iPad vs. iPhone: BOM, pricing gaffes, etc.

[diogen]

iSupply did its thing and came up with the bill of materials (BOM) for the just announced iPad: $220
iPad Estimated to Be Worth as Little as $220 in Parts | Gadget Lab | Wired.com

As always, this is just hardware: software, marketing, distribution, etc. is not taken into account. What's even more, this time iSupply didn't have a device to take apart and mostly guessed what parts could be inside and their cost.

This BOM - less than half the announced selling price - might actually explain why Apple execs already talk about dropping the price to stimulate sales
WSJ: Apple could slash iPad prices if sales disappoint - Mac - Macworld UK
Apple Management: iPad Prices Could Change - MarketBeat - WSJ

The most interesting part, when iPhone came out it had the BOM estimate in the same ballpark
iSuppli reports their own BoM – 8GB iPhone costs Apple $250 to produce | iPhone Buzz

As everybody remembers, iPhone started selling for $600 and two month later was reduced by a third to $400 accompanied by Jobs' apology (first I ever heard). I don't think any proof is needed to claim that the level of excitement iPad has generated is less than the iPhone. Therefore, I'd go on record with a prediction that (entry level) iPad (announced to be $500 when released) will be no more than $400 by no later than summer. Possibly $350. And if it is hacked by then (like the Nook), it will take off.

Diogen.

 

[truckracer]

i won't consider the ipad until it can multitask and use flashplayer.
too many websites that use flash. I have an ipod touch and iphone which i like. My iphone is jailbroken with blackra1n and cydia.

ipod is stock as it came. it has the mc bootrom and i am not interested in tethering if i have to reboot.

the ipad is just a big ipod touch.

when apple quits dangling the carrot at all the apple fanboys...i will jump on an ipad when it is full featured....maybe a camera would be nice too.

 

[diogen]

What's even more, this time iSupply didn't have a device to take apart and mostly guessed what parts could be inside and their cost.

This time iSupply took apart a real iPad and corrected their estimate: iPad's BOM is around $260.
http://www.businessweek.com/technology/content/apr2010/tc2010046_788280.htm

Diogen.

 

[TheForce]

This is stupid. I always thought it was stupid. My reason is quite simple- If they did the same with the human body and figured out the price of the parts based on the chemicals that make it up the worthwhile value would likely be in the neighborhood of 2-3 dollars. In addition a fat slob would be worth more than a skinny physically fit athlete.

This was a lesson from my high school biology class.

 

[diogen]

This is stupid. I always thought it was stupid. My reason is quite simple- If they did the same with the human body...

Yeah...
I'm with you here.
Drawing parallels between human body parts in different people and a Cirrus Logic audio chip in iPad and Dell netbook is extremely stupid...

Diogen.

 

[harshness]

This was a lesson from my high school biology class.

Your high school biology curriculum probably didn't contemplate the black market value of a good kidney.

 

[TheForce]

Yeah...
I'm with you here.
Drawing parallels between human body parts in different people and a Cirrus Logic audio chip in iPad and Dell netbook is extremely stupid...

Diogen.

If Dell had all the parts they would not make an ipad. They would make a Dell and it would not work like an ipad.

If you had all the black market body parts all you'd have is a pile of flesh and goo an empty bank account and you still would not have a person.

So, I suppose the point is if you feel the ipad is only worth $260 then pay your $260 and this guy will sell you the parts. You supply the software, programming and solder and glue. Enjoy your $260 ipad kit.

 

[diogen]

So, I suppose the point is if you feel the ipad is only worth $260 then pay your $260 and this guy will sell you the parts.

Can you read? Do you know what iSupply does? What BOM is?
Do you understand the difference between assembly line parts and body parts?

Where did anybody say the iPad costs $260?

From the first post:

As always, this is just hardware: software, marketing, distribution, etc. is not taken into account.

Diogen.

 

[TheForce]

Oh, I read but so many people use these worthless blogs and do the interpretation I stated. You appropriately posted the facts.

My point remains: his whole concept is stupid. I appreciate your fascination with numbers but how about making an attempt at discriminating between numbers that are meaningful from those that are pointless.

 

[meStevo]

I'm not sure I've ever heard anyone try and say that a company can uniquely put together parts to increase the value of something... I'm kinda in awe you tried to do that Don. And then compare it to deconstruction the human body? A machine vs biology, and the 'miracle' of life?

Humans are more than the sum of their parts, an ipad is just a bunch of parts, and what the software can do with it... and I am sure there's little/no argument that the ipad hardware is probably worth less than $300, and history will repeat itself and a significant price drop will come once the early adopters have all taken a bite (and economies of scale improve post-launch allowing for a similar amount of profit at the lower price, of course).

The premium is software, not the magic of an Apple schematic and assembly line. There is no cracking open a unibody and everyone standing back and marveling at miracle that is Apple engineering. It's just a large PDA with a tablet interface and custom software and hardware with an Apple logo on it.

