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Apple's iPad Mini margins run between 40% and 55%

Gregg Keizer | Nov. 6, 2012
The new iPad Mini costs Apple just under $200 in materials and manufacturing, an analyst said today, putting an exclamation point on the company's devotion to high profit margins.

That also means Apple has maneuvering room, and, if necessary, could cut prices to drive sales. But Rassweiler doesn't expect that to happen: Instead, he's betting that Apple, as has been its habit, will keep prices static and in the next iteration, boost the processor's speed or the screen's resolution.

And there may be more than madness to Apple's pricing, Rassweiler speculated.

"It's almost reverse psychology," he said, of Apple's $329. "Everyone else says, '$199 is our price point,' but Apple goes above the next 'magic number' of $299, perhaps thinking that would send the message that the product is cheap."

The exterior of the iPad Mini is "typically Apple," said Rassweiler, referring to a polished fit and finish. But the interior was "underwhelming," he added.

"There's nothing inside that's cutting edge, they didn't push the envelope," Rassweiler argued. "Like the Apple TV, they took the safe road and reused components." For example, the iPad Mini's SoC, or "system on a chip," the Apple-designed A5, is the same that runs the still-for-sale iPad 2, the Apple TV and the latest iPod Touch.

iSuppli noted that by reusing components in multiple devices, Apple can increase the size of its orders to suppliers, and thus keep costs low.

If the iPad Mini is a success -- and from Apple's claim today that it sold 3 million iPads, including the Mini, between Friday and Sunday, it already is -- Rassweiler expects Apple will invest more in the 7.9-in. tablet.

And likely sooner rather than later.

Although Apple has made a tradition of upgrading the iPad -- and the iPhone -- annually, it departed from that schedule for the first time two weeks ago when it refreshed the iPad with a fourth-generation model by swapping out the March edition's A5X SoC for the A6X, a dual-core processor similar to the one that powers the iPhone 5, albeit with more graphics processing punch.

"It's more and more common [for tablet makers] to do a mid-cycle respin," said Rassweiler. "I'm going to bet that Apple will do that more often to keep up with the [tablet] market."

 

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