Light Reading
4G LTE connectivity, coupled with a new Retina display, camera and battery, will mean less money per iPad sold for Apple, according to UBM TechInsights

Apple Shaves Margins for LTE in New iPad

Sarah Reedy
LR Mobile News Analysis
Sarah Reedy, Senior Editor
3/12/2012
50%
50%

Apple Inc. (Nasdaq: AAPL)'s decision to include 4G Long Term Evolution (LTE) connectivity will cost the device maker ... US$8.40 per device sold, to be exact. (See Apple Intros First 4G LTE iPad.)

According to estimates from Light Reading sister company UBM TechInsights , the new 16GB iPad packs a total bill of materials (BOM) of $310, compared to the iPad 2's original BOM of $276.27. Both retail for $629, giving Apple a 51 percent profit margin on the new iPad, compared to a 57 percent margin it earned on the iPad 2 when it first launched.

At $21, the LTE baseband chip in the new iPad added $8.40 to the device cost, up from $12.60 on the original iPad 2. But the most expensive new component was the new Retina display, which cost Apple $70 per device, compared to $49.50 for the iPad 2. The new iPad's 5MP camera also added $7.50 per tablet, and battery costs to keep up with the LTE speeds rose from $22 to $30 on the LTE iPad.



Note that Apple lowered the cost of the iPad 2 by $100, but its BOM has also decreased from March 2011 to 2012 owing to the natural decline of silicon and Apple's volume gains. According to Allan Yogasingam, TechInsight's technical research manager, the fact that Apple has sold over 100 million units puts it in a better position to negotiate pricing on components with their suppliers.

"Their suppliers will feel more comfortable in lowering their own margins with the knowledge that Apple will be purchasing their components in mass quantities now and in the foreseeable future," he says.

At 51 percent, Apple is still making a healthy margin on the LTE iPad, and likely kept prices the same as the landscape for tablets has changed significantly since it introduced the iPad 2. With more competition, and with Android tablets at lower price points, it didn't have much of a choice in keeping its cost to consumers down. And, reports suggest that certain models of the 4G version are already on backorder, so it should make up for the lower profit margin with its typically high volumes. (See Amazon's Kindle Fire Sells for $55 Over Cost and Apple: the Numbers Behind the (Huge) Numbers.)

TechInsights will perform an actual teardown on the new iPad once it is commercially available on Friday. We'll update the specs at that time.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
joset01
50%
50%
joset01,
User Rank: Light Beer
12/5/2012 | 5:39:49 PM
re: Apple Shaves Margins for LTE in New iPad


Piper Jaffray is estimating more than 1 million of the new iPads pre-sold.

SReedy
50%
50%
SReedy,
User Rank: Blogger
12/5/2012 | 5:39:46 PM
re: Apple Shaves Margins for LTE in New iPad


Yeah, something tells me Apple will be juuuuuust fine with the lower margins.

gtchavan
50%
50%
gtchavan,
User Rank: Light Beer
12/5/2012 | 5:39:38 PM
re: Apple Shaves Margins for LTE in New iPad
I bet the margin of error of this estimation is larger than the estimated decline in the margins.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Huawei Video Resource Center
Interview With Rick Talbot, Principal Analyst, Current Analysis

10|31|14   |   2:12   |   (0) comments


At the NFV Open Cloud Forum 2014, Rick Talbot shared his positive feedback about the holistic and open approach that Huawei adopts for SDN and NFV. He also found the open sharing at the event valuable as it features different perspectives from Huawei experts, telecom operators, industry analysts as well as security experts.
LRTV Huawei Video Resource Center
Interview With David Snow, Principal Analyst, Current Analysis

10|31|14   |   2:24   |   (0) comments


David Snow talked about his understanding of Huawei and its SoftCOM strategy at the NFV Open Cloud Forum 2014, saying that Huawei's wide approach combining IT and CT expertise, introducing big data and analytics into solutions and contributing to the OpenStack community particularly resonate with him and make the company stand out in the industry.
LRTV Huawei Video Resource Center
Interview With Roz Roseboro, Senior Analyst, Heavy Reading

10|31|14   |   3:13   |   (0) comments


Roz Roseboro commented on Huawei's data center capabilities and NFV solutions at the NFV Open Cloud Forum 2014, saying that in addition to covering all three key domains of compute, storage and networking, the company also emphasizes the importance of management capabilities and professional services, which are essential in making NFV a reality.
LRTV Huawei Video Resource Center
Interview With Michael Howard, Co-founder & Principal Analyst, Infonetics Research

10|31|14   |   5:25   |   (0) comments


Michael Howard talked about SDN, NFV, and OpenStack adoption at Huawei's NFV Open Cloud Forum 2014. Particularly, he pointed out that Virtual Enterprise CPE is the top NFV use case that operators plan to invest in over 2014 and 2015 to deliver new enterprise services through virtualized functions.
LRTV Huawei Video Resource Center
Interview With Jerry Caron, Senior Vice President, Current Analysis

10|31|14   |   3:11   |   (0) comments


At Huawei's NFV Open Cloud Forum 2014, Jerry Caron from Current Analysis said that orchestration and management are key to realizing SDN and NFV for global carriers, and the approach that Huawei is taking, with its FusionSphere Cloud OS at the core, is in the right direction to address the challenges.
LRTV Documentaries
Broadband Battles

10|31|14   |   01:39   |   (0) comments


This year's Broadband World Forum featured a number of show floor battles focused on access gear, components and coffee.
Jonestown
Mobile Backhaul: Going to the Dark Side?

10|30|14   |   2:26   |   (1) comment


Heavy Reading's Patrick Donegan shares his view on a dark trend that bubbled up at Light Reading's annual backhaul conference in NYC.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With CEO of SwitchCom

10|30|14   |   4:13   |   (0) comments


SwitchCom, an IT company based in Angola, recommends a variety of Huawei solutions and hardware to their customers in the energy industry.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Ethiopia's Ministry of Water Irrigation & Energy

10|30|14   |   4:08   |   (0) comments


Gosaye Mengistie of Ethiopia's Ministry of Water Irrigation & Energy discusses the collaboration with Huawei in that country.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Dongfang Electronics Corporation

10|30|14   |   5:46   |   (0) comments


Dongfang Electronics Corporation, headquartered in Chengdu, China, is one of China's largest manufacturers of power generators and contractors of power station projects.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Zimbabwe's Customers

10|30|14   |   3:31   |   (0) comments


Representatives of Zimbabwe's Ministry of Power and Development discuss the energy needs of their country as well as new areas of improvement due to enhanced ICT capabilities.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Colbún Chile

10|30|14   |   4:29   |   (0) comments


In Chile, an aging energy infrastructure was in dire need of a modern update. Claudio Valenzuela of Colbún discusses how Huawei's ICT solutions continue to provide crucial information to improve the grid and how an in-country engineer is a cricial asset.
Upcoming Live Events
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
May 6, 2015, McCormick Convention Center, Chicago, IL
May 30, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Microsoft's Skype Embraces WebRTC on IE
Sarah Reedy, Senior Editor, 10/27/2014
FTC Slaps AT&T With Throttling Lawsuit
Sarah Reedy, Senior Editor, 10/28/2014
Wheeler Gets Down With OTT
Mari Silbey, Independent Technology Editor, 10/29/2014
China's MVNOs Hit the Wall
Robert Clark, 10/27/2014
Let's Not Kill SDN & NFV With Silos
Francois Locoh-Donou, Senior VP, Global Products Group, Ciena, 10/28/2014
Like Us on Facebook
Twitter Feed