Why Only Apple Can Make The Sub-$500 iPad


Apple iPad Release

At this year’s Mobile World Congress in Barcelona, over twenty tablets made their debut running Google’s tablet-centric flavor of Android, Honeycomb… but if early indications are anything to go by — namely, the Motorola Xoom 3G’s entry-level price of $799 — it looks like none of these tablets will be competitive with the iPad. If the so-called “Apple Tax” is real, why can’t the competition beat the iPad in price?

Wired’s Brian X. Chen has an excellent overview of the many reasons that other tablet makers are just not able to compete with the iPad’s price tag. There’s a lot of factors at play here, but essentially, what it all comes down to is that Apple doesn’t have to pay a cut of every iPad to nearly as many parties as Motorola, say, has to pay for the Xoom.

Apple’s A4 chip design is owned by them, so they don’t have to pay licensing fees. They sell the iPad primarily through their online store or their 300 retail locations, which means other retailers don’t take as much of a cut. They don’t have to license an operating system. Furthermore, Apple can subsidize each iPad in small part thanks to the cut they make on every sale made through iTunes, including the App Store, their music and video stores and the iBookstore.

All together, it looks like the reason competing manufacturers can’t make a tablet with the same features and price as the iPad is because it’s impossible for anyone but Apple to do so at this point. Apple’s the only device manufacturer out there in control of its own manifest destiny from hardware through software, from physical retail presence down to digital delivery. Forget the Apple Tax: the sub-$500 tablet is a product only Apple is in a position to make.