
Why Nobody Can Match the iPad’s Price - gsivil
http://www.wired.com/gadgetlab/2011/02/ipad-price/
======
gabrielroth
One factor that the author doesn't mention is Apple's success at lining up
deals with component manufacturers. A couple years ago (before anyone had
heard of the iPad) they locked in great prices on flash memory and LCD
displays. They could do that because they were about to invent a huge market,
and they knew it. Anyone trying to get into the tablet business in 2010 had to
pay much, much more.

Steve Jobs and Johnny Ive are no slouches, but Tim Cook doesn't get enough
credit for stuff like that.

~~~
danilocampos
A hundred upvotes, really. Tim Cook turned Apple from a sloppy, cluttered mess
to a perfectly tuned and calibrated machine. He designs business processes
like Ive designs hardware enclosures. He's still at it, too, telling investors
during the last earnings call that Apple once again snapped up a boatload of
supply on an _unnamed type of component_.

I bet he'd be _amazing_ at Starcraft, once he learned the ropes.

~~~
jrbj
I believe it. In Starcraft, Macro beats Micro.

~~~
iwwr
Tell that to those tanks!

<http://www.youtube.com/watch?v=F3IbwjeCx6U>

------
netcan
_"That’s (Apple stores) advantageous, because if the iPad were primarily sold
at third-party retail stores, a big chunk of profit would go to those
retailers, Hiner reasons."_

 _"Designing in-house means Apple doesn’t have to pay licensing fees to third
parties to use their intellectual property. For instance, the A4 chip"_

This is silly. Software development, retail, chip design etc. all cost money.
Apple isn't just taking Bets Buy's cut, it's taking its risk and its costs.
Same for chips, software, etc. Actually it's more risky and costly in many
ways. If the chip turned out to be good but not ideal for iPads they're not
going to go find a different market for it. Apple stores aren't free to cash
in on whatever popular high margin non-Apple widget people are buying this
season.

Vertically integrating obviously works well for Apple, but saying that Apple
is able to sell iPads @ $500 because of it is missing the point. You now just
have to explain what makes apple good at retail, software, chip design, etc.

~~~
wisty
iOS development was already paid for by the iPhone and iPod teams, as was chip
design.

And the App store and iTunes are a benefit, not a cost.

However I agree, there are other reasons - their outsourcing of components has
a very good reputation.

~~~
hessenwolf
There is a bit of a contradiction. It cannot be both great that Apple doesn't
outsource its retailing and great that Apple outsources its components
production. Economically, it should buy from the cheapest and most efficient
source all it requires. If best buy are more efficient retailers, then Apple
should use them; but I think there are some advertising advantages to their
stores.

~~~
gabrielroth
"It cannot be both great that Apple doesn't outsource its retailing and great
that Apple outsources its components production."

Why not? Outsourcing isn't always good or always bad.

Economically, Apple should do the things it can do well (software, design,
retail) and outsource the things it can't do any better than anyone else
(component production, assembly).

~~~
hessenwolf
I think we are saying the same thing, and I just did not say it well. My
problem with the statement I quoted is that it is unconditioned on efficiency.

------
fuzzmeister
"Apple is the most vertically integrated company in the world."

I struggle to see how that statement could be true for a company that
outsources all of its manufacturing.

~~~
markszcz
The wording here is "most" There was an article written in 2006 saying
"Designed By Apple in California. Made in a sweat-shop in China."
([http://blogs.siliconvalley.com/gmsv/2006/06/designed_by_app....](http://blogs.siliconvalley.com/gmsv/2006/06/designed_by_app.html))

Architecturally wise they are vertically integreated with all their in house
hardware and software but I dont think anyone can argue that their
manufacturing practices dont help that statement.

~~~
iwwr
There used to be a time when Left-leaning people knew some history. Terrible
as the worker conditions might have been at the dawn of the Industrial Age,
they were a vast improvement compared to the past.

Equally so, unpleasant as Chinese factories may look to a Westerner, they are
an improvement over the past. Have people actually asked those workers if they
were willing to quit or had better prospects elsewhere?

~~~
psykotic
> There used to be a time when Left-leaning people knew some history.

Everyone tends to view history from an angle that supports their
preconceptions. You don't seem to be any exception.

> Terrible as the worker conditions might have been at the dawn of the
> Industrial Age, they were a vast improvement compared to the past.

How are you defining worker conditions?

A family with a small plot in the countryside could not occupy their full time
with cultivating the land. If you travel throughout the deep countryside of
countries like Cambodia, Vietnam, China and the poorer parts of Thailand like
Isaan, you still see much evidence of this today.

