Cost of iPad Production in the US $1140

Generic News 1994 Published by

Apple has contracted to make its iPad 2s in China, where the typical worker makes a hardy $185 a week. What if, in a fever of uneconomic patriotism, Apple chose to make its iPads in the U.S.? Assuming typical U.S. manufacturers worked at the same speed as the Chinese, and assuming Apple raised the price to maintain its profit margin, the iPad 2 would cost more than $1,100. The Analyst does some back-of-the-envelope math:

Average U.S. manufacturing/mining/construction compensation is $32.53/hour as of December, according to the BLS. Research firm iSuppli estimates the iPad 2 costs $10 to manufacture, which - using the $1.11/hour rate - works out to about 9 hours each to complete. If assembly and manufacture took the same amount of time in the U.S. as it does in China (another possibly unrealistic assumption), the cost of making each iPad 2 comes out to $292.77!

Again, according to iSupply, the material cost for the 32gb iPad 2 WiFi + 3g - which sells for $729 - is about $325, or $335 including labor, which puts Apple's gross margin (ex shipping/handling) at 54%. Just using the simple math above, if the iPad 2 was made in the U.S it would cost $617.77, bringing Apple's gross margin down to 15.25%! Of course, Apple is not in the business of self-immolation, and given their relatively substantial pricing power, they could just make the iPad 2 more expensive, let's say, increasing the price to the point where their gross margins stayed intact, from $729 to $1,144.02!

Meanwhile the Apple iPad 2 had just launched in China and was sold out in less than four hours, according to the folks at M.I.C. Gadgets. Despite the copious iPad copy-cats you could probably find in the country

Share this content
Twitter Facebook Reddit WhatsApp Email Print