Sources from Digitimes reported last week that Apple is shopping around for cheaper components for use in the next iPad and will be "adjusting the cost structure for iPad tablets in order to compete with an array of tablet PCs to be launched by rivals in the second half of 2011." What hasn't been confirmed is whether the price for the iPad will also be cheaper or if Apple is simply trying to lower the cost of making the iPad. So the question arises, Would you buy an iPad if you knew that Apple used cheaper parts but charged the same price? We touched on this topic during this week's PhoneDog Live, our weekly vodcast. You can check out the full video to listen to all of the topics we discussed. In this recap post, we'll focus on this report of Apple using cheaper parts for the next iPad.
It's possible that Apple is looking to lower the manufacturing cost of the iPad so that they can also lower the price of the iPad. It became clear when the Motorola XOOM was debuted for $800 unsubsidized and subsequently suffered poor sales and several price drops that tablet makers would need to be more aggressive with their pricing models in order to compete with Apple. They have done that and it seems to be working. So now the ball is in Apple's court. Will they now lower the price of their tablet to stay competitive in this saturated market?
However, there is also a chance that Apple will keep the same pricing model, since it has been so effective, and simply lower the cost of actually making the iPad by using cheaper parts and components. In some ways, this would be a financially sound move for Apple. After all, each 32GB iPad 2 cost Apple an estimated $323.25 to make, and the touchscreen panel alone cost $127, an increase from the just $95 it cost for each touchscreen panel for the original iPad. Apple is a business and businesses need to make money in order to survive.
It may make sense, but that doesn't mean I'm okay with it. As one viewer brought out during the live broadcast, Apple has built an empire based on making the best products and using the best materials in those products This seems to give Apple the right to charge admittedly high prices for their products. However, if Apple now uses cheaper components, then they aren't necessarily using the best materials and, in my opinion, don't have the right to charge such a high price. For example, we all know that name-brand foods like cereal and soda generally taste better than off-brand foods because they use better ingredients. Therefore, they charge more. But we're okay with that because it tastes better anyway. But if General Mills started using the same ingredients as a cheap off-brand and still charged the same amount for it, people would be a little upset.
Chances are, the overall performance of the device will not be affected by this change. But is it worth the risk? Say Apple does try to save a few dollars by using cheaper parts here and there and then has another "antennagate" issue. Would you start to lose faith in Apple? Would you even buy this iPad at all if you knew that Apple was using cheaper components but still charging the same price? I'm not a iOS fan myself so I don't know that I'd be interested in the iPad anyway, but I'd like to know what you guys think.
If you'd like to watch the next episode of PhoneDog Live, we'll be broadcasting every Friday at 5 p.m. ET from our Ustream channel. You can watch it directly from Ustream or from our Facebook page. This week's show is available to watch on our YouTube channel.