Why A 128GB iPad? Call It The iPad Pro [Opinion]

This is who the 128GB iPad is really for. Photo: http://bit.ly/WMmZv8

This is who the 128GB iPad is really for. Photo: http://bit.ly/WMmZv8

For some reason, Apple released a 128GB iPad this morning. And a lot of people are scratching their heads over it.

It’s not that a 128GB iPad is an unwelcome thing, of course. More storage for apps, movies and music is always a good thing… except, if it’s just a matter of soldering in a couple of 64GB NAND modules instead of a couple of 32GB NAND modules, why the heck didn’t Apple release a 128GB iPad when they refreshed the iPad in October?

In other words, why now? Why announce it today, on a sleepy Tuesday morning at the tail-end of January? And who is this thing for, anyway?

I’ve got a theory.

Last week, Cupertino announced their quarterly earnings, and they sent Apple’s stock into a nose dive. Why?

iPads are cannibalizing Mac sales, and that's an opportunity.

iPads are cannibalizing Mac sales, and that’s an opportunity.

Although it was an epic quarter for Apple when it came to revenues, profits were actually proportionally down since a year ago quarter. On average, Apple’s raking in less profit on every product sold than it did a year ago.

Another interesting fact from the quarterly earnings is that for the first time since 2004, the number of Macs sold fell against the year ago quarter. Apple sold 20% less Macs last quarter than they did in the same quarter in 2012. Meanwhile, iPad shipments grew 48%.

When you look at these results, the takeaway is obvious. More and more people are buying iPads to replace their Macs. And there’s a reason why Apple isn’t worried about it, because the margins on iPads are way better for Apple than they are on Macs.

For example, the margins on the MacBook Air reportedly max out at 37%, making it one of the more profitable Macs from Apple’s perspective. Meanwhile, the margins on the fourth-generation iPad max out at 48%.

iPads are more profitable for Apple to sell than Macs are. And what makes them so profitable? The premium they put on the storage.

Check out this chart of the margins Apple makes on every fourth-generation iPad sold.

iPad16GB32GB64GB
BOM & Manufacturing costs$316$333$366
Retail Price$499$599$699
Gross margin37%44%48%

Data courtesy of iSuppli

See what’s happening here? For every $30 Apple spends doubling storage capacity on the iPad, they can charge an extra hundred dollars at retail.

For every $30 Apple spends on flash storage, they can charge an extra hundred dollars at retail.

Extrapolating from this chart, it’s clear that a 128GB iPad would bump Apple’s iPad margins up above 50%. For roughly $120 worth of NAND chips, Apple will bring in an extra $280 worth of profit on every 128GB iPad sold.

Of course, none of that extra profit means anything if no one buys a 128GB iPad. But they will, and you know who’s going to be buying them in droves? Professionals who are replacing their MacBooks with iPads. Because in the future, the 9.7-inch iPad isn’t going to be purchased primarily as a tablet. The iPad mini has shown that for e-reading and gaming, a 7.85-inch display is more pleasurable to use. But there’s one thing that a 9.7-inch iPad is better at, and it’s working.

You only have to look around you to see that iPads are seriously replacing laptops. Go to any Starbucks, and you will see corporate suits hammering away on reports and students writing on iPads. Keyboard cases for the iPad are a booming market, and another one debuts pretty much every day. Heck, Cult of Mac’s Gadgets & Testing Editor, Charlie Sorrel, files every story from the iPad. The tablet @ work revolution? It’s already here, and the iPad has already won.

You could even call it the iPad Pro.

So why now? Because Apple took a look at their quarterly numbers and saw that now was the time. People aren’t waiting to migrate away from their Macs, and every second that Apple waited was a sliver of potential profit lost.

The 128GB iPad, then, isn’t really a tablet. It’s a MacBook replacement, aimed at professionals. You could even call it the iPad Pro.

Related
  • MrsCleaver

    The author said: “The 128GB iPad, then, isn’t really a tablet. It’s a MacBook replacement, aimed at professionals. You could even call it the iPad Pro.”

    I think the whole article is a stretch on a light new day. The bigger-ram iPad is hardly a replacement for a MacBook. No, the iPad with 128GB of memory is… just an iPad with 128GB of memory.

  • craigburdett

    John, I hate it when I agree with you. But, for 95% of the work that most people really do on a computer (email, calendar/schedule, web-surfing, & presentations) the iPad works perfectly. And at about 2 kilos less than a MBP it’s much easier to travel with.

    And MrsCleaver. You’re right. It’s not a replacement for a MBP – not for (real) video & photos editing, development, design and other processor-intensive applications. But the iPad is still perfect for checking email and sending grandma photos of the kids: what amounts to 95% of most computer use.

