Apple’s iPad 3 More Expensive to Make, Lowers Profit Margins

4G iPad 3The new iPad, or the iPad 3 if you want to be technical, has apparently been more expensive to make, requiring Apple to sacrifice some of its excruciatingly high margins to bring it onto the market. At least that’s how it seems after preliminary estimates from UBM TechInsights showed that the bill of materials for the third installment to the iPad franchise was about $310 for the 16GB 4G model.

Compare that to the $629 retail price of the tablet and you get a profit margin of 51%, slightly less than the 56% profit margin of the company’s equivalent 3G iPad 2. This extra cost in production likely comes from the new 9.7″ screen that has a native 2,048 x 1,536 resolution. Estimates place the cost of the new screen at $70 per device, significantly higher than the $49.50 price of the iPad 2’s 1,024 x 768 display.

The increase in price was also due¬† to the new radio chip that Apple has included in the iPad 3. The chip has bands covering pretty much every mobile carrier’s frequencies, including AT&T and Verizon’s 4G LTE networks. This chip was estimated to cost around $21 per device, over twice as much as the $10 3G chip in the iPad 2.

The new A5X chip with a quad-core graphical processor, which powers the whole thing, came in at nearly $28, $6 more than $22 pricetag of the iPad and iPad 2’s A5 chip. However, this is just an estimate from UMB TechInsights, not an actual number, though estimates like these usually aren’t far off the mark.

What isn’t quoted is the cost of assembly, shipping, marketing and research & development, which would be much harder to include. What is clear, though, is that Apple is definitely profiting big on the iPad 3 regardless. The only question is exactly how big. Though if it’s anything like the iPad 2, I don’t think Apple should be worried.

Source: Phone Arena – New iPad bill of materials is around $320, profit margins drop slightly; Electronista – New 4G iPad seen costing $310 to make, lowering margins; The Wall Street Journal – Firm Estimates New iPad Costs Apple More; Engadget – Early estimates say new iPad cuts Apple’s profit margins

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