Apple, the Low Cost Leader?
By Harry McCracken | Friday, October 8, 2010 at 8:05 am
BGR–which isn’t an unimpeachable source, but one that sometimes gets stuff right early–says that it hears that the Sprint version of Samsung’s Galaxy Tab tablet will go on sale on November 14th for $399 with a two-year contract, or $599 without a subsidy.
The $399 price is $100 less than the cheapest flavor of iPad, but that’s not a very useful comparison, since the $499 iPad doesn’t have 3G and the Galaxy does. You want to compare the Galaxy against the cheapest 3G iPad, which goes for $629. And you want to compare against the $599 Galaxy, since the iPad is always sold unsubsidized, and lets you buy AT&T data at a reasonable price without committing to a contract.
It’s tough to be definitive about how the two tablets stack up as deals. On one hand, the Galaxy Tab has a 7″ screen instead of the iPad’s 9.7-incher. (For some folks, 7″ is better, but it should lower the cost.) On the other, the Galaxy has two cameras to the iPad’s zero. It will apparently come with 2GB of fixed storage and a 16GB MicroSD card; the iPad has 16GB of fixed memory.
Any way you slice it, the iPad is competitive–there’s no “Apple Tax,” unless you want to argue that the iPad needs to be sold with a subsidy. (Anyone who buys a Galaxy Tab to save a meaningful amount of money over the iPad will be getting the $399 version, which carries the considerable baggage of a contract.) It’s a way different situation than exists with Macs and Windows PCs: Macs may not cost a lot more than truly comparable PCs, but their starting prices are far higher than typical PCs.
Some people are so reflexively certain that Apple products are pricey that they’d complain about the iPad’s cost if Apple paid you $629 to take one. But Apple seems to have priced its tablet aggressively enough that it may be hard for other manufacturers to get an edge by selling tablets for appreciably less.
Then again, Amazon currently has Verizon’s Fascinate–a Galaxy S phone that’s essentially a pint-sized Galaxy Tab, and which lists for $599–for a penny under contract. The Galaxy Tab would certainly fly off the shelves if it were more or less free…
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October 8th, 2010 at 12:15 am
Oh, but the galaxy tab has better specs than the iPad. In addition, Apple (almost) never lowers it prices. Samsung is just trying to get early adopters, who will pay anything to get the latest and greatest.
October 8th, 2010 at 1:03 am
Apple can afford to price iPad (and iPod Touch) aggressively due to the massive margins they're making on iPhone and Macs. Why they're being so aggressive is another question, but it goes a long way toward answering Gruber's incessant snark about why there are no iPod Touch competitors.
October 8th, 2010 at 8:46 am
Because of the odd economics of LCD pricing (based on fab efficiencies), OEM sources tell me a 7" display is not cheaper than the iPad's 9.4" and may even cost more.
October 8th, 2010 at 10:05 am
The contract issue is meaningless. If you spent the extra money to get a 3G ipad, then you want 3G internet service. So why does it matter if have a contract or not? It is not as if you can use another carrier's internet service.
On the other hand, the Wifi iPad is the best deal for Android phone users as you can wifi tether for free with any rooted android phone.
October 9th, 2010 at 6:56 am
You do realise that contracts are carefully designed by carriers to make them money, don't you?
They'll have structured the costs so that they get back the price of the subsidy (plus interest) over the life of the contract. Hence you either pay up-front the full cost of the phone, or you pay over the life of the contract.
No such thing as a free lunch, as they say…
October 8th, 2010 at 10:10 am
@Dave.
I respectfully disagree. The contract, I believe, forces you to pay every month whether you need 3g or not. With the iPad, you pay *only* if you need it. You want to go on vacation, turn the 3g on for that month and off when you are done. In and out..
So, the contract is a big deal, IMO.
October 8th, 2010 at 10:39 am
@Dave123….did you seriously just ask that?
October 8th, 2010 at 10:47 am
David is spot on.
I have a 3g that I only buy 3g when I need it. I don't need wifi at the home or office, but only traveling.
This flexibility is likely a big reason for the iPad 3g popularity.
October 8th, 2010 at 11:14 am
Apple has been the low cost leader for some time. Notice there is not an equivalent to the iPod touch for android? Without the ability to hide some cost in the carrier subsidy, they can't compete. Apple's supply chain is simply too big and too tight.
October 11th, 2010 at 6:29 am
@mbaDad – You're absolutely right. Apple's supply chain is simply to tight, and can hardly be modified. There low-cost position is here to stay for a while.
October 8th, 2010 at 2:06 pm
Well, maybe I'm someplace where they don't have wifi. Maybe I'm on the metro. I have an Wifi only version of the iPad because I work from home. And I didn't want to wait. However, there are times when I would have shelled out the $25 perhaps twice since April. So, would I rather pay <rate>*2 or <rate>*6?
My point is that that's money you pay whether you need the item or not so I think that is a big deal, to me, especially ever the course of two years.
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