  • whitts_dad

    iPad Pro? I like that. Better than MAXiPAD.

  • FriarNurgle

    I’d welcome the change from a work laptop to an iPad.

  • The_Network

    The author said: “The 128GB iPad, then, isn’t really a tablet. It’s a MacBook replacement, aimed at professionals. You could even call it the iPad Pro.”

    I think the whole article is a stretch on a light new day. The bigger-ram iPad is hardly a replacement for a MacBook. No, the iPad with 128GB of memory is… just an iPad with 128GB of memory.

    I agree with Mrs Cleaver, what you have is a 128GB iPad. The iPad does a lot, but in it’s current state of not being able to join a Domain, I will have to use my MB Pro on our company network.

  • shahn

    More storage = pro?
    That’s hilarious.

    I’m typing this on an iPad and its worth shit to get actual work done.
    Side note: Tim cook is nuts if he actually spends 80% of his time “working” on the iPad.

  • bdkennedy

    The iPad isn’t replacing the MacBook Pro. Most of the people that use MacBooks are creative people. You can’t run Photoshop on an iPad.

  • mikeytweeterz

    They should name something an “iPad Pro” if it has better specs besides storage. The “Pro” MacBooks are called “Pro” for that reason.

  • darkhuntress

    I don’t care what its called. I m getting one next week. It won’t take the place of my MacAir nor my iMac. It will allow me to download more apps without always having to delete some. It will allow game developers to put more umph into games for the iPad and it will allow me to store more photos on my ipad for editing without worrying if I have enough room or not.

    Plus maybe, just maybe, I will be able to do real 3d content work on my iPad! Can’t wait!!

  • bdkennedy

    Or they are simply beating Microsoft’s Surface Pro to the punch.

  • technochick

    It is not aimed at pros at all. It is simply aimed at folks that like to carry more stuff locally. Can’t do anymore than the rest can etc.

    So no, it isn’t a Pro

  • technochick

    More storage = pro?
    That’s hilarious.

    I’m typing this on an iPad and its worth shit to get actual work done.
    Side note: Tim cook is nuts if he actually spends 80% of his time “working” on the iPad.

    Consider for a moment the type of work he does. He’s likely not typing long letters etc because he has assistants for that. He’s reading emails and other light tasks

  • Chris Leiter

    I’m a traveling professional. I am away from my home for more than 50% of the year. The number one thing that I wish my iPad had was more available space. It is actually very difficult for me to find the space to fit the videos, music and apps I want to use on my iPad (3rd Gen 64GB, AT&T LTE). Having 128GB on my iPad will solve many problems. I’ll probably be picking one up when I get back from my next trip in a month.

  • Jairo

    This is just a way to milk the 4th gen iPad before releasing the 5th.

  • ulyssesric

    The profit margin theory is ridiculous. It’s not just simply soldering another 64GB flash memory module onto the board. No. Apple need to replace the 64GB flash memory module with one 128GB module. And the price gap between 64GB module and 128GB is not merely $30.

    In my local brick-and-motar shop, the price of 64GB SSD ranges from $70 to $150, while most falls in the range of $70 to $80. The price 128GB model ranges from $100 to $250, while most falls in the range of $150 to $180. I think the extra $100 cost is fair.

    So what does it mean that Apple released the 128GB version now ? It means that the iPad is now part of the regular Mac family, and it won’t follow the annually renew route. Apple will release incremental updates in a shorter period, and reshape the product every few years, just like all the other Macs and MacBooks.

  • raymondduong

    Why a 128 GB iPad ?
    1.An FLAC itunes library of 3000 songs can takes up to 30GB
    2.An average consumer has 20 (?) favorite HD movies to be always synced to an iPad, which take up 40GB
    3.Photos 10GB. Photographer may use up to 50GB
    4.Apps. You know how heavy these are. Their graphics are becoming like pc games. 20GB at least.
    All im saying is, you cant imagine what you can do until you have all the capacity. Upgrade your library quantity-wise and quality-wise will use more than 128GB

  • James Barnette

    ehh yeah they sold less Macs While this prolly would have been the case anyway if the new iMacs had been in full stock and ready to ship to customers in late Oct I think that this would have been a different Quarter for them. Same thing with the iPhone 5. They have got to stop this Supply Shortage issue. There were a Lot of people that will just go buy an Samsung Galaxy. The average Consumer is not going to wait months to get the phone they want. Don’t announce until you have sufficient supply. Period. Another thing is that Apple is paying more and more for production. Every time some watchdog group does a story on how bad working conditions are in China and Stories of this nature apple has to shell out more and more cash.

    it will be funny when China gets too expensive to manufacture in and these companies move to the next country down the food chain. Then all of these people will be out of work.

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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