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Topic: When will the iPad prices come down

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Old 03-14-2010, 03:14 AM
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Martin Castillo
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When will the iPad prices come down

With demand being what it is, I would expect the iPads price tag to drop 10 to 15 percent by the summer. The markup on the units are around 75% on average, plenty of padding there to give the consumer a break.
Any thoughts?
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Old 03-14-2010, 08:00 AM
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Anything's possible but I wouldn't bet on it.
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Old 03-14-2010, 09:13 AM
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The 3G models may come down a touch, given that $130 is a huge markup for such a small extra cost, but I doubt the non-3G ones will. People will quickly learn that $130 for 3G that they probably wouldn't use is just too much, this will lessen demand which will encourage Apple to drop the price by $50 or something to get rid of stock.

The $499 non-3G base model, it has been estimated, has 40% markup - making the markup already significantly less than your 75% average figure - so I don't see there being a model cheaper than $499 any time soon.
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Old 03-14-2010, 09:30 AM
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75% markup? I must have missed it when a website tore down the iPad, examined the physical components, and they looked at the prices for said parts.

Well, in examining Apple's past, we won't see a price decrease for the standard wi-fi only iPad until around this time next year when the new generation models are released. Apple just doesn't go around decreasing the prices of their iPods, iPhones, and iPads a few months after they were released. There was only one case in which Apple did this and it was with the first generation iPhone. That has been it.

In all likeliness, Apple will make the 32GB iPad the de-facto standard next year with a $500 starting price, the 64GB model will be $600, and they might come out with a 128GB SSD iPad for $700 (128GB SSD prices are still rather high but they will decrease by April 2011.



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Old 03-14-2010, 01:54 PM
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Quote:
Originally Posted by Martin Castillo View Post
With demand being what it is, I would expect the iPads price tag to drop 10 to 15 percent by the summer.
It sounds like you've answered your own question (albeit incorrectly), but I'm not sure what you mean by "with demand being what it is." Are you saying demand is low? If that were true, it might cause Apple to consider lowering prices. But based on early pre-order data, demand is so strong that Apple may not have enough iPads to sell to everybody who wants one on launch day.

As long as demand stays strong, there will be no incentive for Apple to drop the price, and things will probably play out as Kornchild predicts. "The wise man never doubts Kornchild." That's written in the Tao somewhere, I think.
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Old 03-14-2010, 07:03 PM
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Quote:
Originally Posted by kornchild2002 View Post
75% markup? I must have missed it when a website tore down the iPad, examined the physical components, and they looked at the prices for said parts.
Check this: [Edited to remove link]How much does it cost to build an iPad



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Last edited by honeybee1236; 03-23-2010 at 01:07 PM.
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Old 03-14-2010, 07:08 PM
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I disagree, the market will set the price. The more demand for it there is the better it will get and the less that it will cost. We have seen it across the board with everything from Cell Phones to LCD TVs. I remember seeing a Pioneer 50" plasma TV 10 years ago. It looked so cool, but at $20,000.00 no one could afford it. Where are 50" plasmas now? Under $1000.00. Apple has the whole court now, like they did with the iPhone, but as time goes on other manufactures will come out with multi-touch tablet form devices and drive the price down.
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Old 03-14-2010, 07:19 PM
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Quote:
Originally Posted by Martin Castillo View Post
Check this: [Edited to remove link.]How much does it cost to build an iPad[/URL]
That's guesswork just like all the other estimates. Your link suggests the 16GB non-WiFi model costs $230 to make with $270 profit, while this link: http://www.business-strategy-innovat...nd-kindle.html estimates just $208 profit.

Neither guess is any more accurate than the other, and neither should be taken either as fact or as an indication that Apple would be willing to reduce their profit margin.

Last edited by honeybee1236; 03-23-2010 at 01:07 PM.
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Old 03-14-2010, 07:25 PM
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Originally Posted by Martin Castillo View Post
I disagree, the market will set the price. The more demand for it there is the better it will get and the less that it will cost. We have seen it across the board with everything from Cell Phones to LCD TVs. I remember seeing a Pioneer 50" plasma TV 10 years ago. It looked so cool, but at $20,000.00 no one could afford it. Where are 50" plasmas now? Under $1000.00. Apple has the whole court now, like they did with the iPhone, but as time goes on other manufactures will come out with multi-touch tablet form devices and drive the price down.
You're not comparing similar products. Anyone can make an LCD TV screen if they want, but only Apple can make an iPad. There is plenty of competition for TVs, but no competition for the iPad.

Even when other "multi-touch tablets" start coming out, they won't be the iPad. Everyone and their dog could bring out a tablet with the hope of competing with the iPad but, unless they can make the iPad, it will be no competition.

People who are waiting for an alternative tablet product aren't buying the iPad anyway, so Apple won't lose any sales because they wouldn't have had those sales in the first place.

