The iPad runs Apple between $229 and $346 in materials and manufacturing costs, giving the company plenty of room to cut prices, a research analyst said today.
According to iSuppli, an El Segundo, Calif.-based market research firm known for its consumer electronics teardowns, the least expensive iPad, which Apple will retail for $499, contains $219 in parts and $10 in manufacturing costs, providing a profit margin of 56 percent. Meanwhile, the $829 top-end iPad has a build cost of $346, for a profit margin of 58 percent.
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Those numbers leave Apple lots of wiggle room should it choose to drop prices. "There's definitely room for them to do that, if they so desire," said iSuppli principal analyst Francis Sideco. "But they never do that without some reasonable rationale that retains their value proposition," cautioned Sideco. "If they do cut the price, they're going to put a spin on it."
Not quite never ; Apple hasn't always managed to spin price cuts.
In September 2007, when it dropped the price of the then-top-end 8GB iPhone by 33 percent, CEO Steve Jobs managed only the explanation, "We want to make iPhone even more affordable for even more people this holiday season."
Analysts were divided over whether the $200 price cut was necessary to jumpstart sluggish sales , but owners who had waited in line just two months before for the new smartphone were furious. Within hours, Jobs announced a $100 store credit for all current iPhone owners.