Daniel Dilger with AppleInsider writes an excellent article here that fleshes out what I touched on last week. If you dissect Apple's iPad Income Statement you are left wondering how competitors can offer sub-$199 tablets when you know that material alone has got to be close to the sell price. I figured you either use lower quality components or older tech. I didn't realize that the subsidies could be so large. Over $50!!! By my calculations, Apple probably left the iPad Mini 3 with an A7 chip to save $50!
In the 2000's I watched the PC makers all play a game of chicken to see who could offer PC's at a lower gross margin and still stay solvent. You can do that while you are in an environment of increasing sales units. But when volume peaks, the shakeout begins. Once volume starts falling, those with higher break even points will start falling out of the game. You don't have to be the most efficient manufacturer to survive, but you can't be the least. The mobile electronics world is headed that way. I wondered how long it might take, but with news that Intel is going to quit subsidies, it could be sooner than I thought.