Hoping that the iPad will come down in price due to competition in the marketplace is wishful thinking.
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Old 03-15-2010, 05:51 AM
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Quote:
Originally Posted by Martin Castillo View Post
Check this: [Edited to remove link]
That is pure speculation. It isn't an actual tear down of the iPad. That won't come out until the iPad is actually released and someone looks at every single aspect. So, until that comes out, any speculation should be taken as just that: speculation. I can speculate that it costs $10000 to make the 16GB iPad while coming in here and saying that Apple is losing money on every iPad sold. It still doesn't make it accurate or right.

Quote:
Originally Posted by Martin Castillo View Post
I disagree, the market will set the price. The more demand for it there is the better it will get and the less that it will cost. We have seen it across the board with everything from Cell Phones to LCD TVs. I remember seeing a Pioneer 50" plasma TV 10 years ago. It looked so cool, but at $20,000.00 no one could afford it. Where are 50" plasmas now? Under $1000.00. Apple has the whole court now, like they did with the iPhone, but as time goes on other manufactures will come out with multi-touch tablet form devices and drive the price down.
Although that was previously touched on, I would like to add with a response. The demand was definitely there for 50" plasma and LCD HDTVs 10 years ago. The only thing is that one or two companies were making the panels for those HDTVs which drove up the high costs. The market still hasn't set the prices for HDTVs as the new 3D LCD LED models are about $3000. Again, only a few companies in China are making the displays. That will change as more and more companies start making the displays.

The iPad's price, just like EVERY other Apple product, will be set by Apple. The iPad would decrease to $100 for the 64GB model if the market actually set the price. Not only that but Apple is relying on one assembly plant and a series of other Chinese manufacturers for the parts. There isn't another assembly plant and another company making the same thing.

Apple faced the same thing with the first generation iPod. They really didn't have competition until the third generation and even then nobody offered the full hardware and computer software integration until the first generation Zune years later.



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Last edited by honeybee1236; 03-23-2010 at 01:08 PM.
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Old 03-15-2010, 11:09 AM
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Quote:
Originally Posted by Martin Castillo View Post
I disagree, the market will set the price. The more demand for it there is the better it will get and the less that it will cost.
This is a little backwards. High demand = high prices. As of yet we still have limited information on what the actual demand is or will be, but early reports seem to indicate that demand is high. As a result, prices will probably not drop until/if Apple can manufacture enough to exceed demand at the current price. As long as they can put one on the shelf for $500 and expect it to sell, there's no reason to drop the price.

But it's also not fair to say that the iPad has no competition. Right now the competition seems pretty lackluster, but I expect that will change, too. It will depend on features, though, not the existence or absence of the word "iPad" stamped on the back. Brand recognition, loyalty, and prestige may carry Apple a long way, especially in the absence of strong competition, but once real competition starts, that's when Apple will have to react with pricing and/or feature changes. Early iPhones grabbed a huge market share because there was little in that arena that compared favourably to the iPhone. Now Android phones are creeping into that space as well. As a result we've also seen cheaper iPhones, and their feature set has continued to improve.

Also the amount of profit Apple is making per device is not only theoretical, but also of questionable relevance. One point is that Apple has invested a huge amount of money in Research and Development. Whatever they might make from an individual sale of an iPad, that is not pure profit until they offset their initial investment. But apart from any of that, high profits does not mean that Apple will lower the price. They will only lower the price if they can profit more by selling more units, which, again, will only be if customer demand is lower than their ability to produce units.

There is one situation I can think of where high demand might lead to lower prices, and that is if Apple is making more profit from the sale of media/applications on the iPad than it is making from the actual sale of the device. In that situation it might make sense for Apple to lower their initial profits or even take a loss just to maximize the number of people buying media on their iPads. But that will take time, I expect, because for a lot of media, this is an untested revenue model. It does, however, seem to be a revenue stream Apple is becoming more and more comfortable tapping in to, so on-device purchasing could become a type of device subsidizing if Apple's supply exceeds its demand. But that will happen after they've sold as many at a higher price point as they can.

I disagree with JSRinUK, in that I think competition will be a factor in the next few years. People will not remain hung up on the iPad/Apple name if something comes along that compares favourably. But I do agree with him and with kornchild2002 that prices are unlikely to drop in the immediate future. Like kornchild2002 says, Apple tends to compete more by increasing features for the same price point and then maybe dropping prices (but often just dropping production) of the lower capacity, less featured items. In my opinion whatever price drops Apple does offer tend to pale in comparison to the features it adds, i.e. they may give you last year's model cheaper, but you'll still want to pay extra for this year's model.

Assuming this thing sells well, and that remains to be seen, I would not expect any significant price drop any time soon, but I would expect that within a year we will see a doubling of the capacity of all models and the inclusion of a few extra features (like a camera) for about the same price. I do agree that the biggest wild-card is the 3G model. For a lot of people, the initial price jump will not justify the added functionality, but the cost of using that functionality seems so low (compared to other data plans) that, if that use model is profitable, it will make sense bring the 3G model down closer to the wifi model or maybe even collapse them into one model.
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