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iPad Mini Costs $24 More To Make Than Kindle Fire HD
sweetpea86 writes "... but retails for $130 more. Teardowns of the Apple iPad Mini and the Amazon Kindle Fire HD have revealed that the two devices cost almost the same amount to manufacture, despite the retail prices being significantly different. Andrew Rassweiler, senior principal analyst of teardown services for IHS iSuppli, explains that Apple is sticking to the premium brand strategy it has always used for its media tablet and smartphone products, whereas Amazon is banking on content."
First of all, Apple makes its own OS and applications while Amazon just uses Android. On top of that Amazon has always tried to keep their price down so they can sell more ebooks. Apple tries to make profit by selling their devices. These two things combined, I don't think the $100 price difference is that much. It's almost surprisingly low.
The $35 in extra cost turns into $130 at the consumer level. That's actually pretty much right for a manufactured good. You see, when someone makes a product they typically want to charge MORE for it than it costs to produce. This difference is called Profit. The more it costs, the more you must charge. Plus, it's apple. Even if it cost less, they are selling you the device plus the brand. Or did you think Phil Shiller worked for free?
I own an iPad, an iPod, two Android devices and a Nexus 7 is on its way in the mail. I still haven't purchased anything from any app store.
Furthermore I'm not sure what would compel me to do so: free games are good enough, productivity apps are free, and music, movies and books are still basically free as long as you have a desktop, laptop, or friends.
You're saying that as if the Kindle Fire HD didn't sell for more than it costs to manufacture. I'm pretty sure that they too want to make profit.
Premium works to a point. There is even a market for it. Mass market though is a bit more cost sensitive... For example Sony had what some would argue is the best box in the last gen of game hardware. But they sold it at a 2x premium over everyone else. That cost them dearly in both market share and developers. For example the netbook craze. It wasnt that everyone wanted a netbook. It was everyone wanted a very cheap very portable computer. Tablets are filling that niche now as they are more portable. Eventually though cheap probably will win.
Interesting, but until you compare the design costs of each device, you can't make a statement about whether or not the price is a fair one. These things don't just spontaneously arise.
I am not interested in articles about life extension advancements.
Apple is the most valuable company in the history of the world.
I think they know a little something about how to make money.
...Amazon has a very low cost of ownership for Android, after all. Apple wrote the vast majority of iOS.
Dog is my co-pilot.
Gaming consoles? Cheap mobile phones? Give people the hardware for virtually free, make profit on the services. How does the income from the app store compare to the hardware profits?
1. The OS and online infrastructure costs $0?
2. Selling a product at a profit equates to "premium" now?
No, they just want market saturation. They make their money off of store purchases and advertising. They make more money if more people are using their services, rather than buying their devices.
You're saying that as if the Kindle Fire HD didn't sell for more than it costs to manufacture. I'm pretty sure that they too want to make profit.
Amazon has stated they're not trying to make money on hardware, they are focusing on sales on the devices.
http://www.engadget.com/2012/10/12/amazon-kindle-fire-hd-paperwhite-hardware-no-profit/
The $35 in extra cost turns into $130 at the consumer level. That's actually pretty much right for a manufactured good
Oh, you were so close to being correct, and then missed.
The reason its so close is middlemen. If it costs a farmer 10 cents more to grow an apple, that doesn't mean YOU pay the food store 10 cents more, it means the wholesaler gets 2*10 cents = 20 cents more, the distributor/franchise operator gets 2*20 cents = 40 cents more, the store needs to charge twice invoice on average to keep the lights on, etc, so you pay 2*40 cents = 80 cents more at the store.
Its not quite so bad with market leading electronics, but its bad. I can totally see if a battery costs $4 more, the retail price after layers and layers of middlemen could very well increase $13.
The price at a direct mfgr store goes up because the resellers demand it contractually in order to stock it, Walmart would never carry the kindle if amazon could undercut it every time, so the price, even online, reflects the maximum amount of middleman profiteering via any channel. Mandatory minimum pricing and all that. Yes apple.com probably COULD sell it for only $35 more, but walmart etc would freak out and sue them, so they have to sell it for $130 more.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
The point is that Amazon doesn't need to make a huge profit on the Kindle Fire because they can then sell you content too.
Apple wants to do both, the greedy, greedy bastards.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
You're saying that as if the Kindle Fire HD didn't sell for more than it costs to manufacture. I'm pretty sure that they too want to make profit.
