By Matt Burns
Even though the iPad is still more than a month away from shipping, iSuppli conducted a preliminary itemized parts breakdown. The results aren’t that surprising: Apple’s making a boatload on these things. iSuppli concluded that the $499 16GB/no 3G model only costs $229 to manufacturer with the $829 64GB/3G model costing only $117 more to make even though it carries a $329 premium. Nice, eh?
These numbers can be broken down even further showing Apple’s insane margins. The 3G module only costs $24.50, but Apple (AAPL) charges $129 more for the option. The NAND memory chips are really the only difference between all three options, but their real costs of $29 for 16GB, $59 for $32GB, and $119 for 64GB are nowhere near proportionate with the iPad’s prices. All this data shows that Apple’s abandoning its long-held K.I.S.S. strategy.
So what if Apple got back on the keeping it simple bandwagon, only offered the high-end 64GB with 3G iPad and still sold it for $499? After all, the company would still be making at least $153 on each iPad sold. Would that turn around the iPad’s outlook?
The vast majority that participated in our poll the other day said that the iPad needs a lower price, specifically $349 for the base model. That clearly shows people are not satisfied with what the iPad offers at its $499 price point when it only offers 16 GB of storage and without the 3G wireless option along with a host of other letdowns such as lack of USB, SD card inputs, and multitasking. Surely if the iPad were only offered in a 64GB/3G kit, at least more would be able to look past some of the other transgressions.
In fact this model structure of six different options for the same device is new for Apple as of late. Previously Apple was known for its no nonsense approach of just a high-end or low-end option. (MacBook or MacBook Pro, iMac or Mac Pro) Now consumers have to decide not only how much extra they want to spend for storage, but also if they want to spend $130 more for 3G access.
GPS units are known for this type of rubbish. There might be a dozen different models available, but each step up only adds one or two slight software or hardware change that’s a nominal cost difference, but seems to be enough justification for the gradual price increase up the model line. Only the iPhone and iPod touch share this type of pricing structure, but even though they share a lot of the same parts, their core functionalities are different, justifying the difference. That can’t be said about the iPad, where a unit without 3G will be severally limited compared to one with the option.
Maybe Apple doesn’t need one iPad option priced at $499, but rather only two with both offering 3G access, since it isn’t tied down with a wireless contract anyway. Offer the 32GB option for $399 and then the 64GB one for $549. Something needs to change as clearly consumers aren’t thrilled with the iPad’s current pricing, and now that the whole world can see that Apple is downright robbing buyers of the high-end model, that perception will not improve. Apple, get back to your roots and keep it simple, stupid.