As Steve Jobs ably pointed out, pundits had predicted that Apple’s iPad would sell from anywhere between $700 and $999. Apple, though, shocked everyone when they priced the base model at just $499 in an attempt to get into as many hands as possible. Apple’s surprise pricing structure not only caught the public off-guard, but is also forcing Tablet PC manufacturers like Asus and Micro-Star to adjust the prices of their own products accordingly.
Digitimes reports:
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.
You have to wonder when margins will get so low that the entire “sell on volume” business model will be called into question.
February 1st, 2010 at 11:08 am
Apple will make a fortune, not sure about the wannabes though.
I’ll race you to the bottom. :o)
February 1st, 2010 at 1:47 pm
This is silly. Apple can’t win a price war.
Granted, the iPad is less than the HP Slate is rumored to be, but that won’t last long. Acer, Asus, and the rest will come up with cheap, POS slates that sell for less than Apple’s because they have far lower overhead and will buy cheaper components. Sure, it may be a 6″ 640×480 screen lit by a single candle and powered by 3 hamsters, but they’ll find a way to get something on the market for $299 – and lots of people will buy it because of its price.
February 2nd, 2010 at 8:14 am
Where Apple kills the competition is that the iPad makes Apple between 48-52 % profit per iPad sold because it is so inexpensive to make. Why? Because the iPad does have all the features that the competition is forced to add.
Apple and Steve Jobs are geniuses when it comes to leaving out the unnecessary components of a gadget. The iPad has only four buttons (one main one), an earphone/microphone jack, and an iPod port. That is it.
The competition will have to add features such as multiple USB ports, SD-card slots, keyboards, cameras, a stylus, etc. etc. because people think they need these. The problem is that this cuts hugely into their profit margin making it much more difficult to compete against the iPad.
What people don’t realize is that Apple’s cost to manufacture the iPad is low because Apple uses the same or similar Asian companies to manufacture the iPad – thus the cost of labor is the same.
Apple’s low price point puts a squeeze on the competition for slim margins but keeps huge margins for itself since its product is so much more simple to produce.