New math: Apple spends $23 more than Amazon to build its "mini" tablet, but charges $130 more
You really can't compare the Microsoft Surface with its larger screen to the Amazon Kindle Fire HD. But we can compare the return on the investment in parts and the $165 that it takes to build the Android powered tablet provides very little return if any for the online retailer, who sells them for $199. After computing research and marketing costs, you have to figure that Amazon continues to lose on each unit sold. But here is the difference. As we pointed out more than a year ago, Amazon makes its money by selling Kindle Fire users content, apps and storage. Microsoft wants to make its money on the tablet since it doesn't have the content to sell like Amazon does. After selling content, apps and storage to Amazon Kindle Fire HD users, it is estimated that Amazon makes a $100 profit on each tablet sold which is a pretty decent return on a $199.99 device, although not as high as Microsoft's margin.
Apple spends $188 to build the Apple iPad mini. One way to look at this is that Apple spends $23 more to build the iPad mini than Amazon does to build the Kindle Fire HD, but sells its tablet for $130 more. But that only serves to highlight the difference in the approach taken by the two companies. Amazon wants to get as many tablets into customers hands as possible so it can sell them all of the extras that it profits from selling. Apple, like Microsoft, wants to profit from the actual sale of the device.
Without knowing research and marketing costs or tax rates, we can't compute net profit margins, but based on the tear-down costs and retail pricing, Microsoft's return on its investment to produce its tablet starts at 84%. If Amazon does make $100 selling content, apps and storage, its return is 67% while Apple's figure is 75%. As juicy as it sounds, Apple has already said that the profit margin for the Apple iPad mini is less than the company receives for its other products.
None of the three manufacturers is actually giving away something for nothing. Amazon isn't in business to lose money, so you know that their business plan must be working for them. Microsoft and Apple are more traditional in their approach, which is to sell their tablets as high as possible and profit from the difference it costs the firms to produce them.
1. Mxyzptlk (Posts: 2447; Member since: 21 Apr 2012)
It's better to pay more for higher quality
2. ajac09 (Posts: 1107; Member since: 30 Sep 2009)
paying more doesnt mean you get better quality. It just means apple is making more money
13. Mxyzptlk (Posts: 2447; Member since: 21 Apr 2012)
If Apple continues to make good products then there's no problem for people paying good money to use them.
25. therealestmc (Posts: 128; Member since: 23 Jul 2012)
A product that the user is satisfied, not just thrown in some corners after a month of use. A product that has an unmatched ecosystem and built with premium materials, not cheap plastic.
43. darkkjedii (Posts: 7791; Member since: 05 Feb 2011)
I notice anyone who likes apple, or doesn't agree with u, u tell to get a life. U sound like a big baby that takes his ball and leaves the court, cuz he can't get his way.
33. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
Why wouldnt they be satisfied with there Half-Baked
Restrictead OS, along with a Apple logo stampet on a cheap shatering glass and everyone posing with there iPhone, not caring or botherd what good for nothing useless midrange product.
Yea no wonder theres a product once a year, try buying a new phone every 6 months if your that well of. My foot same booring app launcher for 5 years with no evolution, still following Linux footsteps.
40. p0rkguy (Posts: 671; Member since: 23 Nov 2010)
Bad. If people were satisfied, they wouldn't "need" the next one.
49. firelightx (Posts: 71; Member since: 13 Oct 2011)
If you had stopped with the first sentence, you would have been just fine. At the end of the day, a product that the user purchasing is satisfied with is a legitimately good product. Period the end.
It's when you start getting into "unmatched ecosystem" and "premium materials" that you get so downranked.
You really shouldn't have written those two lines. Particularly when there ARE ecosystems out there that match iOS. Especially when you don't understand the difference between cheap plastic (what that case around your iPhone is made out of) and high grade polycarbonate material (what the battery backing for the GS3 is made from).
Case in point - when I drop my Galaxy on the ground, it doesn't have PAINT chipping away from it's back over my mistake.
55. someones4 (Posts: 607; Member since: 16 Sep 2012)
Coca cola cans are made of premium materials (aluminium ) as well....
22. tedkord (Posts: 3410; Member since: 17 Jun 2009)
That would be true if they made better products than competitors. Sadly, they do not.
30. Mxyzptlk (Posts: 2447; Member since: 21 Apr 2012)
So why do competitors like to copy Apple then? If their products weren't better then there wouldn't be anyone copying them.
35. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
More like your Apple copied Sony and LG. Stop posting negative and causing flame wars.
