Will the iPad Mini cost $299?

There is little doubt that Apple will be announcing a smaller more compact iPad. The 7.85-inch tablet will likely be announced at the iTunes event in October a few weeks after the iPhone event.

There has been speculation about the cost of the iPad to manufacture. Tech-thoughts.net has reviewed the parts necessary to build an iPad mini, and the pricing doesn’t bode well:

Based on the estimates above, Apple’s gross margin for the iPad Mini would be between 30%–37% at a $299 price point and 16%–24% at a $249 price point. As I’ve stated before, any gross margin below 30% would be extremely unpalatable to Apple’s shareholders, making $299 the only reasonable price.

The analyst is using the Kindle Fire, Nexus 7 and the full size iPad bill of materials to project the cost of the device. He may be dead on with those numbers. Because we know the Nexus 7 is shipping for cost, there is some validity to his numbers.

I have a few simple thoughts:

  1. Apple won’t price it without profit. They aren’t going to sell it for $199 if it cost them $190 to make. If this analyst is right, expect an iPad at the price point he suggests.
  2. Apple has been able to get costs much lower than competitors for it’s iPad, iPhone and even MacBook Air product lines in the past, I see no reason they wouldn’t be able to get lower costs than Google for the iPad Mini. Apple may be able to beat these estimates.
  3. Apple won’t come into a market where they aren’t going to be a strong competitor. The product team at Apple knows that the Nexus 7 and Kindle Fire sell for $199. When it comes to the iOS products, Apple’s not the high cost provider anymore; they have very competitive prices. That said, I believe Apple will find a way to sell it for $199, or give it the features it needs to be worth $100 more than competitors.

Joshua Howland

Joshua is a mobile application developer, entrepreneur, and technology enthusiast. His favorite posts to write compare companies and products. He loves sports and start ups and talks about them (along with tech) on Twitter (@jkhowland) and his blog (jkhowland.me).

Tags: , , , , , , , ,