Analyst reckons $499 iPad costs Apple $300 to make

Big mark up means big profits

Analyst reckons $499 iPad costs Apple $300 to make

It been said that the value of an item is whatever you can persuade someone to pay for it.

In that regard the manufacturing cost of a pair of Nike trainers or a can of Coke is meaningless, even if you throw in marketing and distribution costs.

So while the component cost of a iPad might not be particularly significant, in the current news climate it's interesting.

According to BroadPoint AmTech analyst Brian Marshall, the various parts of the iPad cost $270.50, including flash memory and the aluminum case at about $25 each, and the Apple A4 processor at $15. He reckons manufacturing adds another $10, with warranty service charges up to $20.

That puts the total cost to Apple of around $300 for the entry level 16GB wi-fi iPad (cost to you $499), although that obviously doesn't take into account distribution, research and development or other support costs.

Marshall says making the 32GB version (retail $599) adds $25.50 to the cost, while the 64GB model (retail $699) adds $76.50 compared to the 16GB model, making them even more profitable.

The bottom line for the analyst is that he thinks Apple could sell around 7 million units - up from an initial prediction of 2.2 million - and so will make a lot more money. So he's raised his prediction for Apple's share price to a target price of $264. It's currently at $197.88.

Jon Jordan
Jon Jordan
A Pocket Gamer co-founder, Jon can turn his hand to anything except hand turning. He is editor-at-large at which means he can arrive anywhere in the world, acting like a slightly confused uncle looking for the way out. He likes letters, cameras, imaginary numbers and legumes.