Wednesday, February 10, 2010

iPad Cost Estimates In: Profitable, Price-Flexible

Now that parts people priced iPads' components south of $250, Apple's per-unit margins and potential price flexibility have at least some source on which to begin projecting things like Apple's ability to profit, battle competitors, etc. The most expensive part of the iPad (est. $80) is also the part most draining of its battery: the multitouch display.

I would expect Apple to be interested in partnering with producers of display innovation to address both issues. Anyone remember Apple investing in Samsung LCD-manufacturing capacity in order to ensure price and supply?

The idea that the brains in Apple's new machine cost within $5 of the iPhone's processor is interesting: Apple may be able to produce a lower-end version for even less money, assuming it doesn't want to try to stick a whole A4 in every phone, or improve iPhone margins by moving to an in-house chip. The flexibility created by Apple's in-house design and lack of need to support ancient instruction sets for customers Apple won't be seeking means that Apple can now make exactly what Apple needs, and can expect to benefit from huge-volume pricing since it will be installing each chip in every single unit it sells of the design that houses it.

As competition for iPhone and iPad competitors heats up over the next few years, Apple will be able to do with these products what it did with the iPod: move to more and more price points until nobody can compete without having their air choked out as high-end consumers prefer Apple's offering in the same price range.

Catching Apple could prove a trick.

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