iPad Mini to Cost $200 to Manufacture, Expects Analyst
An analyst from KGI Securities estimated component and manufacturing costs of the Apple, Inc. (NASDAQ:AAPL) iPad mini to total somewhere between $195 and $254. This would cover all the rumored varieties of the 7.85-inch mini, although Apple may sell the anticipated tablet with lower profit margins than it is used to.
The meat of Ming-Chi Kuo’s research note sent out last Friday dealt with the iPad mini as a tool for Apple to penetrate the “midsize device” market it has hitherto not been a part of. On the other hand, he also included a breakdown of a tentative bill of materials (BOM) for the iPad mini, which estimated the manufacturing costs to be about $195 for the 16 GB version with Wi-Fi (wireless fidelity) connectivity and $254 for the 64 GB iPad mini with 4G LTE, or Long-Term Evolution.
Taking into consideration the purported inventory list from a UK retailer, Apple’s gross profit margins for the iPad mini may be somewhere between 35 and 58 percent. In comparison, the “new” iPad with proprietary Retina Display technology has a 37 to 51 percent profit margin. The iPhone 5 has margins of between 68 to 72 percent, according to estimates.
Gambling on lower profit margins seems to be a risk Apple is willing to take, as more and more competitors attempt to seize some of Apple’s market-leading consumer electronics share. It may also be an attempt for Apple to become more bullish in the stock market, as stock prices have been down the past two weeks for AAPL.
At the end of Monday’s trading day, AAPL closed at $634.03.