3G models likely to feed more profit

The base material costs of building an iPad are at least $219.35, says research firm iSuppli. In a 16GB model the memory is projected to cost $29.50, while the Apple A4 processor is thought to be worth $17; the manufacturing partner for the chip is believed to be Samsung. If accurate, the price of the A4 may be just $2 more than that of the processor in the iPhone 3GS.

Actually assembling an iPad may bring Apple's costs to a floor of $229.35, although that price still does not account for expenses like research, marketing, labor and logistics. The $499, 16GB Wi-Fi iPad is in fact expected to be Apple's least profitable model, since extra memory and 3G receivers may have little impact on margin. The most lucrative model is anticipated to be the 32GB 3G iPad, which will sell for $729 despite costing about $287.15 in terms of parts and manufacturing. Memory may have more of an impact at the top end, since 64GB of memory should cost $118.

The iSuppli breakdown does suggest that room exists for lowering retail prices. Apple executives have already admitted a willingness to reduce pricing, though in the short term this would be contingent on slow sales. Analysts say that as many as 4 million iPads could be sold in the first year.

by MacNN Staff