iSuppli: Apple’s Whole Widget Model Gives iPad Cost Advantage

| Analysis

 

King iPad

For decades, the prevailing wisdom in the computing industry has been that standardized operating systems and open licensing will result in the cheapest computers, but a report from IHS iSuppli challenges that notion by finding that Apple’s whole widget business model offers design efficiencies that prevent the competition from making media tablets as inexpensively as the iPad.

 

“Since Apple controls both the operating system and hardware design of the iPad, it is able to attain design efficiencies that other tablet manufacturers cannot,” Wayne Lam, a senior analyst at IHS, said in a statement. “These efficiencies become obvious in areas like the memory and the battery, where Apple maintains advantages in cost, space savings and performance compared with every competitor in the business.”

According to the firm’s breakdown of nine different media tablets, Apple has the second lowest bill of materials (BOM) of any of its competitors, and that’s including two 7” devices, the original Samsung Galaxy Tab and Research In Motion’s BlackBerry Playbook.

In the chart below, you can see those breakdowns, which show that Apple’s original iPad has a BOM of US$269. Only the 7” Galaxy Tab is cheaper to build, at $262.

IHS iSuppli Chart

(Click the chart for a slightly larger version)

According to iSuppli, Apple is able to do this because it controls every single aspect of its device. Because it controls the software, Apple can use rely on less main memory in its devices and still offer a best-in-class experience. By using 512MB of main memory instead of the 1GB that Apple’s competitors use in their Android tablets, Apple saves $14 in the manufacturing cost of its iPad.

In addition, “The iPad’s efficient memory usage stems from the fundamental difference in the architecture of the operating system,” Mr. Lam said. “Apple’s iOS handles multitasking differently than other tablet operating systems, allowing it to reduce the amount of memory required to support the microprocessor.”

By tightly controlling the hardware, the software, and every aspect of its supply chain, Apple is also able to use a battery that is, “the thinnest of all competing tablet designs while still having the largest capacity.”

Today, Apple’s Mac computers carry far higher price points than PCs. In fact, Apple utterly dominates sales of computers priced over $1,000, with as much as 91% of that tightly-defined market. Mac fans will argue that you get what you pay for, while PC fans will often argue that cheaper is better.

Whatever the case may be in personal computers, the same conditions don’t appear to exist in the still-young media tablet market. Apple is, hands down, the price leader in this market, even while it dwarfs the competition in terms of features, quality, form factor, design, and general all-around awesomeness.

According to iSuppli’s report, this all comes down to the whole widget model that was disparaged for so long by the good-enough Wintel crowd.

Comments

RonMacGuy

“Apple is, hands down, the price leader in this market, even while it dwarfs the competition in terms of features, quality, form factor, design, and general all-around awesomeness.”

Wow Bryan, you’re really asking for it from you-know-who!!

grin

I wonder what we’ll hear about today.  Probably some kindle ebook reader that’s been hacked, unlocked, modified, rom’d, back-doored, loaded with some flavor of android, and how great all this is once done, and how easy it is to do all of this to make it sort of do what you want it to do!!

Excuse me while I get back to my iPad!!

Constable Odo

The Droidtards always laugh and say, “The iPad buyers get cheated because they only get 512 MB of memory while we get a full 1 GB, so our tablets are better.”  Typical Droidtard assessment of any situation.  They’re always saying that Apple customers are always getting cheated because they have to pay more for less.

aardman

Why is this surprising?  In every other complex, mass market, manufactured consumer product, integrated companies have long ago kicked out the non-integrated companies.

It’s the nature of the technological beast.  As a particular product’s technology gets more and more refined, and competition forces efficiency or death, integrated companies always win out.  In the auto industry, the coach works that outsourced from chassis builders and engine builders had to integrate these separate operations to stay competitive.  Not only that, integration went beyond organization and well into process and design.  Body-on-frame designs gave way to unibody construction as competition spurred technology improvements.

The only reason the PC industry had this hardware-software separation for a looooong time was Microsoft’s monopoly power over the OS market.  With no effective competition, there was no need to squeeze out as much performance and efficiency, not to mention plain old quality, from Windows PCs.

Google is sorely mistaken if it thinks emulating the Windows model is the path to success.  They misunderstand that model.  They think ‘universal compatibility to hardware’ was Windows’ key to success when in fact it was just plain old monopoly power, something that they don’t have by the way.  As the smartphone market develops and competition forces the products to get more and more advanced AND complex, it will become harder and harder for Android to keep up with iOS.  The need to design Android to run in a wide range of hardware designs just makes it impossible to pursue those hardware-specific tweaks and optimizations that Apple can implement with iOS.  The gap in quality between iOS and Android phones will just get wider and wider as the industry matures.

I predict in about 5 years, Android will be consigned mainly to the third world installed in bargain basement smartphones built by ultra-efficient manufacturers like Samsung, LG, ASUS and no-name Chinese mushroom shops (they pop up overnight).

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