People moved to the cities because they could make more money. It's that
simple. In no way were working conditions an improvement if you care about
hours, health and safety. The ready availability of jobs for unskilled labor
also created perverse incentives for parents to send their children to work at
the factories. That was true in late 18th and early 19th century Europe, and
it is still true today in the poorer emerging economies.

~~~
iwwr
And you suppose making more money, or wanting to, is somehow evil?

~~~
psykotic
I suppose, said or insinuated no such thing. What a childish comeback.

Of course it isn't evil. If you're starving then making money is not only not
evil but a necessity. Beyond meeting your immediate needs, working endless
hours at a repetitive, unhealthy job to support your family or further your
children's future is commendable.

That does not mean worker conditions improved with industrialization as
compared to working on your own farm or as a day laborer.

~~~
iwwr
A standard of living is not made by just the raw hours of leisure.
Industrialization also brought security from famine and allowed for hygiene,
sewage and medicine. It also allows people to chose to work very little, _just
to support their bare necessities_ (although very few chose to).

------
staunch
> _"Designing in-house means Apple doesn’t have to pay licensing fees to third
> parties to use their intellectual property. For instance, the A4 chip"_

Isn't the A4 an ARM + PowerVR and doesn't Apple pay design licenses on both
those?

~~~
Samuel_Michon
More than just licensing the tech, Apple buys the companies who make it. Apple
owns Intrinsity, which designed the A4 processor. Apple also owns P.A. Semi,
which contributed to the A4 SoC. Apple partially (10%) owns Imagination
Technologies, the makers of PowerVR.

~~~
masklinn
> Apple owns Intrinsity, which designed the A4 processor.

That's a pretty long shot. Intrinsity clearly improved the A4, but overall A4
is a very standard Cortex A8 SoC.

> Apple also owns P.A. Semi, which contributed to the A4 SoC.

I have not seen any analysis or information pointing to actual PA Semi input
in A4. Where Intrinsity is well known for improvements to existing designs
(power-wise, mostly), PA Semi is generally credited with brand new and unique
design, which the A4 isn't. I also understand most of PA Semi left after its
acquisition.

~~~
Samuel_Michon
> Intrinsity clearly improved the A4, but overall A4 is a very standard Cortex
> A8 SoC.

Agreed. According to the Times, Intrinsity only made the Cortex A8 perform at
a higher frequency [0]. An another Times article suggests PA Semi worked on
the A4 [1], but no details are given.

[0] <http://www.nytimes.com/2010/04/28/technology/28apple.html>

[1] [http://www.nytimes.com/2010/02/02/technology/business-
comput...](http://www.nytimes.com/2010/02/02/technology/business-
computing/02chip.html)

------
cosmicray
> Apple has partnered with a few retail chains such as Best Buy and Walmart,
> but those stores always seem to get a small number of units in stock. Hiner
> rationalizes that the true purpose of these partnerships is probably to help
> spread the marketing message, not so much to sell iPads.

The display unit at WalMart is behind plexiglass. If you want to touch it,
someone with a key has to open the cover. I'm glad to see current Apple
products at WalMart, but the actual sales experience is significantly less
than going to an Apple store, or to BB.

IMHO, the real secret behind the iPad's price is supply chain management and
very astute inventory control. Idle inventory can really wreck your bottom
line.

------
eik3_de
> _Designing in-house means Apple doesn’t have to pay licensing fees to third
> parties to use their intellectual property. For instance, the A4 chip inside
> the iPad is based on technology developed and owned by Apple (not Intel, AMD
> or Nvidia). The operating system is Apple’s own, not something licensed from
> Microsoft or Google._

Apple doesn't/didn't pay licensing fees to ARM or PowerVR for the A4
components?

What exactly do you have to pay to Google to "license" Android?

It seems like the author doesn't quite know what he's talking about.

~~~
Athtar
>What exactly do you have to pay to Google to "license" Android?

For one thing, all of Google's core applications - Gmail, Maps, Search, Google
Voice, Googles, etc. Same thing with the Marketplace too. All the handset
manufacturers have to pay Google to include those apps on their handsets.

------
drhodes
From the mouth of the CEO of motorola, the wifi-only Xoom to be priced at
$600, he announced Wednesday.

[http://arstechnica.com/gadgets/news/2011/02/motorola-xoom-
ta...](http://arstechnica.com/gadgets/news/2011/02/motorola-xoom-tablet-will-
come-in-wifi-only-version-priced-at-600.ars)

~~~
haribilalic
That's still $100 more expensive than the cheapest WiFi iPad and only $29
cheaper than the cheapest WiFi + 3G iPad.

~~~
flyt
and it's competing with a product announced over a year ago, not the next
generation of iPad due any day now.

