A price point none of our competitors will be able to match

  • Posted: 31 January 2010 09:15 PM

    Unexpectedly low Apple iPad price forces notebook vendors to re-evaluate their tablet PC strategies
     

    Monica Chen, Taipei; Joseph Tsai, DIGITIMES [Friday 29 January 2010]

    Notebook vendors include Asustek Computer and Micro-Star International (MSI) have re-evaluated their strategies for the tablet PC market following Apple’s launch of the iPad at a consumer-friendly price, according to industry sources.

    The vendors originally planned to offer prices pegged at 20-30% lower than the Apple iPad, while they generally expected the device to cost as much as US$1,000. The US$499 entry-level price has caught vendors by surprise and means they will now need to adjust their price scales even lower to attract consumers, the sources pointed out.

    However, starting a price war at below US$499 raises concerns that any profitably will be driven out of the nascent tablet PC market, before it even has a chance to take off. Vendors are currently evaluating their strategies hoping to avoid price competition, the sources noted.

         
  • Posted: 31 January 2010 09:43 PM #1

    This is Apple’s genius at work. There will be little profitability for competitors in the market, no app store support and little to offer developers in terms of a market.

    Try establishing as market at less than $499 with all of the inherent risks.

         
  • Posted: 31 January 2010 10:23 PM #2

    DawnTreader - 01 February 2010 01:43 AM

    This is Apple’s genius at work. There will be little profitability for competitors in the market, no app store support and little to offer developers in terms of a market.

    Try establishing as market at less than $499 with all of the inherent risks.

    AND at gross margins of around 40% if you can believe early cost estimates, which I do.

         
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    Posted: 31 January 2010 10:34 PM #3

    I think Apple has managed to significantly decrease the cost of manufacturing by designing better screens and lap tops.

    Designing their own chips may be saving them lots of money as well.  If they follow this trend they could lower their laptops further and put further pressure on other PC vendors.

         
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    Posted: 01 February 2010 12:16 AM #4

    My take is that the iPad will start out slowly on the uptake but with newer versions sales will take off something like the way the iPod started out and then sales took off except initial iPad sales will be in the millions.

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    Posted: 01 February 2010 12:32 AM #5

    Eric Landstrom - 01 February 2010 04:16 AM

    My take is that the iPad will start out slowly on the uptake but with newer versions sales will take off something like the way the iPod started out and then sales took off except initial iPad sales will be in the millions.

    Hey, that’s what I said in another thread.  Stop copying me :-D.

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  • Posted: 01 February 2010 01:06 AM #6

    Mace - 01 February 2010 04:32 AM
    Eric Landstrom - 01 February 2010 04:16 AM

    My take is that the iPad will start out slowly on the uptake but with newer versions sales will take off something like the way the iPod started out and then sales took off except initial iPad sales will be in the millions.

    Hey, that’s what I said in another thread.  Stop copying me :-D.

    The difference is it was awhile from the release of the first iPods to the opening of the iTunes store. The iPad will debut with 140,000+ apps to use. Sales will scale as content becomes available.

    It appears Apple has already upset Amazon’s eBook pricing plans. Magazine and newspaper distribution is next.

         
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    Posted: 01 February 2010 01:57 AM #7

    DawnTreader - 01 February 2010 05:06 AM
    Mace - 01 February 2010 04:32 AM
    Eric Landstrom - 01 February 2010 04:16 AM

    My take is that the iPad will start out slowly on the uptake but with newer versions sales will take off something like the way the iPod started out and then sales took off except initial iPad sales will be in the millions.

    Hey, that’s what I said in another thread.  Stop copying me :-D.

    The difference is it was awhile from the release of the first iPods to the opening of the iTunes store. The iPad will debut with 140,000+ apps to use. Sales will scale as content becomes available.

    It appears Apple has already upset Amazon’s eBook pricing plans. Magazine and newspaper distribution is next.

    At this point I fail to see why ANYONE would buy a Kindle, unless their only interest is in reading (and there are a few, though many of them prefer “real” books to virtual books).  Amazon did well with its hardware concept, but they should have known that they could not compete over the long term with a company that has hardware and software usability in its DNA.

