Monday, May 10, 2010

iPad parts cost at least $259, what about new iPhones?

For innovative products, price and cost may at first not be directly related, but, as Damon Runyon says, "The race is not always to the swift, nor the battle to the strong, but that is the way to bet."

I enjoy reading how iSuppli and other firms dissemble products to determine their cost. For example, Apple's iPad tablet computer costs as little as $259.60 to build.

Materials for the iPad, which went on sale Apr. 3, include a touchscreen display that costs $95 and a $26.80 processor designed by Apple and manufactured by Samsung Electronics, according to El Segundo (Calif.)-based iSuppli. This analysis means that the components of the lowest-priced iPad, which includes 16 GB of memory, constitute 52% of its $499 retail price, on par with other Apple products including the iPhone 3GS. You can find more details on the costs in an article by Arik Hesseldahl in Business Week.

Will the iPad price trend resemble the iPhone? Back in 2007, early iPhone adopters paid $600 for a phone. Two months later, Apple dropped the price to $400. Then, in June 2009, it introduced a better version, with twice the storage, for $200, one-third the original’s price. Now as we anxiously anticipate a new iPhone, we all wonder what the price will be.

Back to the iPad, will the cost drop significantly? Probably so. And when it does, we should follow the advice of DAMON DARLIN, “Applause, Please, for Early Adopters,” as related in the NYTimes.

“WHY would anyone rush to buy a product knowing full well that it would be cheaper — and probably better — in a matter of months?

”What is truly remarkable about this surge in consumption is that early adopters — those who simply have to own a new gadget right away — cheerfully exhibited what might seem to be irrational behavior. These ardent consumers will stand in long lines, if that’s what it takes, to get an overpriced gadget ahead of everyone else they know.” In my own case, I want to thank my former student, Rick Genter, the first person to show me an iPad.

If you are an entrepreneur contemplating product development in the iPad/iPhone arena, or represent a large volume purchaser of similar products, it would be very helpful to have direct access to the reports from iSuppli. “Unfortunately iSuppli does not allow for public posting of our report pricing,” says Debra Jaramilla, Manager, Marketing. “However, please do direct them (you) to or 310.524.4007 for more questions.”

1 comment:

  1. What many of the articles who refer to early adopters as exhibiting irrational behavior conveniently omit is that there is an opportunity cost to *not* being an early adopter. In my case I am able to do things with my iPad that I could only otherwise reasonably do with a laptop computer, which costs significantly more while using a larger footprint with a lower battery life. By being an early adopter I gain those advantages, which translate into greater productivity and therefore, certainly over the life of the iPad, a negative cost of ownership.

    Why *wouldn't* I be an early adopter?