You (and the article) miss the point about the economics of manufacturing. It's not like every single manufactured item is aiming for the same markup. It might help you realize how silly it would be to expect (for example) that a vehicle should should have the same markup as a toaster. That's dumb. The OP is right; the more expensive the item is, the higher the markup has to be to account for higher R&D costs and to help offset the higher risk.
There are legitimate reasons to criticize Apple, but this is stretching... far....
You know -- for the FreeBSD project providing all that free coding that helps pay for those gigantic bonuses?
Apple is a hardware company, Amazon is not. They both have different motives and you can clearly see it reflected in their products. With the Kindle and other tablets sold at a near-loss, vendors have an incentive to shove advertising in your face. Everyone will likely complain that the iPad mini is overpriced and shame on them for making a profit.
The truth of the matter is that Amazon is just repeating the commodity PC bundleware strategy. I'd rather pay a little bit more to support a company that doesn't subsidize it's products with advertising.
If I was Apple I would have set the price at $250 and lived with little or no profit and counted on iTunes sales. The point is Apple has always taken the stance that they are a hardware maker not an OS or even a software and music retailer. Those are considered sidelines. It's one of the reasons their hardware has always cost more but they sell their OS dirt cheap. I don't know the profit margin on a Fire but say Apple is pulling 30% or 35%. It's high but not out of line with some products and no one ever wants to factor in development costs. Yes it's a downsized iPad but there's still tooling and design costs. Overall they are making probably 25% without advertising. Oops there's that cost and Apple loves to advertise. I have no idea the final cost once you add in distribution and advertising and all the other expenses. I'm sure they are easily making 15% or 20% pure profit. It's a health profit but that's what a company in their position should make, a healthy profit. The companies have to make money somewhere but everyone says they don't want to pay much for music, movies, games and software so where exactly do you build in profit? Everyone else is playing catch up so they have to sell near or at a loss but so long as Apple products are selling well they have no incentive to cut out the profit margin. Sure they are making a profit on every step but that's what companies do, make money. At least they are making a solid product. One of the reasons Microsoft got into so much trouble is they became dependent on a couple of products then started turning out crappy products and said so what? We have a monopoly in PC OSs and office software so what are you gonna do about it? Well over the last five or so years a lot of people switched to Apple. Apple's evil? Here's a revelation, corporations are evil! They exist to make money not to make you happy. They want to make their investors happy. As much as I would like to see Apple products cheaper I don't want to see them cut quality to do it. Little things like the metal instead of plastic cases on the pad devices. The iOS is elegant and fun to use once you get used to shoehorning your personal content onto them. I'd love to see them more open but it would come at a sacrifice of stability so I'm happy the way things are. In the end if you want a device with zero profit margin then buy Android. If you want iTunes then you're talking an Apple device and deal with them making a profit.
Perhaps if people didnt kiss Apples ass and buy everything that has an Apple logo, regardless of price, their prices wouldnt be outrageously high to begin with..
How old is your "kid"?
My kid is 19 and pays for her own iPhone, which is a lot more expensive than my Android.
Just wondering.
All this talk about greed is ridiculous. All companies want huge profits. Amazon priced the Kindle as they did because they though it would maximize profit. Apple did the same with the iPad mini. That is what companies do.
The Anti-Apple routine here at Slashdot is getting very, very old. Well of course Apple charges more. They make the majority of their cash on hardware (although the App and iTunes stores are pretty lucrative too). Amazon is *all* about the content. So their goal is to get you to buy a Kindle by any means possible so they can make money on content sales. Apple's goal is to entice you to buy their hardware - if you don't buy anything in the store, no big deal they've made their money. Anything extra is gravy. The Kindle and iPad have different use cases & marketing models and are priced accordingly.
Now you wanna complain? Why does Microsoft make more than $250 on every Surface Tablet ? (Guess: because they actually don't expect to sell many)
Apple is more of a media company than Amazon is. By a long shot. And "anything else" is not gravy for Apple. Its the sole reason for the devices existing, and the sole reason they have to justify their stock price to investors.
If people wouldn't pay $500 for an iPad, Apple would be selling them at cost, just like Amazon. Amazon doesn't have the brand clout Apple does. The Amazon name doesn't automatically add $200 in value to the product. You better believe, if Amazon could get away with $500, they would. And if Apple couldn't, they'd still be selling the iPads.
the external speakers being one downside but I don't believe he'll be needing stereo speakers
Not quite sure if this is what you are referring to, but the iPad mini has stereo speakers (older iPads do not). Amazon had that wrong in an ad they have since pulled.
