You don't have to "make" it for less than Apple to be competitive, as long as you're willing to live with a smaller margin. So, if iPad costs Apple $350 to make

You don't have to "make" it for less than Apple to be competitive, as long as you're willing to live with a smaller margin. So, if iPad costs Apple $350 to make to sell for $499 at a margin of $149, someone else can make it for $400 and sell it for $499 at a lower margin. Of course you have to take retailer's margin and other things into account but my argument stands.