Tim Bajarin explains how Apple's huge production of iPods and iPhones has enabled Apple to lock up vast supplies of key components like flash memory which in turn gives the iPad a huge pricing advantage over competitors.
Motorola hopes it can sell millions of Xooms however, it doesn't have the same assurance that Apple does, or the huge cash reserves in the bank to prepay for components in large quantities. So, Motorola goes to the display supplier and orders perhaps 250,000 to 500,000 screens, while Apple has ordered 10's of millions of the same. Now the law of economics kicks in at this point. The company buying the most screens gets the best price breaks. This explains why Apple will sell its high end 64 GB iPad for $699, while the Xoom with only 32 GB of flash storage and a similar screen will sell for $799.
Apple's strategic advantage is in high gear here and unless Motorola and other competitors can match its buying power, Apple will continue to have at least a one to two year lead on them with pricing alone. Now add to this Apple's attention to details and focused brainpower and you get a better sense of how Apple's strategic advantage is a rather big one.
-PC Magazine, Feb. 28, 2011