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IPhone: 4% of market, 50% of profit

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Re: IPhone: 4% of market, 50% of profit

#31

Post by ceejayoz »

sliverstorm wrote: post #10
ptomato wrote: post #7

Earlier quoted context omitted.

And yet, oddly, similar phones (see: android devices) are not priced significantly less.

But do android device makers get the same cut from the carrier as Apple? Notice an unlocked iPhone 4 is ~$750, and Apple probably gets a little more out of it when they sell with a contract (otherwise wouldn't they just sell unlocked phones with no particular carrier association?)

> otherwise wouldn't they just sell unlocked phones with no particular carrier association?

Not if Apple has contracts preventing it.

Re: IPhone: 4% of market, 50% of profit

#32

Post by rmah »

JofArnold wrote: post #22
baddox wrote: post #9

Earlier quoted context omitted.

Exactly. Unless the hardware of an iPhone costs significantly less than, say, an Evo 4g or Touch Pro 2, there's no reason their profit margin would be any better. Of course, the whole pricing model is very obfuscated at least with US carriers due to contracts, required internet plans, etc.

As a former manufacturing engineer, I can tell you Apple's devices are extremely optimised to reduce the cost of manufacture yet maintain quality and this helps their margins considerable I'd imagine. Their attention to the cost of assembly is - to me - as beautiful as the aesthetic design; they clearly have some amazing mechanical/design/process engineers.

To back up what JofArnold is saying, I have been told that Hon Hai (aka Foxconn) receives about $15 for the assembly of an iPad. I'd bet they get about the same, give or take $10 for assembling each iPhone. As a point of reference an assembly worker there makes about $3,500 USD per year or $1.50 per hour (note, the company provides housing and some food).

Re: IPhone: 4% of market, 50% of profit

#33

Post by aditya42 »

maximilian wrote: post #26
JofArnold wrote: post #22

Earlier quoted context omitted.

As a former manufacturing engineer, I can tell you Apple's devices are extremely optimised to reduce the cost of manufacture yet maintain quality and this helps their margins considerable I'd imagine. Their attention to the cost of assembly is - to me - as beautiful as the aesthetic design; they clearly have some amazing mechanical/design/process engineers.

From things I've read on Steve Jobs, he seems equally interested in the industrial of building the products he designs[1]. I've also heard their lead designer Jonathon Ives talk a lot about materials and how to use them, which I think underscores the fact that he is an industrial designer, meaning he doesn't just design an end product, but also designs the process, or at least designs the product with process holding…

Ive, not Ives.

Secondly, as an Industrial Design graduate, I believe Ive has more of a functional knowledge of subjects like strength of materials. The rest is just experiential from working with industrial engineers and others at Apple. For example, what you hear him saying in the iPhone commercial about the manufacturing is experiential knowledge. His job is to design the form. It's the people under him who give him the best materials based on his requirements.

A good way to understand what the process from top to bottom is, is to hear Jobs explain how they came up with the idea for the iPhone at D8. It starts with an idea that is then handed down to relevant people to think and work on.

Both Jobs and Ive are fantastic at what they do, don't get me wrong. But the truth is they're run as much by other people's ideas as they're run by their own.

Re: IPhone: 4% of market, 50% of profit

#34

Post by nuriaion »

maximilian wrote: post #26
JofArnold wrote: post #22

Earlier quoted context omitted.

As a former manufacturing engineer, I can tell you Apple's devices are extremely optimised to reduce the cost of manufacture yet maintain quality and this helps their margins considerable I'd imagine. Their attention to the cost of assembly is - to me - as beautiful as the aesthetic design; they clearly have some amazing mechanical/design/process engineers.

From things I've read on Steve Jobs, he seems equally interested in the industrial of building the products he designs[1]. I've also heard their lead designer Jonathon Ives talk a lot about materials and how to use them, which I think underscores the fact that he is an industrial designer, meaning he doesn't just design an end product, but also designs the process, or at least designs the product with process holding…

Double sourcing is standard. It helps also when you try to get lower prices.

Re: IPhone: 4% of market, 50% of profit

#35

Post by ergo98 »

JofArnold wrote: post #21

This is my biggest question (and I'd love thoughts from HN people on it); if Android is mostly seen on handsets with very small margins that compete on price with almost identical features... who's paying for the R&D to keep up with Apple's innovations? That question assumes that innovation is important in the smartphone sector. That may not be the case I guess. I'm just trying to understand the end situation as best…

Apple is responsible for shockingly little of the innovation in the smartphone field.

They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU.

They didn't create the "Retina display" or their memory or their touchscreen sensor.

They are a software company that other companies -- like LG and Samsung -- supply with hardware.

The electronics market has traditionally been a very low margin industry (which is good for consumers). Apple has managed a pretty remarkable game of finding a very profitable niche and exploiting it as it exploded, with them in a leadership position, however it is not sustainable, which Apple realizes.

And it is simply perverse seeing people actually bragging on behalf of Apple about the fact that they are rolling in cash.

Re: IPhone: 4% of market, 50% of profit

#36

Post by brudgers »

charlief wrote: post #4
brudgers wrote: post #2

I see the graphics. I see the app store affiliate links. I do not see the source for the data upon which the graphics are based listed.

It is underneath the charts: "Source: Asymco" http://www.asymco.com/2010/09/21/can-android-change-the-prof...

Asymco prepared the graphic, they did not collect the original data upon which it is based.