         
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    Posted: 01 February 2010 02:00 AM #8

    I may be a minority here but the price point on the iPad is the biggest reason why Apple will have a hard time keeping it in stock.

    I thought it would be priced at $1200 and they could sell a couple of million.  But the $499 price point is huge. What makes even more amazing is that Apple can make a good margin on it. 

    I said 10 million in the first year.

         
  • Posted: 01 February 2010 06:38 AM #9

    Speculation:

    SJ/Apple have always been interested in advanced manufacturing. iPad may be capable of a higher level of automation in manufacture than previous products, because of the absence of moving parts, extreme simplicity of design, with enough space to allow a design with a single layer of components inside the case.

    I presume it’s unibody (extruded/machined aluminium), but no mention has been made of this. It’s metal, and very stiff, and looks exactly like unibody. Unibody helps automated assembly, but it’s probably not itself a cheap process.

    Chinese workers may be cheap, but they aren’t free, and they’re getting more expensive. It’s possible that with unibody, Apple has proprietary manufacturing capabilities that further reduce manufacturing cost.

         
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    Posted: 01 February 2010 07:32 AM #10

    sleepygeek - 01 February 2010 10:38 AM

    Chinese workers may be cheap, but they aren’t free, and they’re getting more expensive. It’s possible that with unibody, Apple has proprietary manufacturing capabilities that further reduce manufacturing cost.

    This is a bit off-topic, but wouldn’t it be great if Apple managed to sufficiently automate their production line that bringing it back to the US didn’t increase costs appreciably? Now that would be a huge coup.

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    Posted: 01 February 2010 10:01 AM #11

    wheeles - 01 February 2010 11:32 AM
    sleepygeek - 01 February 2010 10:38 AM

    Chinese workers may be cheap, but they aren’t free, and they’re getting more expensive. It’s possible that with unibody, Apple has proprietary manufacturing capabilities that further reduce manufacturing cost.

    This is a bit off-topic, but wouldn’t it be great if Apple managed to sufficiently automate their production line that bringing it back to the US didn’t increase costs appreciably? Now that would be a huge coup.

    Would Apple really want to own a manuf. plant at this stage?
    Regarding automation, the big obstacle has often been union opposition; since it meant loss of manuf. jobs.

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    Posted: 01 February 2010 01:47 PM #12

    Play Ultimate - 01 February 2010 02:01 PM

    Would Apple really want to own a manuf. plant at this stage?
    Regarding automation, the big obstacle has often been union opposition; since it meant loss of manuf. jobs.

    Jobs tried it before with NeXT. I think a lot will come down to how much they could automate the production, and provide a good working environment for those they employ.

    Agreed, unions do have a tendency to shoot themselves in the foot. We suffer it as much, if not more in the UK.

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    Posted: 01 February 2010 01:56 PM #13

    Guys….

    ... come on, think.

    Right now, Foxconn {Hon Hai Precision Industries} the manufacturing entity that assembles the iPhone gets….

    SIX DOLLARS for making it, SIX.

    How on earth can anyone believe it can be made HERE in the USA for anything comparable for assembly?
    Not to mention, the red tape, governmental loons, the greenie nutcases, and lawsuit hungry lawyers?

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    Posted: 01 February 2010 02:14 PM #14

    TanToday - 01 February 2010 05:56 PM

    Guys….

    ... come on, think.

    Right now, Foxconn {Hon Hai Precision Industries} the manufacturing entity that assembles the iPhone gets….

    SIX DOLLARS for making it, SIX.

    How on earth can anyone believe it can be made HERE in the USA for anything comparable for assembly?
    Not to mention, the red tape, governmental loons, the greenie nutcases, and lawsuit hungry lawyers?

    I don’t disagree with what you’re saying. But if China had not artificially held their currency down, how much would it really cost? When you factor in how much it costs to keep someone who would have worked in a US Apple factory, on unemployment benefits, then the real cost is a lot more than $6 even if it is not directly felt by Apple, but by all US taxpayers. That’s why I believe a lot of the offshoring that goes on is ultimately a false economy.

    Apologies for veering off into the subject of globalisation. I’ll stop now.

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    Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. ? Jesse Livermore