iPad Costs Could ‘Leave Room for Price Cuts’

Research firm iSuppli has produced a preliminary estimate of the iPad’s component costs -- based on what is known about it, rather than tearing one down, as the company usually does -- that could be as low as US$219.35, leaving room for potential price cuts.

Writing about the report for BusinessWeek, Arik Hesseldahl quoted iSuppli analyst Francis Sideco as noting: "There's certainly a decent amount of headroom in there. If they had to reduce the retail price, they certainly could." Mr. Hesseldahl also cited a Feb. 8 research note from Credit Suisse analyst Bill Shope, who said he had recently met with Apple executives who said they “will remain nimble” on pricing.

According to iSuppli’s estimates, the iPad’s most expensive part is its 9.7-inch multi-touch screen, which came in at $80. The A4 processor at its heart, which was developed by Apple after it purchased PA Semi, was estimated to cost about $17, not much more than the $14.46 Samsung chip used in the iPhone 3GS.

Mr. Sideco said that the most profitable iPod model is the 32GB one with 3G cellular network connectivity: it came in at $287.15, or 39.4 percent of its retail price. At the other end of the margin spectrum is the 16GB version without 3G access, which totaled $229.35, or 46 percent of its retail price.

Keep in mind that those are simply the costs for parts. Marketing, advertising, distribution, and other costs were not included.