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Teardowns highlight Amazon's and Apple's opposite tablet strategies

05 Nov 2012
Ipad Mini with Smart Cover IOS 6

Apple and Google are taking strikingly different approaches to the pricing on their small-screen tablet models, say analysts.

A pair of teardown reports from research firm IHS has found that while Amazon's Kindle Fire HD and Apple's iPad Mini carry a similar cost to build and manufacture, Apple charges a higher price while Amazon is opting for lower margins in hopes of selling more units.

According to the report, Apple's iPad Mini costs an estimated $188 in hardware and manufacturing costs, while Amazon's Kindle Fire HD costs $174 to build.

Despite their similar costs of manufacturing, the two devices represent opposite ends of the pricing spectrum. Apple prices its tablet from $329, while Amazon takes a much lower margin with prices from $199.

"Apple’s strategy entails offering differentiated hardware that justifies higher price tags than comparable products. This differs markedly from Amazon’s 7in Kindle Fire HD and Google’s Nexus 7 tablets, both of which are essentially low-margin or no-margin giveaways at a $199 retail price," said Andrew Rassweiler, senior principal analyst for teardown services at IHS.

"Apple makes healthy margins on its hardware, while Amazon and Google employ different strategies with their 7in tablets."

Thus far, both strategies have paid off as the tablet market continues to explode. Apple said that it moved some three million iPad Mini and fourth generation iPads in the first three days of availability.

Meanwhile, the lower margin Android tablets have helped to establish the platform as a contender in the tablet space. Researchers estimate that Android saw a 6.7 percent jump in sales in the last quarter alone.

"Amazon and Google want to put tablets in consumers’ hands, even if it means doing so at a minimal hardware profit, with the intent of making their money on the content users buy, and/or the advertising and paid content they will be exposed to by buying the devices," Rassweiler said.

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Shaun Nichols
About

Shaun Nichols is the US correspondent for V3.co.uk. He has been with the company since 2006, originally joining as a news intern at the site's San Francisco offices.

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