~~~
edtechdev
For that extra $100 you get 2 cameras, dual core instead of single core
processor, 1gb ram instead of 256mb ram, 1080p instead of 720p, 1280
resolution instead of 1024, android 3.0 (built for tablets) instead of ios 4,
expandable storage up to 32gb microsd, flash support, hdmi, usb 2.0,
gyroscope, 4g (for the more expensive model), and a motherfrackin' barometer
:)

And by the way there are perfectly good android tablets already available for
around half the price of the cheapest ipad. You can already run android 3.0 on
a $249 nook color.

~~~
Cadsby
Are you seriously comparing an iPad to a Nook Color?

~~~
blinkingled
Why not? Even if you compared it as "half the iPad at half the price" - it
still is a touch based tablet computer with similar hardware to the iPad,
albeit a smaller screen.

Nook color full specs:

Processor: ARM Cortex A8-based Ti OMAP 3621 @ 800 MHz (same processor as Droid
2 and Droid X) GPU Processor: PowerVR SGX530 Graphics Rendering: Open
GLES1.1/2.0 Hardware Scaling: 854x480 scaled to 1024x600 Video Formats: .3GP,
.MP4, .3G2 __Video Codecs: H.263, H.264, MPEG-4, ON2 VP7 __Image Formats:
JPEG, GIF, PNG, BMP __(same GPU as Droid 2 and Droid X) RAM: 512MB Hynix
H8MBX00U0MER-0EM MCM (Stacked Chips 2x256MB each die mDDR) Internal Flash: 8GB
Sandisk SDIN4C1-8g Removable Flash: 32GB via microSDHC Connectivity:
802.11b/g/n Security: WEP/WPA/WPA2/802.1x Mode: Infrastructure Display: 7"
1024x600 IPS Display w\VividView Cypress Semiconductor TTSP Gen 3 (TMA340)
Touchscreen , kernel driver , reference LG Display LD070WS1 (SL)(02) LED
Backlight Pixels per Inch: 169 Aspect Ratio: 16:9 Colors: 16 Million Viewing
Angle: 178° (same as HTC 7 Surround and HTC 7 Mozart) battery Battery Life: ~8
hours Micro-B USB 2.0 High-Speed Accelerometer

So B&N is able to deliver a device with matching specs minus smaller display
for $250 less than iPad. I am not counting magic or experience anywhere - we
are talking about concrete stuff like hardware components here - with
Honeycomb we could argue that it is possible to ship a iPad alternative with
better hardware and equal or better software for $499.

~~~
Cadsby
I think your comparison is more than a little narrow. The Nook and the iPad
are marginally similar but not really comparable devices. There's a reason why
one has been far more successful than the other, and no, I'm not referring to
any sort of "magic" or ephemeral voodoo.

But there's a larger point to be made in that I think your comments reflect a
common attitude among many nerds - this obsession with specs. Most consumers
don't make purchasing decisions based on a giant list of specs. Maybe you feel
they should and they're stupid for not doing so, but that just isn't the
reality of the market. And many manufactures, as well as Google, are starting
to realize they simple can't put a faster processor and more memory in their
products and expect to compete with Apple. Google in particular is putting a
lot more effort in to the "polish" and overall "experience" of using Android
devices. I know these are dirty words for some, but they reflect the market
realities of how consumers make purchasing decisions. And I think it's a good
move that will help Android increase it's market share even further.

~~~
blinkingled
I am not denying the "experience" factor. You are right that most consumers
don't care about specs at that detailed a level - they do care in general at
high level about it, i.e. screen sizes and storage space etc. but that is
besides the point.

What I am pointing out is that it is possible to produce and sell a device
that can compete with the iPad on specs and experience - the original article
said nobody else could sell a device matching the specs of the iPad at $500.
It clearly is possible and with Honeycomb improving the experience the
software part is also covered - mostly for free to Android tablet device
makers.

------
antimatter15
I guess it's also a problem with Android. When the iPad is sold for the low
price, they're aiming for market share. This in turn, attracts developers
which attract consumers where apple makes a nice 30%. But if Motorola competed
for a low price, it wouldn't necessarily secure a future as it only furthers
the Android platform, which any vendor can build on top of. Thus it doesn't
make sense for any Android tablet vendors to play loss-leader, while it does
for Apple to.

