How much does the TouchPad cost HP to build? 12
$318. Or so the research and teardown experts at iSupply have found that to be the approximate number. If you break down the device and look at the materials as they are ordered, piece by piece, we can get a good idea at the total price for HP to even produce one of these new tablet devices. At a $318 pricetag for the 32GB TouchPad, the device only gets a return of about $281. Out of that HP still has a number of other companies along the sales chain that they'll need to pay out (the stores, shipping companies, advertisments, etc..) and as iSupply points out, "the teardown costs account only for hardware and manufacturing and do not include other expenses such as software, royalties and licensing fees." So the amount that HP actually makes on the device we can't entirely be sure of yet, but we know it's not a whole lot.
More than just telling us the cost of the device, seeing the numbers broken down like this can give us some insight into the reason for various design decisions, as well. If we compare the TouchPad cost to the iPad 2, you see some very interesting differences. While the iPad 2 is estimated to cost Apple a bit more to produce ($326 for the 32GB CDMA model) than the TouchPad does for HP, Apple very simply gets higher quality materials at a lower cost than HP can, meaning that Apple can afford to buy those exotic materials right now, while HP is just beginning to get their feet wet in tablet tech. There's a good reason for that, though, as our sister-site TiPB points out in a recent piece, "How Apple stays years ahead of the competition", and it will only take time before HP is able to get into a good flow with developing these devices that we might start to see the same pattern.
The materials that make up the TouchPad right now aren't necessarily bad (by any means), but there's definitely a need to continue improvement as the months push forward. iSupply says that one major shortcoming of the TouchPad, its weight and thickness, could actually be an advantage in the future. While the product makeup of the TouchPad does make it larger than the iPad 2, thus less desirable to consumers, that design choice also gives HP much greater freedom with the development of future devices. Apple is stuck in a battle to try and find materials that make their devices thinner or more exotic, meanwhile HP has plenty of playroom to enhance future models of the TouchPad to be more powerful and user-friendly, and to push out more tablet devices at a faster rate.
Click through the break below to see the full tablet with the bill of materials for the HP TouchPad. We've included the same tablet for the iPad 2 as well, for those of you that are curious, so you can do some of your own comparison shopping.
HP TouchPad Bill of Materials
iPad 2 Bill of Materials
Source: iSupply TouchPad BOM; Via: webOS Roundup;
12 Comments
FWIW: Amazon: 32GB HPTP
July 6: $591.57
July 7: $570.91
http://www.amazon.com/HP-TouchPad-9-7-inch-Tablet-Computer/dp/B0055D66V4...
Which is why I haven't bought the touchpad yet. They released it at a very high price, for a new tablet with an unpopular OS. I'm hoping in a few months I can get the 16GB touchpad for around $350
uhhh, what about economies of scale....this isn't accurate at all
Yeah... Basically this article says that the largest technology company in the world can't compete with Apple, a company with half the revenue of HP. I'm not buying it.
HP could compete with Apple on prices of supplies if they are willing to buy them in the same bulk. HP is not guaranteeing suppliers that they are going to buy tens of millions of a specific product.
If it's a product that they can use in their notebooks as well (maybe some of the power or something), then HP would be able to use that scale to get lower prices. I would think that if HP put webOS on notebooks/netbooks, you'd see some great scale.
Interesting that a $22 difference in memory cost (16GB vs 32GB) = $100 at the retail end. I always knew doubling of the memory couldn't possibly justify the $100 price tag... it's nice to have actual numbers now.
Of course it doesn't, but this is actually a part of their "mix-calculation". Probably the 16 GB makes no profit, or just bit or might even be sold with a loss (if you calculate all costs) but if they calculate to sell like 70% with the 16 GB and 30% with the 32 GB-Version it changes the whole calculation and makes the $ 499 Touchpad possible.
Of course nothing that people who bought the 32 GB version want to hear, but that's how it is ;)
Plus the reality of people wanting 'the best there is' are often willing to just fork it out.
The explanation is called "price discrimination". For an excellent description of how this works, read the first chapter of Tim Harford's "The Undercover Economist". Then read the rest of the book, because it's excellent.
The thing I find interesting is that HP offers a $50 discount on the 32GB model as it's "make it right" campaign. According to the above, HP's profit margin on the 16GB model is $192.85 and on the 32GB model is $270.85. So even with a $50 discount, they're still expanding their profit margin over the 16GB model.
All this means is that some measurable spec (amount of RAM) is clearly the thing that sells best. This kind of thing seems to matter a lot to consumers as they pay a huge premium for it. Which also explains why both Apple and HP aren't interested in microsd slots. Harder to make that bigger profit selling something (flash memory) that they don't even make!
This is exactly what makes me disappointed in the "make things right" offer from HP. It's disguised as a good deal for consumers and maybe it is, but it's an upsell for HP, so they make more money if you take advantage of it vs. buying the 16GB model.
I think HP has to go with the SD slot as a differentiator to bridge the gap in hardware differences (as this article points out "Apple very simply gets higher quality materials at a lower cost than HP can").
It should cost a lot less for HP to build the TouchPad, because they are able to get bulk pricing. The prices above are if you buy the parts individually.
I l like Engadget's commentary to that: "can HP afford the same margins on TP as Apple on iPad2? Probably not."
Just saying (...and WAS saying that all along)...