 

[diogen]

...not the magic of an Apple schematic and assembly line. There is no cracking open a unibody and everyone standing back and marveling at miracle that is Apple engineering.

Hey, hey...
This way you are gona question Jobs' prophet status soon...
and his awesome reality distortion field...

Diogen.

 

[TheForce]

so, I still ask what's the point?

Do you deny the existence of synergy?

If making an ipad is so easy, if making an ipod is so easy, if making an iphone is so easy, why didn't everyone else do it? It was Apple's unique collection of talent and philosophy that made it's entire cult exist. The total some of all the parts, not just a bunch of chips and solder and glass etc, but all to include the marketing concepts and way of doing things we didn't do before. The development of which is an important ingredient in everything they do that participates in their success.

 

[diogen]

so, I still ask what's the point?

You mean calculating the BOM?

If you don't get it, you won't, sorry...

Do you at least understand that meaningful/meaningless is subjective?

Diogen.

 

[TheForce]

diogen- calculating a bill of materials is worthless because the data used to calculate it is not real data but rather a fictitious made up list using information that is an educated guess at best. If the author had access to the real numbers than he would have something that might be fascinating to someone like you but he doesn't. Likely Apple pays far less for some irtems than he estimates and more for others. Bottom line- It's his best guess. and you'll never know the real number as if it matters anyway.
Now if you're telling me this guy has copies of invoiced costs to Apple then fine, but I'm willing to bet odds he doesn't.

 

[meStevo]

I would agree with you if it was 'just a blogger' and not ' the global leader in technology value chain research and advisory services' for the last decade.

You seem to have gone from 'whatever is best for my stocks' guy to 'the ipad is magic do not question the genius of apple' guy pretty quickly.

 

[mike123abc]

Good for Apple to be able to sell devices with nice margins. It is what they need to continue to develop new products and make money for their shareholders and employees.

I do not doubt that the BOM is pretty close since iSupply makes its money by being as accurate as possible.

No one forces anyone to buy these products, Apple is a master at making people want to buy them.

 

[meStevo]

Good for Apple to be able to sell devices with nice margins. It is what they need to continue to develop new products and make money for their shareholders and employees.

I do not doubt that the BOM is pretty close since iSupply makes its money by being as accurate as possible.

No one forces anyone to buy these products, Apple is a master at making people want to buy them.

This is a much better argument than 'well you get 200-500 worth of synergy'

 

[diogen]

diogen- calculating a bill of materials is worthless because the data used to calculate it is not real data but rather a fictitious made up list using information that is an educated guess at best.

Here we go again... what's worthless? My guess, this very quoted statement. Whereas BOM is very useful.

iSupply BOM estimates are done for years.
It was very accurate when measuring PlayStation starting from v.2 (that I read), PS3, Xbox360, Wii...
It is an ongoing exercise while silicon and other parts drop in price...

Educated guess is probably close to reality but "educated" doesn't mean owning stock and reading their 10k/10q filings... Hence, your guess won't qualify...

Bottom line, BOM is most of the time within 10% to the invoices (based on the 2-3 real invoices that were leaked in the past).
It shows not as much the profit margin (assembly, advertising, distribution, shipping is much harder to estimate and part of the price) as the cushion for potential price drops.

You prefer to talk in terms of awesome, great, magical, revolutionary an other sh!t - knock yourself out.
Worthless is much more applicable to these terms - in my books - than BOM...

Diogen.

 

[TheForce]

You prefer to talk in terms of awesome, great, magical, revolutionary an other sh!t - knock yourself out.
Worthless is much more applicable to these terms - in my books - than BOM...

Where have you seen me post using those terms? Maybe I did but I don't recall where. It would be out of character for me to do that. Now Steve Jobs, yes, I heard him use those terms during his intro of the ipad. I'm sure you didn't confuse me with Steve Jobs.

Usually, I describe devices like this in very specific terms. I don't even like to use the terms laptop killer or ipod killer etc. That's because I don't think it will do that. I just believe it will offer some people a better tool in certain environments they may find themselves in.

IMO, the ipad is not a computer at all. It is a simple, easy way for me to gain quick access to media content when away from my always on computer workstation but not where I am walking around in a store. There, the TP2 does a better job (for me) if I need something.

If someone could explain why this guy's BOM is so important I might understand. But until then, what matters to me is how much I have to pay for the device and whether that price is worth it to me. It doesn't matter if Apple paid $120 for the battery inside or 50 cents. I don't even know what I would do with the information if I had it and it was guaranteed accurate, and confirmed by the CFO of Apple.

I do respect that some people do have a fascination with how much buisinesses pay for stuff or how much money they make, but unless I can use the info to my advantage, I really don't care.

 

[rockymtnhigh]

Ok, guys, lets go back to your respective corners, and take a minor time out...