Light Reading

Apple Shaves Margins for LTE in New iPad

Sarah Thomas
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        ADD A COMMENT
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.

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.
From The Founder
Against the odds, Huawei is growing its telecoms networking equipment business in the US -- that should be ringing some alarm bells for domestic vendors.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
CEO Chat With Jeff Miller, ActiveVideo

8|28|15   |   19:05   |   (0) comments


Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
LRTV Huawei Video Resource Center
Vodafone: Mobile Money Is About Customer Trust

8|27|15   |   06.36   |   (0) comments


Light Reading spoke with Vodafone's Ian Ravenscroft about the unique responsibilities and opportunities facing operators handling customers' financial transactions over the network.
Telecom Innovators Video Showcase
Palo Alto Networks on Expanding in the Carrier/Service Provider Market

8|26|15   |   07:54   |   (0) comments


Alfred Lee from Palo Alto Networks tells Steve Saunders about their new chassis-based system, the PA-7080, and how it can benefit service providers compared to legacy firewalls.
LRTV Custom TV
Global Services Forum Preview

8|25|15   |   02:36   |   (0) comments


Light Reading's CEO and Founder Steve Saunders talks about Huawei's upcoming Global Services Forum with the help of Heavy Reading's Patrick Donegan and Teresa Mastrangelo.
Telecom Innovators Video Showcase
Infoblox on DNS Threat Index

8|19|15   |   04:39   |   (0) comments


Dilip Pillaipakam from Infoblox talks to Steve Saunders about his company's core network services.
Between the CEOs
CEO Chat With Ihab Tarazi, Equinix

8|14|15   |   20:18   |   (1) comment


Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about the dramatic changes in the data center, cloud and interconnect markets and discusses the impact of SDN and NFV in the coming years.
Telecom Innovators Video Showcase
The Netformx Ecosystem

8|14|15   |   09:39   |   (1) comment


Ittai Bareket, CEO of Netformx, talks with Steve Saunders about the Netformx Ecosystem, which employs cutting-edge prescriptive analytics to help solution providers maximize profits.
Telecom Innovators Video Showcase
Versa Networks on Leveraging VNFs

8|12|15   |   07:37   |   (0) comments


Kumar Mehta, founder and CEO of stealth mode startup Versa Networks, talks with Steve Saunders about how providers can best leverage virtualized network functions (VNFs).
LRTV Custom TV
Transforming the Network Through OPNFV

8|5|15   |   7:09   |   (0) comments


Sandra Rivera, VP Data Center Group; GM Network Platforms Group, Intel Corporation, on OPNFV Arno and how the industry is coming together to accelerate the deployment of NFV and transform the network.
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Cisco's cloud and virtualization portfolio can increase business agility and innovation by building a more flexible network architecture.
Hot Topics
Verizon Hums a Driving Tune
Sarah Thomas, Editorial Operations Director, 8/26/2015
Gogo Approved to Speed Up In-Flight WiFi
Sarah Thomas, Editorial Operations Director, 8/24/2015
Could Market Volatility Hurt Tech IPOs?
Dan Jones, Mobile Editor, 8/24/2015
Sprint's Claure: '3 to 5 Years' to Turnaround
Dan Jones, Mobile Editor, 8/25/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about data center, cloud and the impact of virtualization in the coming years.
Cats with Phones
Cats Are a Smartphone's Best Friend Click Here
Whoever said cats didn't live to please their humans?