6. As an Apple (iPhones, Mini, and MBP) and Amazon customer (I'm a Prime member and use them for video rentals, most online purchases, etc)
I am also a Prime member - happily just as there is a Kindle app for the iPad, there's also an Amazon Prime Video app you can use to access video on an iPad from your Prime subscription (though I find Prime video pretty limited compared to Netflix, they have a few different things Netflix streaming does not).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
4:3 and 16:9. Even the cheapo Chinese tabs have significant difference on pricing on those - screen size is bigger and possibly has to do with volume. 7.9" is really 8" - Apple just tries to let people 'compare' them with the Fire/Galaxy but it's really apples/oranges.
*No HD movies, less PPI, mono sound. Not to mention the handcuffs. No thanks.
http://news.cnet.com/8301-1023_3-57541838-93/amazon-pits-kindle-fire-hd-vs-ipad-mini/
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That's what happens when you have a competitive advantage, market share, brand, vertical integration, etc.
Not only that, but $24 in parts cost plus additional labor cost (the iPad mini looks significantly trickier to assemble than the Fire does), and it certainly doesn't appear out of line.
You're special forces then? That's great! I just love your olympics!
It might help you realize how silly it would be to expect (for example) that a vehicle should should have the same markup as a toaster. That's dumb.
It might help you to realize that we're not comparing a vehicle to a toaster, but different models of vehicles from different manufacturers. I'd expect a Chrysler, GM and Ford vehicles to all have similar markups.
for someone to manage all those slaves...
slave master outside of the sex industry is not a popular job...
I can give $20 worth of ingredients to my neighbor (he's a chef) and the same to my kid, but you'd be a fool to think that you'll get two meals of comparable value from them.
Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
Do you go to the $5 barber or the $25 barber? After all the cost for the barber's equipment is rougtly the same. Is the $25 barber overcharging you or delivering you something the $5 barber could not deliver? The cost of parts doesn't determine the skill of the design.
Some drink at the fountain of knowledge. Others just gargle.
If MMP were somehow not part of the equation, the MSRP would just be something ridiculous like $599 and then each outlet would offer a "great deal" to their own liking (this is what happens with goods that aren't as easy to MMP like an iPad) and the consumer would end up shelling out $329 or something close, depending on how discriminating (in the economic sense) they were. The profit WILL be had.
He said not to worry, it'll work itself out. Then he slapped me with his invisible hand (i think ... i'm pretty sure) for getting in a tizzy about it.
"Ahh! I see you're in that indeterminate Schrodinger state where - oh, uh
Yep, when the ipod first came out it retailed for less than the 1.8" drive that was embedded in it, Apple was definitely in it to grow marketshare and build up the itunes ecosystem. It wasn't until much later that the brand had enough power to push up hardware margins.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
I wonder if Apple figured that the Mini would be going predominantly to people who:
1) Own an iPhone but not an iPad
2) Previous version iPad owners looking for a smaller device upgrade
3) iDevice completists who want to own one or more of each
Each of these groups will buy less content over time because they already have a lot of apps and other content on their other devices; the Mini simply becomes yet another consumption device and they will not be buying more content specifically for the mini, hence the margin is higher than it would otherwise be for 'primary' devices.
I own an iPhone and iPad 3 but had little interest in the Mini due to hardware specs and lack of a reason to own one outside of curiosity. However, had they included telephony (with the option to take my iPhone 5 SIM...) I might have been interested as it would have been an interesting compromise device when traveling or away from home when the Phone would be too tedious for books or movies and an iPad would have been too big/fragile.
Because Chrysler, GM and Ford all create same luxury level. Compare a Lexus to a Camry and while the production cost of a lexus may only be a little more, the MSRP is significantly more. Yes those are from the same manufacturer, but people still buy the Lexus even though it does the same thing as the Camry, just looks better doing it.
It might help you realize how silly it would be to expect (for example) that a vehicle should should have the same markup as a toaster. That's dumb.
It might help you to realize that we're not comparing a vehicle to a toaster, but different models of vehicles from different manufacturers. I'd expect a Chrysler, GM and Ford vehicles to all have similar markups.
