Apple’s iPad only costs $270 to make, says analyst

John Brownlee ()

Apple’s iPad only costs $270 to make, says analystAlthough that $499 entry-level iPad is pretty much affordably by everyone, Apple will still be making a rather sizable profit on each one, if a bill-of-materials (BOM) breakdown conducted by BroadPoint AmTech analyst Marshall is to be trusted.

According to the BOM, the low-end $499 iPad only costs $270 to make, with the 9.7-inch touch-sensitive display being the most expensive element at around $100, with the 16GB SSD and aluminum case each costing only about $25.

As the storage jumps, so do Apple’s profits: the 32GB and 64GB iPads only see their costs rise another $25.50 and $76.50, respectively, but their suggested prices go up $100 and $200.

Apple’s most profitable BOM item? The 3G radio: it only costs them $16, but Apple’s charging over $130 for it. I personally wonder if some of that mark-up might be shared with AT&T to compensate them for assumed profit losses related to the month-by-month, cancel-anytime iPad 3G deal, but either way, Apple’s charging a premium for the functionality.

DON'T MISS
Analyst: 32GB iPad Costs $287.15 to Make

It’s all an estimate, of course — no one will know the iPad’s true cost until it’s actually vivisected after launch — but Apple knows how to put together a high-quality product that is both extremely profitable and an extremely good value. I wouldn’t be surprised if these numbers were exactly right.

15 comments »

About the author

John BrownleeJohn Brownlee is news editor here at Cult of Mac, and has also written about a lot of things for a lot of different places, including Wired, Playboy, Boing Boing, Popular Mechanics, Gizmodo, Kotaku, Lifehacker, AMC, Geek and the Consumerist. He lives in Cambridge with his charming inamorata and a tiny budgerigar punningly christened after Nabokov's most famous pervert. You can follow him here on Twitter.

(sorry, you need Javascript to see this e-mail address)| Read more posts by .

Posted in iPad, News |

  • brassman

    Is it unusual for Apple to be charging for engineering and design services? Not to mention the cost of marketing (mostly free thanks to hype) and distribution.

  • http://www.spark-creative.co.uk Mark Astle

    What’s your point? ‘Company makes a profit on stuff it sells shocker.’

  • Jeff

    I don’t mind this kind of article. I find these kind of details interesting.

    But I do think that putting “only” in the headline is needlessly jerky and probably why the 2 comments ahead of me are also being critical.

  • John Brownlee

    That’s a valid point, Jeff, but really wasn’t what I intended. I’m not anti-capitalist: if a company can sell me an awesome device for a price I think is steal, I don’t care if it cost them literally nothing to make… and that’s certainly true with the iPad. “Only” in this case was meant to highlight some incredible efficiency, not offer an implied criticism that Apple should charge less.

  • Charli

    agreed. not a shock. Apple has always had high margins.

    although I wonder if they really are that high. that Apple Tax that so many folks think is pure profit may not be. Perhaps they are including other costs like the free workshops they will do on the device, the repairs etc. I mean the AppleCare on this thing will be $100 at most. that isn’t likely to be enough to cover costs when you consider that like the iphone this isn’t a device you can take apart. any ‘repairs’ will probably be a swap and the $270 cost is more than the AppleCare. And if that swap is in the first year (thus without AC) there went the extra money you paid, or at least a good chunk of it.

  • David

    Most retail stores have a mark-up of 35-60 Percent, and that 1/4 pound hamburger you get for lunch, well with cheese it costs less than 60c to make, by the way thats labor added also. So your point is what?

    David

  • iFanboy

    How can any ‘analyst’ know that?

    Yet another attempt to murder the iPad in the womb ~ Apple is bringing in an (admittedly underspec) first model at $499, which for them… is a good price point

    So… make it sound like A RIP-OFF and let word-of-web do its damage

  • iFanboy

    Yes, 3:49 is BONA FIDE iFanboy

  • http://helpmymac.livejournal.com Евгений

    In Russia this gadged price will start at minimum 800 USD. So dont worry to lose some money :-)

  • Jason

    Um, the 3g radio only costs $16 but the GSM or CDMA patent royalties cost nearly $100. Thats why everyone else charges over $100 for a 3g radio upgrade.

  • FineTunes

    So how much did you say that you paid for your Coffee Latte this morning, your bowl of cornflakes or organic granola, your fine dinner out? Coffee beans, water, milk and a paper cup how much? A box of cornflakes or granola cereal cost how much–ever see what you get for the price? You order the salmon, veggies and salad, plus wine–how much does it cost per component, especially the wine–do you know the mark up on wine?

    You pay for what you are willing to buy and what you think you should pay. If you get some pleasure or benefits from the purchase all the better.

    The break down does not consider the other cost associated to develop and cost to market the product. Also consider that each of the component makers are making a profit. That’s how it works–if you buy everything at cost and you don’t make anything, then there is no R&D–assuming that you put money in R&D. Apple and other companies who develop a wide range of products do R&D.

  • http://www.allisoncrawfordsblog.com Allison Crawford

    lots of nonsense being said, if you want one you`ll have the pay the price, that simple

  • BaldSpot

    It only goes to show what a ripoff the Kindle DX is! ha ha ha!
    ——————————–
    Kindle DX $489
    3 apps (Books, Dictionary, Bookstore)
    Lovely monochrome display
    Plastic body
    Don’t forget to buy the $50 Book Light and the $50 cover
    ——————————–
    iPad $499
    140,000 apps (so far)
    Lovely full color backlit display
    Aluminum body
    Internet, email, iWorks, movies, games, etc.
    ——————————–

  • Bas

    In general. I agree the breakdown to components is a somewhat limited way of looking at the price issue (although not entirely without merit). The real question is how much value a device has for the user, which is a bigger worry for the ipad I think. What will the ipad do that I do not already have a superior device for? (@ BaldSpot, The ‘lovely monochrome [e-ink] display’ means the Kindle can at least be be used to read books comfortable). In my opinion that is the real reason the ipad is not such a swell deal.

  • blair

    people need to understand that it cost millions to produce this ipad. they had to pay dozens of people to create it, pay millions to create a factory, and machines to make it and pay for adds campaigns. so even though it costs a lot less to make then they sell it for, a lot of the ipad profit in the first year or so will go towards paying off pre-debts of the product