New math: Apple spends $23 more than Amazon to build its "mini" tablet, but charges $130 more

New math: Apple spends $23 more than Amazon to build its
Many casual gadget fans might wonder what the point is of those tear-downs. But not only are they interesting for the advanced Geek to see what is inside the device he is using, it also gives us a look at the different business practices of the manufacturers. Let's take a look at Microsoft. As we already told you, the Redmond based company spends $271 for components to build the Microsoft Surface RT. The tablet is priced at $499 and up. The Touch Cover brings in another $100 of pure profit to the bottom line.

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.

What about Apple? The previous tear-down revealed that 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.

source: Gizmodo

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55 Comments

1. Mxyzptlk unregistered

It's better to pay more for higher quality

2. ajac09

Posts: 1482; Member since: Sep 30, 2009

paying more doesnt mean you get better quality. It just means apple is making more money

13. Mxyzptlk unregistered

If Apple continues to make good products then there's no problem for people paying good money to use them.

15. TROLL

Posts: 4851; Member since: Apr 13, 2012

What good products?

25. therealestmc

Posts: 679; Member since: Jul 23, 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.

29. Mxyzptlk unregistered

The truth has been commented.

34. AnTuTu

Posts: 1620; Member since: Oct 14, 2012

Get a life Mxyptlk

43. darkkjedii

Posts: 31320; Member since: Feb 05, 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

Posts: 4851; Member since: Apr 13, 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: 685; Member since: Nov 23, 2010

Bad. If people were satisfied, they wouldn't "need" the next one.

52. Darkerm

Posts: 322; Member since: Jan 31, 2012

Well Said Bro :D

49. firelightx

Posts: 71; Member since: Oct 13, 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: 628; Member since: Sep 16, 2012

Coca cola cans are made of premium materials (aluminium ) as well....

44. darkkjedii

Posts: 31320; Member since: Feb 05, 2011

What bad products do they make?

22. tedkord

Posts: 17415; Member since: Jun 17, 2009

That would be true if they made better products than competitors. Sadly, they do not.

30. Mxyzptlk unregistered

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

Posts: 4851; Member since: Apr 13, 2012

More like your Apple copied Sony and LG. Stop posting negative and causing flame wars.

41. p0rkguy

Posts: 685; Member since: Nov 23, 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

Posts: 4851; Member since: Apr 13, 2012

No matter what, they will disagree.

51. Nadr1212

Posts: 741; Member since: Sep 22, 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: Aug 13, 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.

6. TROLL

Posts: 4851; Member since: Apr 13, 2012

More like for logo and false hype.

9. JonBjSig

Posts: 176; Member since: Nov 17, 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: 1236; Member since: Sep 26, 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!

27. therealestmc

Posts: 679; Member since: Jul 23, 2012

Welcome to earth!

31. PhenomFaz

Posts: 1236; Member since: Sep 26, 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: 31320; Member since: Feb 05, 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: 1236; Member since: Sep 26, 2012

Dude Star Wars is and will forever be THE FORCE to reckon with in Hollywood...its just awesome!

47. rusticguy

Posts: 2828; Member since: Aug 11, 2012

It's better to save money than to pay up for a overhyped crap.

3. Savage unregistered

Is that really a surprise?

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