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Schweb's Lounge Forum for general conversation, chit chat, or most topics that don't fit in another forum.

Why do we take this from Apple?


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mattramsey

 
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There may be a very clear explanation for this that I am missing but:

Why, after all the advances of technology in the last few years, are iPads/iPods/iPhones still coming out with 16 gb, 32 gb, 64 gb options that are $100 apart from each other*?

Shouldn't we be seeing much higher memory capacities at lower prices?

My main issue is probably the fact that, with memory being much cheaper than ever, we are still paying premium prices for bread crumbs.

The very fact that going from 16 to 32 gb (a jump of 16 gb for those counting) is the same price as going from 32 gb to 64 gb (which...*calculator*...is a 32 gb jump) suggests that the pricing is not based on anything but a marketing gimmick.

Don't get me wrong: Apple can do whatever it wants. I just feel like we are being suckered.

I don't know why that just hit me today but it makes me pretty unhappy with Apple.


EDIT: If anyone knows of articles where this subject has been raised (or elsewhere in the forums) I'd love to educate myself more--share the links please!



*I see they have a 128gb ipad--the principle still stands.
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chscag

 
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The memory price is consistent with the current prices for flash memory. For example compare the prices of SSDs... We're not talking about standard memory modules and therefore you can not compare flash memory prices to normal module prices which have fallen in recent years.
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mattramsey

 
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Quote:
Originally Posted by chscag View Post
The memory price is consistent with the current prices for flash memory. For example compare the prices of SSDs... We're not talking about standard memory modules and therefore you can not compare flash memory prices to normal module prices which have fallen in recent years.

Point taken--but how can it be anything other than a gimmick if we are paying $100 for a 16gb upgrade, $100 for a 32 gb upgrade, and $100 for a 64 gb upgrade?

Clearly 16gb should not be costing $100 when 64 gb costs $100. By Apple's pricing logic going from a 16 gb to a 32 gb should be more like $25.

Which seems a lot more reasonable imo. What do you (or anyone can chime in) think?

Again, I may be missing something but it seems like we are paying a lot for a little.
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Raz0rEdge

 
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You are correct, the pricing itself is not ENTIRELY based on the components themselves. The BOM (Bill of Materials) cost of the iPad 32GB is around $320-$340 depending on the addition of the 3G components or not. Going down to 16GB or up to 64GB doesn't remove or add a significant amount to that BOM cost since the NAND flash memory is acquired based on quantity pricing (can you tell I've done this before? ) and with quantities of millions, you get VERY good pricing from NAND vendors..

That being the case, the cheapest iPad retail price yields about a $150 margin and the margins go up by $100 for the higher models..

So it's not necessarily a marketing gimmick but rather a profit margin thing. The 128GB iPad, for example, probably costs them about $375 to produce and when it sells for $799, that's a nice $424 or so magin..

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mattramsey

 
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Quote:
Originally Posted by Raz0rEdge View Post
You are correct, the pricing itself is not ENTIRELY based on the components themselves. The BOM (Bill of Materials) cost of the iPad 32GB is around $320-$340 depending on the addition of the 3G components or not. Going down to 16GB or up to 64GB doesn't remove or add a significant amount to that BOM cost since the NAND flash memory is acquired based on quantity pricing (can you tell I've done this before? ) and with quantities of millions, you get VERY good pricing from NAND vendors..

That being the case, the cheapest iPad retail price yields about a $150 margin and the margins go up by $100 for the higher models..

So it's not necessarily a marketing gimmick but rather a profit margin thing. The 128GB iPad, for example, probably costs them about $375 to produce and when it sells for $799, that's a nice $424 or so magin..

That is really interesting to me--thank you for the post!

And it does make sense that Apple would charge more for "upgrades." You want a premium product? You pay a premium price. No problem there.

I'm just surprised the user base isn't more vocal about this issue. Or maybe I'm surprised it hasn't occurred to me/bothered me before.

But, at some level, I just can't get beyond feeling kinda ripped off buying the 32 gb iphone/ipad/iwhatever.
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Quote:
Originally Posted by mattramsey View Post
There may be a very clear explanation for this that I am missing but:

Why, after all the advances of technology in the last few years, are iPads/iPods/iPhones still coming out with 16 gb, 32 gb, 64 gb options that are $100 apart from each other*?
Why?? Because Apple can...no competition (simple answer).

If someone wants to purchase an iPad, iPhone, or iPod...who is the supplier (Apple)...so you MUST purchase from Apple. And yes...you can buy Apple products from other stores...but Apple is the supplier...and RARELY does Apple give any other store price breaks.

Apple makes the rules!

- Nick

p.s. When sales of these devices are strong...prices will remain the same. When sales weaken...prices will change.

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If you really want to save some $$, buy refurbished. Good as new and usually 15% - 20% cheaper. Most items start to show in refurbished store +/- 6 months after they're released.

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Or even simpler buy another brand.

Hang on to those original install discs like grim death! Using OS X.7 or later make a bootable USB thumb drive before running Installer!
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Let's remember that the BOM on an iPad is not the sum cost of an iPad.

UNBELIEVABLE amounts of engineering, research and other man-hours when into the little miracle you are holding. That ain't cheap, and it's something Dell (for example) has never put on its books ever, since they are not an innovator, just an assembler.

The effort and expense of coming up with iOS *alone* likely cost tens, if not hundreds, of millions of dollars. Then there's assembly, distribution, advertising, sales infrastructure and a hundred other factors not covered at all in the BOM.

Anyone who thinks Apple is making $424 on a 128GB iPad has no understanding of how manufacturing works.

Apple's average margin on products is about 38 percent. Take the wholesale (not retail) price of the iPad, then find let's say 38 percent of that amount (far less if we're talking about an iPad mini). That's probably Apple's "profit."

Now take something around half of that figure, and plow it back into opex. NOW you've actually arrived at something like Apple's true profit.
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I for one believe they deserve all the profit they can make. As others have said, a tremendous amount of R&D, designing, advertising, etc. goes into the final Apple product, and they've come out with fantastic products that are high-quality.

I wonder what kind of flash NAND Apple uses? Is it the MLC type (10,000 P/E cycles), or the better SLC type (100,000 P/E cycles), and is there some sort of "garbage collection" or "TRIM" feature like with SSD drives?

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Another factor that plays a role is the calculated demand for the higher priced/storage versions. You have to adjust prices to meet expected demands so that all your units sell, otherwise you will end up with one version selling(higher storage), while the other one sits on the shelves if the prices are not set accordingly. Apple is probably one of the best at spreading the prices around to place their items and versions into their correct price segment, one that allows all their units to sell well for their expectations.

It might sound counter intuitive, but you can't have people buying more of the expensive version than the cheaper version. A successful business makes people buy the "cheaper" item, and lust over the expensive one. This is what Apple does really well in the tech market.

There was also a nice video showing what Apple's true profit was on an iphone, ipad, and ipod, but I can't seem to find it. It's not as simple as some people make it out to be( ex: $424 profit on iPad).

“If you are distressed by anything external, the pain is not due to the thing itself but to your own estimate of it; and this you have the power to revoke at any moment.” Marcus Aurelius
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