------
nhangen
As far as I'm concerned, I'm not sure this is about price. Yes, I have the
$499 Wi-Fi iPad, but I bought it over the Kindle, Nook, and Galaxy because
it's a perfect blend of technology and efficiency.

The Galaxy feels like a clunker, and the Nook isn't versatile.

I don't believe the iPad can replace a decent netbook or macbook for working
on the road, but it works great for doing what it's supposed to do.

The reason the competition can't get it right is because they're trying to
compete by adding more junk that we don't need. They do the same with phones
too. Loading more memory or faster processors isn't what works for me - what
works for me is a lightweight device that works.

I rarely use my iPad, but I wouldn't sell it because it serves a great
purpose, which is as a tweener. The competition is trying to turn their
tablets into souped up netbooks with touch screens, and that's why they are
failing.

~~~
krschultz
The Kindle is not a tablet though. That's not dismissing the Kindle (I own one
of the big sized Kindle's and I lvoe it), Amazon explicitedly has set out to
make an e-book reader, not a tablet.

The Nook is closer, but it still isn't comparable to an iPad.

------
gnaffle
When I read about the component shortages of 10" displays, I couldn't help but
think about Steve Jobs rant last year about tablet sizes. He went on about how
Apple had thought a lot about tablet screen sizes, and that you needed a 10"
screen to get a decent experience. The companies deciding on a 7" screen had
made the wrong choice.

It now seems like he was just mocking the competition about being unable to
ship a similar price competitive tablet.

------
krschultz
The most ironic part of the iPad (and now Android) tablet explosion is that
hard Bill Gates had been pushing tablets for _years_ at Microsoft. And now
Microsoft doesn't even have a dog in the fight.

~~~
lallysingh
Bill was too early, didn't want to do the necessary UI work, and didn't have
the hardware team to push the hardware standards up. I remember people trying
to use windows tablets. They were full-on laptops running an extended version
of windows, with a few apps and a handwriting recognizer slapped on top. They
were heavy, confusing to use, and not terribly finger-friendly.

They've got good reason to stay out of this one. iOS came from Apple's phone
OS (esp. in terms of UI). Until Windows Mobile starts getting some traction,
MS is better off staying out of the fight. You can always commoditize your
opponent later.

------
martythemaniak
Somehow, having a crapload more hardware hasn't entered the author's analysis
anywhere. Why would you expect 1GB of RAM to cost the same as 256mb?

I can't believe people are buying this tripe. I'm willing to put down $20 that
by the holidays, you'll see cheaper android tablets (same specs, not this
bullshit), any takers?

~~~
nika
I don't see what will change between now and christmas. Many of the android
tablets are vaporware at this point so there is nothing to stop them from
advertising that they'll be cheaper... yet they seem to be more expensive for
the most part.

~~~
martythemaniak
Well, you should go ahead and take my money then - I wasn't kidding about the
bet.

What will change? First of all, the Xoom isn't spec-comparable to the iPad and
second, other manufacturers will start shipping their tablets, bringing prices
down.

------
nazgulnarsil
nook color is $250 (sold at a loss, but available nontheless) xoom is $600
Archos 70 and 101 are $300 notion ink is $425

I call shenaningans

~~~
nhangen
Are you really comparing a Nook to the iPad?

~~~
nazgulnarsil
features that someone never uses aren't really a selling point.

~~~
nhangen
such as?

~~~
nazgulnarsil
you're the one touting the ipad. whatfeatures does it have that I can't do on
a rooted nook?

------
scdc
What if Apple is selling iPads at/below cost in a bid for marketshare? I could
see Jobs et al guessing this would be a big market, and choosing to sell
(especially the entry model) at/below cost. Reminds me of the Jobs'
perspective on why the the Mac stalled in the 1980s, "when they should have
gone for market share, they went for profits." (<a
href="[http://www.newsweek.com/2004/02/01/ok-mac-make-a-wish.html&#...</a>).
This time he's going for market share.

~~~
scdc
Botched the link, sorry: <http://www.newsweek.com/2004/02/01/ok-mac-make-a-
wish.html>

------
markszcz
I feel a lot of other companies are riding the tablet wave. Why would motorola
underprice the Xoom when possibly they could make a killing on selling the
next "iPad" killer.

If its true that Apple is sitting on a pretty price margin on the iPad, then
the Xoom, I feel, wouldent be to far off. If they had to they could lower the
price to gain momentum but so far this is Motorolas first good tablet release
and I dont think they will want to miss an opportunity to make a pretty penny
on this.