41. p0rkguy (Posts: 671; Member since: 23 Nov 2010)
Copy is such a hypocritical word to defend Apple.
That's like saying you, Mxyzptlk, telling me, p0rkguy, to go suck a d*ck when you already have one in your mouth. I mean how do you even say that? Does that even make sense to you?
Also, neutral words would be to combining for the better, not stealing. Let's say Apple combined things and made better, why can't other companies do it now?
Do you not want better? I mean sure back in the days Power Rangers was awesome, but now there's better. Are you going to disagree with that?
42. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
No matter what, they will disagree.
51. Nadr1212 (Posts: 741; Member since: 22 Sep 2012)
Are any of us surprised ? It's Apple we're talking about, they just want to make money!!!
5. timtimity (Posts: 196; Member since: 13 Aug 2012)
I'm happy to pay more for better quality - when the product costs more to make because of it. I'm not happy at paying a lot more than it costs to make just to line a company's pocket.
In this instance quality doesn't come into it. This article is not about quality. It's about price difference between the cost to make and selling cost.
9. JonBjSig (Posts: 167; Member since: 17 Nov 2011)
They're spending $23 more than Amazon to build the tablet but selling it for $130 more, the extra money goes directly into Apple's pocket and has nothing to do with quality.
11. PhenomFaz (Posts: 1042; Member since: 26 Sep 2012)
and what about the less fortunate?
are you saying people who cant pay premium price dont deserve to use a common feature like online services? Premium price is good for premium features...in today's day and age neither a tablet nor do basic online services qualify as premium buddy!
And what about socio-economic responsibilities of a tech giant like Apple?
on one side it says it is launching an education focussed product llike ipad mini yet is charging students a helluva lot more than what they pay for kindle, nook or nexus 7!
Pure capitalistic bureaucracy!
31. PhenomFaz (Posts: 1042; Member since: 26 Sep 2012)
dont really need a welcome...i am quite familiar with the place :)
I am not asking for anyone to become Mother Teresa but all I am saying is people shouldnt just snuggle up in their own comfy bubble and forget about others.
The truth of the matter is If you're naked then you should cover yourself, not close your eyes and pretend you're not naked because you cant see yourself naked! If you do that then only you're the fool and everyone else is already seeing you naked!
45. darkkjedii (Posts: 7791; Member since: 05 Feb 2011)
Capitalistic bureaucracy? Phenom I'm starting to think u may b a starwars fan like me. Those where the emperors words too
54. PhenomFaz (Posts: 1042; Member since: 26 Sep 2012)
Dude Star Wars is and will forever be THE FORCE to reckon with in Hollywood...its just awesome!
47. rusticguy (Posts: 2701; Member since: 11 Aug 2012)
It's better to save money than to pay up for a overhyped crap.
8. Aeires (unregistered)
Agreed. Apple wants to make money on their ecosystem just as much as Amazon, they just want you to pay a huge amount up front as well.
12. Mxyzptlk (Posts: 2447; Member since: 21 Apr 2012)
Apple doesn't force people to buy their products.
16. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
Apple brainwashes and temtates innocent unsmart untechy people, and the h!ppy$ more like.
18. Slammer (Posts: 679; Member since: 03 Jun 2010)
You're right. My uncle knew someone that worked at Apple. They had an inside motto:
"We can't control someone's stupidity, but we can surely benefit from it".
This certainly would concur with Steve Jobs' documented belief that consumers are technologically dumb.
48. rusticguy (Posts: 2701; Member since: 11 Aug 2012)
Much like the drug peddler doesn't force anyone to buy drugs...
7. mas11 (Posts: 1005; Member since: 30 Mar 2012)
I just can't believe people let themselves get taken advantage of by companies like Apple, you could but the nexus 7 for $130 less and get more for your money.
17. MorePhonesThanNeeded (Posts: 612; Member since: 23 Oct 2011)
Lol, with blind devotion of it's reputed defenders like Mxy and others like him/her, Apple has plenty of consumers to r@pe and pillage. They are so arrogant that they do not dare pass off any savings to customers because the consumer so believes in this premium myth, when it obviously costs them peanuts to slap those components together.
Marketing and reality distortion field do all their work for them, that logo and iconic name makes people think that they are the only things that matter. The marketing has done it's job, can't tell you how often people call the name iPod for every tiny device that has headphones attached to them. Bravo Apple, you guys are the best as selling people things at grossly inflated prices just to keep up with the Jones'.