Re: IPhone: 4% of market, 50% of profit

#37

Post by Hoff »

ergo98 wrote: post #35
JofArnold wrote: post #21

This is my biggest question (and I'd love thoughts from HN people on it); if Android is mostly seen on handsets with very small margins that compete on price with almost identical features... who's paying for the R&D to keep up with Apple's innovations? That question assumes that innovation is important in the smartphone sector. That may not be the case I guess. I'm just trying to understand the end situation as best…

Apple is responsible for shockingly little of the innovation in the smartphone field. They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU. They didn't create the "Retina display" or their memory or their touchscreen sensor. They are a software company that other companies -- like LG and Samsung -- supply with hardware. The electronics m…

Then why not connect all those thoughts together? If it was so easy and if the hardware was so widely available and if the stuff here is a commodity and if user interface design and fit and finish was so easy, then why is Apple the bunch that is rolling in cash, and not looking like roadkill?

From what I've encountered with many of the low-margin commodity products, various manufacturers reach the "it works and meets our minimal specs, ship it" stage, and we get lids and covers and doors and other pieces that don't fit or quickly break and fall off, software and firmware incompatibility or crashes, fuzzy displays, sloppy switch mechanisms, user interfaces that are somewhere between truly bizarre and purely inscrutable, and related, well, dreck.

And for the consumers, a low-margin business means plug-compatible race-to-the-bottom no-name interchangeable and irrelevant product vendors, too.

Sure. There's a market for dreck. But as you've noticed, it doesn't pay well.

Re: IPhone: 4% of market, 50% of profit

#38

Post by ergo98 »

Hoff wrote: post #37
ergo98 wrote: post #35

Earlier quoted context omitted.

Apple is responsible for shockingly little of the innovation in the smartphone field. They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU. They didn't create the "Retina display" or their memory or their touchscreen sensor. They are a software company that other companies -- like LG and Samsung -- supply with hardware. The electronics m…

Then why not connect all those thoughts together? If it was so easy and if the hardware was so widely available and if the stuff here is a commodity and if user interface design and fit and finish was so easy, then why is Apple the bunch that is rolling in cash, and not looking like roadkill? From what I've encountered with many of the low-margin commodity products, various manufacturers reach the "it works and meets…

>Then why not connect all those thoughts together? If it was so easy

Who are you responding to? I didn't say it was "easy". I further said that Apple is a software company, not a hardware company. They do software well.

Their hardware superiority is 90% myth, 10% reality. There were excellent Windows Mobile devices with high resolution displays, better processors, more RAM, and on and on, long before Apple brought that "innovation".

You could directly attribute the fact that Apple isn't responsible for most of that hardware R&D for their high profit margins. They know to buy the cutting edge from the rest of the industry, put some software on it, and they've got a product.

Apple puts some great software on it and made a well integrated device. Their only innovation is in software. In hardware they're not much more than a VAR.

>From what I've encountered with many of the low-margin commodity products

I like the addition of the editorialized "commodity" there.

However your core point is utter nonsense. Almost every bit of extremely high quality electronics hardware you can buy in the industry, from ultra-high end LED televisions to audio equipment to high performance routers to digital cameras, came from a company making very low margins, yet managing to yield a very respectable billion or so in profit.

Apple has a short time where they essentially could go to the bank on the backs of a cult-like following. That isn't a scalable business model, which is exactly why Apple is warning about reduced margins going forward.

Re: IPhone: 4% of market, 50% of profit

#39

Post by twitter_v2 »

ergo98 wrote: post #35
JofArnold wrote: post #21

This is my biggest question (and I'd love thoughts from HN people on it); if Android is mostly seen on handsets with very small margins that compete on price with almost identical features... who's paying for the R&D to keep up with Apple's innovations? That question assumes that innovation is important in the smartphone sector. That may not be the case I guess. I'm just trying to understand the end situation as best…

Apple is responsible for shockingly little of the innovation in the smartphone field. They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU. They didn't create the "Retina display" or their memory or their touchscreen sensor. They are a software company that other companies -- like LG and Samsung -- supply with hardware. The electronics m…

I have to disagree with your points above, Apple create stylish / iconic user friendly products, built to last, which will reflect in the price from a consumer point of view. Where the likes of Dell, Sony, LG, Samsung and the rest build Laptops and PC's to compete in a very competitive & affordable price range set by millions of retailers world wide, whom created a price war amongst themselves. A company does not need to own or create all of their IP in order to be successful or ask a higher MSRP, they just need to distance themselves from their competition and create a buzz, which Apple have done remarkably well.

I see Apple as a type of Fashion brand or a designer - look at the handbag market for instance, why do they range from $10 -$10,000 if they do the exact same thing and majority of the time they're made from near enough from the same materials and on average cost the same to make.

Regarding your last point "And it is simply perverse seeing people actually bragging on behalf of Apple about the fact that they are rolling in cash." I find it quite amusing to see how many people are so unhappy about the success Apple have made, when they really should be pointing their anger to laptop manufactures that are responsible for consumers spending huge sums of money constantly replacing or updating poorly built products that only last 12 months before they start cooking themselves!

Re: IPhone: 4% of market, 50% of profit

#40

Post by ZeroGravitas »

mjfern wrote: post #11

Apple's profitability with its iPhone business is partly a function of its vertical integration and its industry power. Consider that Apple controls the key inputs for the iPhone (e.g., the A4 system on a chip and iOS), owns important distribution channels (e.g., the Apple Stores), and exercises substantial power over complements (e.g., AT&T and apps via the App Store). In short, Apple creates substantial customer va…

Apple doesn't "control" the A4 in any way they didn't "control" all the other Samsung chips they've bought and put Apple logos on.

They've now bought the design team that worked with Samsung on it, so we might see something interesting come out of that, but it's not the A4.

The rest of your post is entirely reasonable so it's a shame to lead off with a regularly debunked misconception.

It is however fun to speculate about why Apple puts so much effort into misleading people about the provenance of this fairly standard chip. It's clearly worked on some people, but what have they gained from this deception?

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