Why do you think 3G is an extra $130? Is installing the 3G radio that expensive?

[colmaclean]

The profit on the $499 iPad is probably no more than about $150 per unit. They may save some money since they are using their own processors. Which isn't too bad a deal for you, since Apple had to develop the thing and its software. I'm sure we'll see when the breakdowns inevitably come.

I'm wondering if the iPad could be close to a loss-leader (like the Sony PS3). Apple know they're going to make money back through the iTunes store.

 

[sushi]

I'm wondering if the iPad could be close to a loss-leader (like the Sony PS3).

Interesting. Apple is not the type of company to do this.

However, I would agree that they may be offering the iPad at a lower profit rate than normal for them.

Apple know they're going to make money back through the iTunes store.

True.

The iTMS, the App Store and the iBook store.

 

[MikeyTree]

I'm wondering if the iPad could be close to a loss-leader (like the Sony PS3). Apple know they're going to make money back through the iTunes store.

I doubt it's an actual loss leader (i.e. something that the company sells for below cost). But I would't be surprised if Apple is selling at a substantially lower profit margin than they have on their other products. The profit they'll make from their App, Book, and Music stores may be a factor, but I suspect their biggest concern right now is for iPad to become as dominant in its market as the iPod and iPhone.

It's unlike Apple to sell a product as a loss leader just to make money on apps. But it's entirely like Apple to sacrifice a little short-term profit in order to maximize a long-term strategy of market dominance.

 

[Ruahrc]

People always seem to forget the cost of R&D, as if these products designed themselves and they just need to buy the materials. R&D is not cheap, especially considering that the A4 CPU is a custom design. And P.A. Semi did not join Apple for free.

I have no doubt that Apple makes a good profit margin on all models of the iPad, and that the 3G upgrade does not cost $130 in extra materials, but there is also that extra R&D to consider, not to mention all the royalties and licensing they have to go through.

Does it cost a lot of money to get a device approved by the FCC? This could factor in as well since the 3G model would likely need its own approval process.

I know some of that $130 is profit for the 3G version but it's not like Apple is just throwing on a $10 radio chip and calling it good... there's a lot more involved in actually designing the 3G version.