iSuppli: Entry-level iPad costs $229.35 to manufacture, chea


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If the iPad does take off to a slow start, Apple has a decent amount of headroom to slash the retail price. Don’t pray for a $199 iPad, though – a large screen and other components that go into the device don’t come cheap.
According to a preliminary iSuppli estimate, total cost of components that go into Apple’s iPad tops out at around $219.35, meaning there’s room for price cuts. The most and the least profitable iPads are the 32GB 3G model and the 16GB WiFi model with a combined materials and manufacturing cost of $287.15 and $229.35, respectively.
Although nobody can figure out the exact cost of components until someone tears the iPad apart and examines its guts, rough calculations are possible, thanks to sources who recently named possible iPad component suppliers. Based on this data and known wholesale prices of common electronic components, a rough cost analysis is possible.
The priciest part is the iPad’s 9.7-inch multitouch display enhanced with a premium display technology called IPS. iSuppli estimated the iPad’s display at $80, or five times more than the display on the iPhone 3GS. Apple’s custom-engineered silicon called A4 is manufactured by Samsung, iSuppli said, and it costs around $17 a piece. That’s just $2 more than the Samsung chip that goes into iPhone 3GS and third-generation iPod touch. Scroll down for iSuppli’s table containing all iPad components and accompanying price estimates.

Note that iSuppli’s estimate doesn’t take into account the costs associated with research and development, sales, transportation, marketing, licence fees, and other costs not directly related to manufacturing. According to iSuppli, a quick laundry list of key components that go into the iPad includes the following items:

  • 9.7-inch multitouch display, valued at about $80
  • Apple’s custom A4 chip, estimated at $17
  • 16GB flash memory, roughly $29.50
  • 32GB flash memory, roughly $59
  • 64GB flash memory, roughly $118
Apple has managed to keep the cost of iPad parts low enough to discourage rival vendors who lack Apple’s market size and buying power that helps the company squeeze favorable component deals. According to DigiTimes, the unexpectedly low-priced iPad has forced tablet makers to rethink their products.
Some folks fear that a possible price war that the iPad might have already sparked could easily drive any profitably out of the tablet market before it even takes off. iSuppli’s analyst Francis Sideco told Business Week that a relatively low component cost gives Apple room for possible price reductions:
There’s certainly a decent amount of headroom in there. If they had to reduce the retail price, they certainly could.
Indeed, a recent Retrevo survey revealed that only half of the people who wanted to buy an Apple tablet prior to the iPad announcement said they would buy the iPad. The survey suggested that interest in the device is dropping following the announcement. Apple is apparently prepared to take necessary actions should the iPad take off to a slow start. According to a recent piece by the Wall Street Journal, Credit Suisse analysts who met with Apple executives wrote in a note to clients that Apple intends to stay “nimble” on pricing of the iPad.