If there’s one thing Apple knows how to make, it’s money. Even so, the iPad Air 2 is one of the best value tablets Apple has ever made.
Even though it costs Apple roughly the same amount to make an iPad Air 2 as it did to make a first-gen iPad Air, Apple’s margins have actually gone down slightly on the superslim, A8X-powered tablet.
According to a new report from research firm IHS, the 16GB iPad Air 2 (Wi-Fi only) costs Apple just $275 to make, while the top-end 128GB LTE iPad Air 2 costs $358.
That means Apple’s profit margin on the iPad Air 2 ranges between 45 percent and 57 percent, depending on the device.
Comparatively, Apple made more money selling the first-gen iPad Air: The profit margin Apple could depend on making there ranged from 45 percent on the low end to 61 percent on the high end.
Where is the profit margin dip coming from? Memory. The iPad Air 1 shipped with 16, 32, 64 and 128GB of memory; the iPad Air 2, on the other hand, leaves out the 32GB tier, effectively lowering the price for the 64GB and 128GB models by $100 each.
Don’t cry too much for Apple though. According to IHS, Cupertino still makes most of its profit on memory: Wile 128GB of flash memory costs Apple just $60, they sell a 128GB device at a $300 premium.
Not a bad business model, if you can manage it. Sadly, few besides Apple can.
John Brownlee is a writer for Fast Company, and a contributing writer here at CoM. 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.
3 responses to “Apple makes a sick amount of money selling more storage for iPad Air 2”
*Correction in second last paragraph: The 128GB device sells at a $200 premium to the base, not a $300 premium.
These figures do not include costs associated with R&D, labor, marketing, shipping, etc, which is why they differ from the profit margin numbers reported by Apple.
We’re talking storage, right? Not memory.