5 ms·

So an iPhone is $600, but I can buy an iPad for $320? That alone is pretty impressive job Apple/AT&T/Verizon have done on positioning & playing to people's psy

So an iPhone is $600, but I can buy an iPad for $320? That alone is pretty impressive job Apple/AT&T/Verizon have done on positioning & playing to people's psychology.

thedrbrian 14y ago
That iPad is a generation behind in processor and only has a 1024x768 pixel screen.
- Samuel_Michon 14y ago
  Not to mention it has no phone or 3G data connectivity, way worse cameras, and no GPS. Apple also sells unlocked and contract-free iPhones, starting at $450 for the iPhone 4.
  - adrr 14y ago
    Exactly. Licensing costs for technology involving mobile phone and mobile communication adds lot of expense. Fair comparison is with the IPads with mobile data but that still lacks the licensing for mobile voice.
  - barredo 14y ago
    You, and the parent comment are right. But the main difference in cost between a smartphone and a tablet is miniaturization of hardware.
    - Samuel_Michon 14y ago
      Not really. iPad and iPhone have the same chips. iPad retina screens are actually more expensive than iPhone retina screens because they're bigger (they're the same panels, just cut to a different size). The same is true for iPad batteries: they're larger than iPhone batteries and hold way more energy. I couldn't find Bill-of-Materials cost analysis for the latest models, but let's compare the iPad 3 Wifi+4G with the iPhone 4S: iPad screen: $127, iPhone screen: $37 iPad battery: $32, iPhone battery: $6 http://www.isuppli.com/Teardowns/News/pages/New-iPad-32-GB-4G-Carries-364-35-Bill-of-Materials.aspx http://www.isuppli.com/Teardowns/News/pages/New-iPad-32-GB-4... http://www.isuppli.com/Teardowns/News/Pages/iPhone-4S-Carries-BOM-of-$188,-IHS-iSuppli-Teardown-Analysis-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/iPhone-4S-Carrie...
      - barredo 14y ago
        Thanks for the correction then! I'm checking the links, very interesting
  - recuter 14y ago
    An iPad Mini 3G is also $450 and while there is no default phone app you can just put Google Voice on it or something. Same difference.
    - Samuel_Michon 14y ago
      That's a good comparison. Those two models both have the same Bill-of-Materials costs: $188.[1][2] [1] http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries-Bill-of-Materials-of-187-51-According-to-iSuppli.aspx http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries... [2] http://www.isuppli.com/Teardowns/News/Pages/Low-End-iPad-mini-Carries-188-Bill-of-Materials-Teardown-Analysis-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/Low-End-iPad-min...
- ajross 14y ago
  Those aren't cost drivers though; in volume I doubt a retina screen is any more expensive than the low-res ones, and semiconductor cost does with die area, not "generation". The iPad 2 is possibly cheaper because of better integration -- as the manufacturer revs the board they can address inefficiencies. Not also that some components go the other way entirely: battery cost goes with the physical mass of the battery for obvious reasons, and the iPad has 3x as much battery as the phone. The real reason the "premium" product is cheaper than the "budget" one is pure price discrimination. The iPhone 5 is "better enough" than its previous incarnations that people are willing to buy it for $600. But there are people who won't buy an iOS product at all at that price, and as Apple can manufacture them more cheaply they sell a differently configured model (carefully tuned to be "worse enough" than the premium models that it won't cannibalize sales!) for a lower price that the market will bear and that will still make them money. Everyone does this, across all market segments (and not just in tech). There's nothing surprising in that.
  - xenophanes 14y ago
    > in volume I doubt a retina screen is any more expensive than the low-res ones I'm skeptical! Retina has more and smaller parts that require better machines to work with. Source or evidence? PS iPhone's miniaturization adds cost compared with an iPad. And it has margins over 50% instead of 30-35%.
    - ajross 14y ago
      The fact that desktop flat panel retail prices have never scaled by LCD element pitch is the best I have. But in general arguments of the form "newer/better/fancier technology must be more expensive!" are always wrong. Things are getting cheaper, not more expensive. This has been nearly-universally true over the last three decades. I see nothing special about LCDs that would argue against that. Occasionally you can see situations where "old" stuff is cheaper, but usually it's due to things like mature production processes being exploited by manufacturers who aren't competing at the high end anymore (and thus don't have to pay for their own R&D and/or worry about cannibalizing sales). I know you want to believe that it costs Apple $559 to make that $600 phone, but it doesn't. It's probably not even close. You're being fleeced, and that's a good thing for the industry as it drives innovation.
pazimzadeh 14y ago
The iPad mini is $330. Interestingly, the iPod touch is $299 which seems expensive compared to the iPad mini, and cheap compared to the iPhone 5.
- joezydeco 14y ago
  Welcome to the magic stratification of Apple's pricing. The next "upgrade" is always $30-$50 away, which makes the upsell so tempting.
cjensen 14y ago
The human mind has a number of faults hard-wired into it like optical illusions or the illogical notion that it is unfair if your mom gives extra toys to your brother and not you. Lesson for entrepreneurs everywhere: your brain is lying when it says price should be a function solely of production cost. Supply and Demand is the Law!
- HarryHirsch 14y ago
  > your brain is lying when it says price should be a function solely of production cost. Supply and Demand is the Law! One must not forget other factors, notably entry barriers into the market. In theory at least, no one should be able to make any profit selling anything at market because someone will always be selling a little cheaper. In practice - just look at the cost of broadband internet!

