While we’re on the topic of teardowns, this is also interesting from Arik Hesseldahl:
With a base price of $499 for a 32 gigabyte Surface without the Touch Cover accessory, IHS estimates that the cost of components used to build it amount to $271 for a starter 32GB model, without the cover.
Simple math: if these estimates are correct, the base-level Surface costs only $83 more to make than the base-level iPad mini. Still think $329 isn’t a good deal?
Put it this way: Microsoft is selling a product that costs $83 more to make for $170 more. In pure economic terms, it sure looks like the iPad mini is a great deal.
As for the Kindle Fire HD:
Like the old one, the new Kindle Fire HD sells for a starting price of $199, and carries a combined cost of components of $165, according to IHS estimates.
So the Kindle Fire is cheaper to build than the iPad mini — no surprise there, despite the “HD” screen. But Amazon is selling it at a tiny profit, so it’s technically the best “deal”.
With the iPad, AT&T offers 250 MB of data a month for $15 a month (technically, $14.99, which is odd since every other deal is a round number). With the Kindle Fire HD, AT&T offers 250 MB of data for $50 a year. So that’s $180 a year versus $50 a year for the same data on the two different devices.
Perhaps not coincidentally, when you factor out the storage markup, Amazon is charging users $130 to upgrade to the Kindle Fire HD with 4G/LTE.
So it’s possible that Amazon is passing the entire $130 from consumers over to AT&T to secure their good-looking deal. But if that’s the case, why not either tack-on or eat the remaining $50?
It’s just another layer of complexity for the consumer and it’s a weird one since most consumers are going to want more than 250 MB of data a month with an LTE connection. In fact, it’s such a weirdly small amount, that Verizon doesn’t even offer the option.
Again, I just don’t get it.
I was very impressed by Amazon’s press conference today. I went in thinking it’d be a single (as opposed to the whiffs by Nokia and especially Motorola the day before), but I ended up thinking it was actually a homerun. I already bought a Kindle Paperwhite.
But there’s one thing I’ve been thinking about that I still don’t really get: the $499 Kindle Fire HD.
That price doesn’t bother me per se, but why is it so much more expensive than the $299 version? It has two key differences: twice the storage (32 GB versus 16 GB) and 4G LTE connectivity.
Amazon is selling the non-4G Kindle Fire HD with 32 GB for $369, which means they value the 4G element at $130. Coincidentally (or not) that’s the *exact* premium Apple charges for LTE on the new iPad.
But that’s a huge premium. There’s no way the 4G/LTE chip costs that much. Apple gets away with it because Apple gets away with charging huge premiums. But Amazon usually does the opposite. And in fact, Jeff Bezos himself made a point of saying today that they’re not in this to make money from the hardware. So why the huge markup?
You could certainly argue that you’re getting more with Amazon’s 4G/LTE upgrade — and you sort of are. Amazon is bundling 20GB of Cloud Drive storage and a $10 Amazon Appstore promotional credit (which is just as beneficial to Amazon as the consumer since it encourages app lock-in). You also get 250 MB of data a month for 12 months — but you have to pay an additional $49.99 for that.
I suppose some of the $130 4G/LTE markup may go towards the data rate they secured for consumers from AT&T. But 250 MB worth of data is basically a joke these days. Especially with LTE. (Verizon doesn’t even offer the option for the iPad. Naturally, AT&T does, for $14.99 a month.) $50 a year may *look* like a great deal for a year of data, but it’s just sort of a weird, borderline deceiving deal. You’re going to want more.
Overall, there’s no question that the 4G Kindle Fire HD is a better price than you’d get with a similar iPad. But based on the early hands-on, it certainly seems like the iPad is still a much nicer device. It’s bigger. Faster. And again, Apple goes after premiums on the hardware. They’re in the business of selling hardware. Amazon is not.
I don’t get why Amazon wouldn’t launch the 4G Kindle Fire HD at $399. Or, if they’re insisting on going with $499, why not eat the silly $50 extra cost for the 250 MB of data? It’s like they subsidized 75% of the data cost, but didn’t feel like going the entire way.
It almost feels like Bezos decided he wanted to make some kind of point about the $499 price and really, the iPad, on stage today. So maybe he went to his team and said, “what’s the best we can offer for $499?” And this is what we got.
The product just doesn’t feel like it’s priced right to me, given Amazon’s other Fires, and their intentions. I think the iPad still wins at the $499 price point, even without LTE. Amazon didn’t quite sell me on this one.
Update: Doing the math.