Users Will Overpay for iPad by an Average of $269

Since its launch at the end of January, the iPad, like all Apple products, has attracted significant public attention, which is divided over the usability and cost-effectiveness of the latest toy from Steve Jobs’ lab.

However, somewhat beyond the usual bickering, the research firm iSuppli attempted to calculate, in black and white, how much Apple actually paid to produce each unit of the iPad, or how much a potential buyer is overpaying for the device. Good or bad, on the first day of pre-orders, the iPad gathered over 90,000 future owners, although it will only reach their hands at the beginning of April, and this joy will cost them at least $500, while more enthusiastic buyers will spend up to $829. According to iSuppli’s estimates, passionate fans will overpay for the device by about $250, specifically $269, compared to the cumulative cost of all parts.

If this calculation is accurate, Apple, always insatiably thirsty for money, will achieve a profit margin of 54 percent, placing it at the top of the rankings in its industry, and later it will easily be able to lower the price when the initial wave of interest wanes and it becomes necessary to renew the demand for a new product. It is not unreasonable to expect that the demand from the Cupertino company will be further strengthened by the release of a new model, improved and patched, which will then be cheaper than its inferior predecessor. This scenario was seen in the case of the iPhone, so it is not unfounded to expect a repetition of the scenario, especially considering that in this case it is not about a brilliant idea from Apple, but about a textbook concept of maintaining the product life cycle.

So, here is how iSuppli estimates the individual parts of the new technological wonder that is changing the world. The wireless connection chip costs $8.05, while the 3G and GPS equipment adds another $27.10 to the cost. The contract with AT&T, the American operator that most users will likely accept, will cost about $30 per month. The battery, which, like in other Apple products, cannot simply be removed and replaced, is worth $17.50, and Steve Jobs promises a duration of 10 hours. They could not arrive at the cost of the operating system, but since it is a variant of homegrown software, it is to be assumed that the cost of the operating system is very low for Apple, especially considering the fact that they use a customized version of the existing OS X system, which powers all Apple products. The aluminum casing costs Apple about $35, while the price of memory varies by model, so it can cost $29.50 for 16 GB of memory, or even $118 for 64 GB of memory. The aforementioned average overpayment was calculated on the cheapest model, that is, the one where the memory costs $29.

The display, one of the key components, is individually the most expensive, estimated at $80. This is a 9.7-inch display that will likely be sourced from three different suppliers, including LG and Innolux. The last component included in iSuppli’s estimate is the processor, which should cost around $17, and its low price is due, as with the operating system, to the fact that it is produced in-house to be tailored to the needs of the company’s products. It is assumed that the A4 chip in the iPad was designed by PA Semi, a company that Apple acquired two years ago, and it will be produced by Samsung. The device will, according to iSuppli, run Apple applications, such as Pandora Radio and Glow Hockey, and serve as an electronic book reader from publishers such as Simon & Schuster and Penguin.

Of course, one cannot only look at the manufacturing cost and retail price, but the difference of $270, even after accounting for additional costs, will certainly ensure Apple one of the most generous profits per device in the industry, as well as a very wide maneuvering space for repopularizing the device when the initial excitement wanes. If the scenario seen in the case of the iPhone repeats, Apple will actually thank its most loyal fans, who can hardly wait to buy the first device, with a worse and more expensive product compared to later buyers. (Vanja Figenwald)