Meanwhile back at Cupertino headquarters...Now how do we make another device and slap an prefix i and make it expensive and sell it to these sheepish morons out there. If making money was this easy I would have signed up too...capitalism baby...lie, cheat and steal your way to the top.
Apple excels in all three areas no question!
Go read the review for the iPad mini and you'll see just how well the reality distortion field works and even objective reviewers lose all reason and give high marks to Apple logo bearing devices for no apparent reason and lavish it with praise too.
Just call it Apple math, they might have a patent on that too so be careful using it in public.
28. therealestmc (Posts: 128; Member since: 23 Jul 2012)
How does affect what people buy with their money? I truly do not see how that is your problem. Do you have problem with people who buy expensive cars, too?
37. MorePhonesThanNeeded (Posts: 612; Member since: 23 Oct 2011)
What does anything I say have an issue with how stupid people with more money than sense spend their money? People can buy what they want for whatever perceived value and I can sit back and laugh at them for having more money than sense. They can parade around with their devices as if it's a social status symbol all they want to, make me no difference but I can poke fun at their ineptitude.
I clearly stated that they have great marketing and to be able to make a profit off people stupidity is epic. Just bad that Apple doesn't care enough about you to give you a bit of a break on the asking price, but you know why should they if you are more than willing to spend such a large amount on it anyway. That shed some light in your dark corner, since you want to be cynical.
A wise man spends wisely, the idiot spends.
10. addict27 (Posts: 7; Member since: 01 Oct 2012)
These tear-downs are greatly underestimating the true "cost of materials". That apple logo is made from pure apple magic by the hands of the late Steve Jobs himself and is worth $150 by itself! /s
14. gallitoking (Posts: 4571; Member since: 17 May 2011)
what is not included on those cost is the Apple award winning customer service and support.. and brand name, so for that 130 dollars more you are getting plenty of.. if not don't buy is that simple.. and I know a couple of Apple stores here in my area. Amazon store for tech support.. yeah.. Apple is it
26. tedkord (Posts: 3410; Member since: 17 Jun 2009)
Don't forget the R&D costs of years of developing cutting edge technology like rectangles with rounded corners and grids of icons.
Of course, they did save some money by stealing ideas like swipe to unlock and fro down notifications. Plus, there's the practice of just using others FRAND patents and never paying, but all that saved money goes to lawyers.
19. zvioocge (Posts: 26; Member since: 23 Oct 2012)
which is expensive is the BEST!
Go f**k Off,Buy N7 32GB HSPA+ Version which is still cheaper than 16gb,only wifi,sub hd screened Ipad MINI
20. gallitoking (Posts: 4571; Member since: 17 May 2011)
get back at me in 7 months when your N7 falls appart..
39. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)
Get back when your fake stop pause start multitasking become true like Android, till then enjoy your Half-cooked ios fake Darwin dusts.
21. downphoenix (Posts: 1991; Member since: 19 Jun 2010)
Lot of Apple bashing here, yet not a peep about Microsoft making over $100 more profit on a surface than Apple makes on a mini. Yes, it is a more expensive product to make and thus fair to charge more, but you cant argue that the Mini is a product marketed as a budget instead of premium devie since it makes around $150 profit on the $330 price tag. The mini is considered premium as far as 7inch tablets go, the Kindle Fire HD is considered budget. It has nothing to do with what's under the hood and everything to do with what is on the outside.
36. MorePhonesThanNeeded (Posts: 612; Member since: 23 Oct 2011)
Because no one in their right mind would buy Surface RT, only those Windows fanatics can see value where there is absolutely none in that mess of hardware and software that is too bloated for it's own good.
24. JunitoNH (Posts: 651; Member since: 15 Feb 2012)
You are very generous, seven months, more like four.
32. TheMan (Posts: 317; Member since: 21 Sep 2012)
This analysis would be more meaningful if wholesale pricing were used.
50. kindlefireowner (Posts: 232; Member since: 05 Dec 2011)
Business 101. Make a product that people want to buy, then sell as many of those products as possible at full price. Can't hate Apple for that.
53. a961009 (Posts: 92; Member since: 04 Aug 2011)
Can I call Apple as a GTO(Global Thief Organization)?? LMAO
56. shuaibhere (Posts: 593; Member since: 07 Jul 2012)
Did any one noticed that microsoft makes more profit than apple???????
Microsoft is no different from apple....the only difference is they hide behind the screen and acts smart....while apple shows it's stupidity publicly.....