So an iPhone is $600, but I can buy an iPad for $320? That alone is pretty impressive job Apple/AT&T/Verizon have done on positioning & playing to people's psychology.

thedrbrian 14y ago

That iPad is a generation behind in processor and only has a 1024x768 pixel screen.

Samuel_Michon 14y ago
Not to mention it has no phone or 3G data connectivity, way worse cameras, and no GPS. Apple also sells unlocked and contract-free iPhones, starting at $450 for the iPhone 4.
- adrr 14y ago
  Exactly. Licensing costs for technology involving mobile phone and mobile communication adds lot of expense. Fair comparison is with the IPads with mobile data but that still lacks the licensing for mobile voice.
- barredo 14y ago
  You, and the parent comment are right. But the main difference in cost between a smartphone and a tablet is miniaturization of hardware.
  - Samuel_Michon 14y ago
    Not really. iPad and iPhone have the same chips. iPad retina screens are actually more expensive than iPhone retina screens because they're bigger (they're the same panels, just cut to a different size). The same is true for iPad batteries: they're larger than iPhone batteries and hold way more energy. I couldn't find Bill-of-Materials cost analysis for the latest models, but let's compare the iPad 3 Wifi+4G with the iPhone 4S: iPad screen: $127, iPhone screen: $37 iPad battery: $32, iPhone battery: $6 http://www.isuppli.com/Teardowns/News/pages/New-iPad-32-GB-4G-Carries-364-35-Bill-of-Materials.aspx http://www.isuppli.com/Teardowns/News/pages/New-iPad-32-GB-4... http://www.isuppli.com/Teardowns/News/Pages/iPhone-4S-Carries-BOM-of-$188,-IHS-iSuppli-Teardown-Analysis-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/iPhone-4S-Carrie...
    - barredo 14y ago
      Thanks for the correction then! I'm checking the links, very interesting
- recuter 14y ago
  An iPad Mini 3G is also $450 and while there is no default phone app you can just put Google Voice on it or something. Same difference.
  - Samuel_Michon 14y ago
    That's a good comparison. Those two models both have the same Bill-of-Materials costs: $188.[1][2] [1] http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries-Bill-of-Materials-of-187-51-According-to-iSuppli.aspx http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries... [2] http://www.isuppli.com/Teardowns/News/Pages/Low-End-iPad-mini-Carries-188-Bill-of-Materials-Teardown-Analysis-Reveals.aspx http://www.isuppli.com/Teardowns/News/Pages/Low-End-iPad-min...
ajross 14y ago
Those aren't cost drivers though; in volume I doubt a retina screen is any more expensive than the low-res ones, and semiconductor cost does with die area, not "generation". The iPad 2 is possibly cheaper because of better integration -- as the manufacturer revs the board they can address inefficiencies. Not also that some components go the other way entirely: battery cost goes with the physical mass of the battery for obvious reasons, and the iPad has 3x as much battery as the phone. The real reason the "premium" product is cheaper than the "budget" one is pure price discrimination. The iPhone 5 is "better enough" than its previous incarnations that people are willing to buy it for $600. But there are people who won't buy an iOS product at all at that price, and as Apple can manufacture them more cheaply they sell a differently configured model (carefully tuned to be "worse enough" than the premium models that it won't cannibalize sales!) for a lower price that the market will bear and that will still make them money. Everyone does this, across all market segments (and not just in tech). There's nothing surprising in that.
- xenophanes 14y ago
  > in volume I doubt a retina screen is any more expensive than the low-res ones I'm skeptical! Retina has more and smaller parts that require better machines to work with. Source or evidence? PS iPhone's miniaturization adds cost compared with an iPad. And it has margins over 50% instead of 30-35%.
  - ajross 14y ago
    The fact that desktop flat panel retail prices have never scaled by LCD element pitch is the best I have. But in general arguments of the form "newer/better/fancier technology must be more expensive!" are always wrong. Things are getting cheaper, not more expensive. This has been nearly-universally true over the last three decades. I see nothing special about LCDs that would argue against that. Occasionally you can see situations where "old" stuff is cheaper, but usually it's due to things like mature production processes being exploited by manufacturers who aren't competing at the high end anymore (and thus don't have to pay for their own R&D and/or worry about cannibalizing sales). I know you want to believe that it costs Apple $559 to make that $600 phone, but it doesn't. It's probably not even close. You're being fleeced, and that's a good thing for the industry as it drives innovation.

pazimzadeh 14y ago

The iPad mini is $330. Interestingly, the iPod touch is $299 which seems expensive compared to the iPad mini, and cheap compared to the iPhone 5.

joezydeco 14y ago
Welcome to the magic stratification of Apple's pricing. The next "upgrade" is always $30-$50 away, which makes the upsell so tempting.

cjensen 14y ago

The human mind has a number of faults hard-wired into it like optical illusions or the illogical notion that it is unfair if your mom gives extra toys to your brother and not you. Lesson for entrepreneurs everywhere: your brain is lying when it says price should be a function solely of production cost. Supply and Demand is the Law!

HarryHirsch 14y ago
> your brain is lying when it says price should be a function solely of production cost. Supply and Demand is the Law! One must not forget other factors, notably entry barriers into the market. In theory at least, no one should be able to make any profit selling anything at market because someone will always be selling a little cheaper. In practice - just look at the cost of broadband internet!