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.
Flash Poll
From The Founder
Network architects aiming to upgrade their networks to support agile, open, virtualized services in the 21st century need to consider new criteria when choosing between technology suppliers.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Custom TV
Procera: Enhancing the Subscriber Experience

7|7|15   |   4:53   |   (0) comments


Hear from Procera on the latest in Subscriber Experience solutions. Learn how Procera's RAN Perspective technology helps network operators monitor and manage network traffic, in real-time, solving congestion and other network issues.
Between the CEOs
HP's Prodip Sen: The NFV Journey

7|7|15   |   21:39   |   (0) comments


Prodip Sen, CTO of the Network Functions Virtualization (NFV) business unit at HP, talks to Light Reading founder and CEO Steve Saunders about the four stages of the NFV journey.
LRTV Documentaries
Leading Lights 2015 Winners' Video

7|7|15   |   08:34   |   (0) comments


Hear what the Leading Lights 2015 winners had to say after they picked up their awards in Chicago.
LRTV Documentaries
PSA: The Perils of a Hyper-Connected Society

7|6|15   |   1:38   |   (0) comments


A public service announcement calling attention to the perils of a hyper-connected society.
LRTV Interviews
Guavus Takes Analytics on the Road

7|6|15   |   4:09   |   (1) comment


Guavus CEO Anukool Lakhina tells Light Reading CEO and founder Steve Saunders how the analytics tools developed for telcos are applicable to the transportation industry.
Telecom Innovators Video Showcase
Mellanox's New 25/50/100Gb/s Ethernet Products

7|6|15   |   2:44   |   (0) comments


Mellanox offers a complete 10/25/40/50/56/100Gbit/s solution that delivers industry-leading performance, scalability, reliability and efficiency for optimal application performance and data center ROI.
Telecom Innovators Video Showcase
Arista's CloudVision

7|6|15   |   6:01   |   (0) comments


Anshul Sadana answers questions from Steve Saunders, Light Reading’s founder and CEO, about Arista’s CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
LRTV Custom TV
Red Hat Demo

7|2|15   |   10:53   |   (0) comments


Red Hat's Nicolas Lemieux demonstrates how Red Hat is driving innovation through open source communities.
LRTV Custom TV
Red Hat's Approach to OpenStack Adoption

7|2|15   |   5:17   |   (0) comments


Red Hat's Radhesh Balakrishnan outlines his company's open source strategy for both enterprises and telcos.
LRTV Custom TV
The New IP Goes Mobile With vEPC

7|2|15   |   1:12   |   (0) comments


Heavy Reading's Gabriel Brown discusses results of a Light Reading survey sponsored by Brocade that shows a clear commitment by mobile operators to move quickly to virtual EPC deployment.
LRTV Custom TV
Making Business Sense of SDN

7|2|15   |   1:42   |   (0) comments


Results of a Brocade-sponsored survey show that CSPs have a clear sense of SDN use cases but are wrestling with the business case. Sterling Perrin of Heavy Reading looks behind the numbers.
LRTV Custom TV
NFV Will Be Here Sooner Than You Think

7|2|15   |   2:22   |   (0) comments


Forget the usual ten-year cycle for new technologies – NFV will be a core part of CSP networks in five years, based on results of a Brocade-sponsored survey, says Heavy Reading's Caroline Chappell.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
All Upcoming Live Events
Infographics
Equinix walks through the past four digital economy eras from computing to network to connected to today's interconneted world.
Hot Topics
What's a Gigabit Good For?
Carol Wilson, Editor-at-large, 7/1/2015
Colt to Jettison Ailing IT Business
Iain Morris, News Editor, 6/30/2015
FCC Chairman Talks Up SDN/NFV
Mari Silbey, Senior Editor, Cable/Video, 7/2/2015
A&E Launches Lifetime OTT Service
Alan Breznick, Cable/Video Practice Leader, 7/3/2015
IBM Sows Seed for New Telco Unit, Plans NFV/SDN Push
Ray Le Maistre, Editor-in-chief, 7/6/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Prodip Sen, CTO of the Network Functions Virtualization (NFV) business unit at HP, talks to Light Reading founder and CEO Steve Saunders about the four stages of the NFV journey.
Casa Systems has been going from strength to strength over the last couple of years. In 2013, it became the first vendor to ship an integrated CCAP device -- the ...
Cats with Phones