~~~
davidedicillo
Apple locked down the 10" screens lcd market, why do you think samsung went
with a 7"?

~~~
minalecs
I don't know why samsung went with a 7" vs 10" but it makes a huge difference.
In comparison its like carrying around a big hardcover book vs a paperback
book. Watching youtube and stuff on it is fine, I don't find a huge
difference. The biggest difference I find it much easier to hold with one
hand, and manipulate the screen with the other without having to place it on
my lap or needing a stand, and hold it like a real pad should be held and to
pass around.

------
teyc
Steve Jobs had already warned that margins are going to be down. It was a
strategic decision to not earn Apple-sized margins on the iPad, but rather
outflank the PC industry by introducing a new computing product.

Wired.com is right though on the ability to suck the air out of the
touchscreen supply. It is an acknowledgement to the artificial gravitational
field Apple exerts on the hardware components market.

------
fxj
archos101 $300, 10 inch screen, 1024x600, android 2.2, usb host and client. of
course, not a us company ;-)

------
etaty
They should thank Foxconn!
[http://news.google.com/news/search?aq=0&pz=1&cf=all&...](http://news.google.com/news/search?aq=0&pz=1&cf=all&ned=us&hl=en&q=apple+foxconn&oq=apple+foxc)

------
runinit
The Notion Ink Adam is cheaper...

Notion Ink Adam with LCD & WiFi (no 3G) - $375 USD Notion Ink Adam with LCD,
WiFi & 3G - $425 USD

Notion Ink Adam with Pixel Qi display & WiFi (no 3G) - $499USD Notion Ink Adam
with Pixel Qi display, WiFi & 3G - $549 USD

~~~
jodrellblank
The iPad is available to purchase.

------
elgy
bad

------
yock
Apple can sell the iPad for $500 because they have the iTunes store backing
it. They know they don't need to make money on the sale of the device because
the entire point of buying the device is to buy apps for it, and Apple as we
all know gets a cut from every sale.

Other manufacturers don't have this working for them.

~~~
Samuel_Michon
_"[Apple knows it doesn't] need to make money on the sale of the device
because the entire point of buying the device is to buy apps for it,"_

The opposite is true. Apple doesn't need to make money on software, because
their hardware products have healthy profit margins. The iTunes Store breaks
even, and it has done so for years. The same is true for the other software
Apple sells.

Compared to competing products, Apple's software products are dirt cheap. Its
office suite (iWork) is priced at $60 while Microsoft Office is priced at
$280. Apple's photography software (Aperture) costs $80, Adobe's Lightroom
costs $300. Apple's video editing suite (Final Cut) costs $1000, Avid's Media
Composer costs $2300.

~~~
lurker19
Do not ignore the fact that Apple's offerings are far less powerful, useful,
and debugged than the competing software you listed.

Aperture requires a Mac Pro to run properly, which undermines the cost
argument.

~~~
Synaesthesia
Aperture runs fine on any Mac. 4gb RAM helps, and an SSD.

------
edtechdev
This article didn't get the prices right (which is suprising since that was
the sole point of the article), and it got the history exactly backward.

The main shock people had about the ipad was how expensive it was priced
($500-$750). They weren't 'surprised' at how low it was priced. And to Apple's
credit, we now know that even at that price it would sell well, and also we
know that this price is actually not so unreasonable or inflated as we
thought, because other major manufacturers making comparable quality tablet
products are also in that price range (except for the nook color, notion ink
adam, archos 101 and 70, or several no-name tablets).

Also, the xoom is $600 compared to the old ipad's price of $500. If you want
to compare the $800 xoom with 3g (and 4g), compare it with the $750 ipad with
3g. So the prices are not so different.

~~~
Cadsby
I disagree. I remember much of the Tech press predicating a $1000 price point
and being rather surprised at the existence of a low end model at $499. It was
only the cross section of nerds that really dislike Apple that called it
expensive and panned it as a crippled piece of junk. (Engadet had to shut down
their commenting system for a few days due to all the vitriol)

Also, I think you're missing the point on pricing. It really hurts Motorola
that there isn't a low end model at $499, because there are a lot of non-
technical users for whom 16GB is perfectly adequate. We don't have direct data
AFAIK, but I'm willing to bet the low end iPad is Apple's best selling model
by far.

~~~
SoftwareMaven
I completely agree with you. There was a collective jaw drop when Steve put
the $499 slide up. The lowest the rumor mill had gotten was $800 leading up to
that point.

