By Khurram Aziz | Nov 07, 2012 12:16 PM EST
Technology analyst IHS iSuppli has revealed that Apple's latest device, the iPad Mini, costs the company as much as $188 to manufacture. When you add the assembly cost, that rises to $198 for a device which retails for $329.
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Apple maintains high margins for all its products, well over 40%. However, sales of the new 7.9-inch tablet only yields 43%, suggesting the company is making little profit from the sale of the iPad mini.
iSuppli performed a "teardown" of the iPad mini, which means taking the tablet computer apart to its core components and calculating its Bill of Materials.
It revealed that the display, made by LG, is the most expensive component on the iPad Mini, costing around $80, with memory chips costing the firm about $15.50.
However, the Mini, which has been released to compete with rival devices from Google and Amazon, costs almost the same to manufacture as both the Nexus 7 and the Kindle Fire HD. Those devices are priced at $250 and $199 respectively, barely breaking even.
"Apple's strategy entails offering differentiated hardware that justifies higher price tags than comparable products. This differs markedly from Amazon's 7-inch Kindle Fire HD and Google's Nexus 7 tablets, both of which are essentially low-margin or no-margin giveaways," said iSuppli senior principal analyst Andrew Rassweiler.
"Amazon's strategy with the Kindle Fire HD 7-inch tablet is not really to make money on the hardware itself. Rather, the idea is to create a product at a compelling price point and then get a lot of consumer traction in order to put Amazon content and the Amazon online store into consumers' hands."
Rassweiler believes that the tablets from Amazon and Google have set new consumer pricing expectations for 7-inch tablets, posing a competitive challenge to Apple's media tablet dominance.
Apple CFO Peter Oppenheimer told investors recently that the iPad mini "has a higher cost and the gross margin is significantly below our corporate average".
This suggests, despite the fact that the margins are significantly higher than rival products, the iPad Mini isn't making the company the kind of profits it is used to. Nevertheless, with claims that it's sold three million of the tablets in the opening weekend, the device still adds significantly to the company's coffers.
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