing, and put the stuff in nicer packaging.
The ISuppli evaluation shows a 52 percent profit margin for the lowest cost version of the iPad, priced at $499. This is apparently consistent with other Apple products. We also must take into consideration that this only covers the actual physical components that go into putting the device together. This doesn’t cover intangible things like cost of any software, development of that software, design and testing, or actual manufacturing costs.
ISuppli found more silicon chips devoted to powering interactions with the iPad screen than they thought they would, at least 3 in all. This seems to indicate that we could see price reductions in the iPad as time goes on since their is room to simplify and combine some of the components. I know many people who wouldn’t even think of an iPad at $499 but, at $299, it would fit into a lot more budgets.