I wouldn't expect vehicles to have similar markups. I would expect a Chevy and a Dodge sedan to be quite similar, but if you look at all sedans (Toyota, Mazda, Chevy, Dodge, Lexus, Mercedes-Benz, BMW, Audi, Volkswagen, Kia, Hyundai, Fiat and who knows how many more) you'd find several ranges of prices and margins. Some focus on low end, high volume, low margin (let's say.... Kia). Others focus on low volume, high end, high margin (let's say..... Mercedes). Some even hit multiple targets. A Camry isn't the cheapest car, but it's affordable and well built (iPad Mini). Their Lexus stuff is more expensive, and still well built, with some higher end features (iPad 4 with better graphics, higher resolution).
The only thing that really makes me mad... is that somehow I got pulled into a car analogy.
App store income is trivial compared to Apple's hardware income.
Amazon doesn't make any profits. At all. That's not really a good business model, unless you're a non-profit.
There are two types of people in the world: Those who crave closure
add $24 of parts to the Kindle and then do a side by side comparison :-)
You should not have been modded troll. While you could just leave the kissing part out of it. People buy their products at the current price at a high enough rate that they are making enough money to keep it at the current price. They may pre-emptively lower the price if they see another product from Samsung or whoever that may directly compete with their sales, but in general they set price based on what people actually buy. The problem is not that Apple sets the price where it does. It's that a bunch of whiners think they can whine their way to lower prices, posting said whines with one of the three Apple products they bought this year.
The investiment in stocks (of finished goods, parts, everything, at the manufaturer, distributor, retailer), the risk that some products won't sell, the loses on transportation, and event he amount of money the governent gets to keep; all increase when the price of the product increases.
Rethinking email
This seems to come up a lot. Apple is overprice, apple is overpriced. Perhaps they are just the "luxury" devices of the computer world. I feel this applies to cars as well, but I don't see people posting that Lexus' or BMW's are overpriced. A Ford Focus gets me from point A to point B just as well as a Benz, but the perceived quality and status symbol of the Benz helps keep prices high. Hell, I had a Nissan that has gone 235,000 miles at a much lower price than "luxury" cars. So Apple charges more than other device retailers/manufacturers? Why is this surprising? So does BMW and Lexus compared to Fords and Chevy's.
No freaking kidding. But the idiots that plague slashdot think they have a right to an iPad. And they go so far as to say that government should be regulating Apple so that they can't make "absurd" profits...forgetting that people buying them means people really do see them as worth the price.
Wouldn't be a problem if they'd chosen a licence that didn't explicitly permit Apple to do what it did.
What problem? The BSD based code that Apple uses is available on Apple's website. Its called the Darwin kernel.
Its been proven time and time and time again people will pay more for a logo, so they can get on a bandwagon of a trend with a brand name. This is old news.
Bottom line is apple sells their product for more because people will pay it so they can feel better about themselves and can be seen using an apple product. People pay more so they can have bragging rights and feel like they are elite. Thats why people with apple products dont call their cell phone a cell phone, they call it a iphone. They dont call their computer a computer, they call it a mac. They dont call their mp3 player a mp3 player, they call it a ipod. They dont call their tablet a tablet, they call it a ipad. Apple users can not shut up about having an apple product while everyone else in the world has a cell phone, a computer, etc.
Every product apple sells is very closed ended and every product they sell has a more powerful, more user friendly, more open ended for the user and much cheaper alternative but apple markets to pretentious and smug people so they can afford to charge a lot more than the product is worth because they know their customer base WANTS to pay more because they want others to know they paid more.
Plus people assume that charging more means its better. If I charged 12 bucks an hour to fix computers no one would use me because I am so cheap but if I charged 45 bucks an hour I would get more customers because a lot of people assign prestiege and quality on price.
I dont buy super expensive coffee at the store because the store brand is the same damned thing. I use a galaxy s3 because its just as powerful as a iphone and I can put whatever the hell on it I want instead of what apple will let me. I have a honda crv for a car instead of a mercedes. So I dont waste my money on overpriced shit just to look cool. With that said I still buy black and decker tools, I pay a little more to build my computers instead of buying one off the shelf and so on because I am willing to pay more when I am actually getting a better product. But the whole buying apple products for more than a cheaper and superior product is just plain stupid.
Does that include iTunes, though? Because it's all one ecosystem.
