iPad Mini Teardown: $188 to Build
If you’re wondering how much it costs to build an iPad mini (given the retail price of $329 and that Apple makes an average margin of over 40% on its products), here’s your answer: $188
AllThingsD reports on the findings of IHS (formerly iSuppli) that when you take an iPad mini apart and see how much things cost you get something under $200:
Previously known as iSuppli, and widely known for its so-called “teardown” analysis reports, IHS has just completed its teardown report on the Apple’s newest iteration of the tablet. The verdict: The base model, a Wi-Fi-only 16 gigabyte iPad mini, which sells for a starting retail price of $329, costs about $188 to build. Adding additional memory — the options are 32GB and 64GB — adds only incremental cost but a fair amount of profit, amounting to an additional $90 for the 32GB version and $162 per unit on the 64GB model. (I revised this paragraph. See my note below.)
Nice and tidy profit margin on the devices, even when you factor in the additional cost of 32GB and 64GB versions. Yes, the margin on the iPad mini is less than the average, but Apple wants to knock it out of the park here. New manufacturing technologies, smaller parts, great displays all cost bucks. You can’t get around that. I wouldn’t be too worried about Apple’s profits though, I’m sure that Tim Cook is going to be working his supply chain magic on suppliers and manufacturers to get those costs down.
As AllThingsD (and others) reports, while Apple is still using some parts from Samsung, when it can choose another supplier—it does. The first iFixit teardown had a Samsung display, but shipping models (like above) have LG Display and AU Optronics components. RAM, flash memory and other key components come from a range of suppliers. I guess it just doesn’t pay to piss off Apple.
The cost to build is pretty close to what was predicted to before (195 vs 188), which is very interesting since it was posted before the Apple event and we didn’t know all the specs for the iPad mini.
It’s very important to note here that the cost to build a product isn’t really the cost of a product. You still have to manufacture it, ship it, market it, make other materials (boxes etc) to get the total cost of the unit. So is Apple taking a hit on the mini? Maybe a little. They are certainly not making their usual profit margin on the devices, but this was covered off in the year-end financials call. Apple wanted to make a great product and to them, it’s worth earning fewer profits—in the short term.
Update: I found this analysis on GigaOm on the potential sales and profit for the mini. What do you think? Big smash for Apple or a product that is looking for a niche?