Premium doesn't mean something is "Better" it just means it is more expensive! For instance, "Premium Beers", that dumb people flocked to in such numbers they forced the Local breweries out of business and made American beer a joke around the world! Same situation here! Apple has never been more than marginally "Better" than Windows or Linux, and you paid for that slightly better experience in both money and lack of choice, what you got was hat things like control P did the same thing in all the software for apple where Windows you had to learn the keyboard short cuts for each software package in the early days, since they were all suing each other over silly stuff like that!
Product....Kindle...iPadMin... Surface
Cost.......174.00...198.00.....284.00
Price......199.00...329.00.....599.00
Profit.....14.37%...66.16%.....110.9%
So Microsoft is hoping that by embracing Apple's strategy (huge profit margins on hardware) and extending it (almost double Apple's margin, which is already four times Amazon's), it can extinguish the Kindle Fire? I know MS doesn't do business the way it used to, but leopards don't change their spots.
BUTTS! The need to move their manufacturing BACK TO THE USA. Doing business as they have been is immoral and simply greedy! The price difference between Apple and Android is going to eat Apple's lunch!
I like Apple from a functional and software point of view, but continuing to abuse Chinese workers to ensure their massive profits has simply got to stop. Realizing this has caused me to have a lot less respect for Steve Jobs, the man who built Apple's current view of the world. RIP Steve, but maybe you should haunt Tim Cook to do the right thing.
Like the inimitable Groucho Marx, I would never join a club that would have me as a member.
Japanese phone companies found a way around that over a decade ago. They let shops sell the products for near or even below cost, just like they would via their own direct sales. No profit there but then the shop also gets a cut of the phone contract for the first 12 months. In other words they just brought the shops into the same revenue stream they are relying on.
Amazon actually does something similar. Retailers make almost nothing on the Kindle, but it then gives the customer the ability to buy their ebooks. The retailers like it because it is a good chance for them to load you with advertising for their own ebook stores, where as otherwise you would probably just stick with Amazon.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
The problem with car analogies is that there is much more range between two different car manufacturers and very little between PC or tablet manufacturers.
So the people that are trying to pretend that their generic electronics device is a BMW are just hilarious.
Differences in things like reliability, performance, and even durability are negligible. You could swap logos and most people would be none the wiser.
It's like Ford versus Mercury.
A Pirate and a Puritan look the same on a balance sheet.
parts + software + ecosystem
Last I heard (several years ago now; back when songs were $0.99 and DRMed), Apple gave $0.67 to the labels for each song purchased. iTunes itself has never been a big money-maker, but more a way to convince people to buy an iPod (now iPhone/iPad). The App Store makes just above break-even.
I feel that Amazon did their homework here, I really like the iPad, but not $100+ more. Seriously, I expected a price of $249.
I do feel that some Apple hardware is worth the "premium" price for the good experience, fewer problems (overall) and quality materials. I like the store support and warranty also. But the Kindle Fire is a good enough product, sturdy and simple. A bit bulkier but overall a nice experience.
The iPad mini has about the same screen, about the same CPU, and slightly better wireless and better package.
I've got two Kindle Fires, and I'm pretty happy with them. Sorry Apple, price matters and I can't justify your luxury iPad prices.
I said no... but I missed and it came out yes.
and maybe they're actually planning on making a profit unlike amazon with its 3168 to 1 PE ratio lmao, that's the real PE ratio right off google finance i kid you not!
$24 more in parts? Perhaps. But so what?
However, what about differences in costs around engineering, part yields, manufacturing time, etc.?
Stories like this are meaningless. The headline should read: "Some guy guesses some numbers."
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You've forgotten the cost of the $106 Apple logo, so really the cost is totally justified.
How does isuppli know the exact amounts that both Apple and Amazon pay for their parts? If I were law enforcement I'd certainly be wondering how they came by that confidential information legally. I highly doubt either company would give away such information freely.
Quite an experience to live in fear, isn't it? That's what it is to be a slave.
If you build your own? You have to pay. SuSE? Has to pay. RH? Has to pay. Even for the free versions. Gentoo? Debian? Mythbuntu? Each one has to pay.
And since it is POSIX compliant anyway, why does it need a certificate?
I agree, seems most here are like my father and in shock a company makes something and charges more than the physical components to make it.
They don't seem to factor in like... Everything else involved in selling it to you. Electricity, labor, internal shipping costs, advertisement, etc...
Not to mention engineering, and quality control. Hell, I'm a huge fan of how apple QA is, and the engineering to make their items so resilient, yet look good at the same time.