IPhone: 4% of market, 50% of profit • Hacker News Board

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

#41

Post by bbgm » Sun, Oct 31, 2010, 5:41 PM UTC

ergo98 wrote: post #38

Hoff wrote: post #37

Earlier quoted context omitted.

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 th…

I partly agree. The design on MacBook Pros was not sufficient to make me switch, although it was very tempting. It was the combination of hardware and software that did the trick.

However, I think you are underestimating their hardware prowess. There is a certain joy to using hardware (computers, musical instruments, name it). You get that with Apple hardware because of the little things. Apple things about the whole experience, which includes software, but even on the hardware side, there are few that actually pay attention to the whole. No one does it better. Packing features into a product shows you are not thinking as a whole, but just checking boxes. Innovation comes from thinking about the end result and user experience, not from features.

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

#42

Post by snom370 » Sun, Oct 31, 2010, 6:43 PM UTC

ergo98 wrote: post #38

Hoff wrote: post #37

Earlier quoted context omitted.

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 th…

Sure, they buy a lot of components off the shelf. But they are extremely involved in the design and manufacturing process of their products, and often work with the manufacturers to push the manufacturing technology forward to meet their design goals (machine milling is nothing new, but machine milling a $999 laptop requires quite a bit of innovation).

Unlike many other companies, Apple _doesn't_ just take various technologies and piece them together to make a product. And they do a lot of core technologies in-house, which is why they've bought companies like FingerWorks and PA Sami.

The interview with Jony Ive in the Objectified movie (http://www.youtube.com/watch?v=t0fe800C2CU) shows some of the thought process that is involved in Apples hardware design process.

By your logic, other PC/mobile manufacturers should have similar profit margins to Apple, but they don't. Now, the usual answer is that Apple has a "cult-like following" that will pay a higher price for "more or less the same hardware in a different box".

A better explanation, given that the "cult following" has only increased the last few years, is that Apple manages to make more appealing products by being extremely involved in _both_ hardware and software, leaving other companies to compete by sticking together commodity components. Apple did not say that they expected decreased profit margins because they would have to slash their prices, what they did warn was that their forthcoming products would have higher hardware costs. But of course, time will show.

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

#43

Post by YooLi » Sun, Oct 31, 2010, 6:46 PM UTC

ZeroGravitas wrote: post #40

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…

Apple has said barely anything about A4. All the 'misleading' and 'deception' you mention comes from people speculating about what A4 is and isn't.

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

#44

Post by JofArnold » Sun, Oct 31, 2010, 6:56 PM UTC

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 was actually musing on this very point in the pub earlier, having re-read an article on Apple's novel-ish approach to the SIM card (i.e., not having one) and what that means from a business perspective.

What people seem to gloss over is that Apple's major innovations come more from (or as much from) business revolutions than from hardware:

- iTunes: re-invented MP3 distribution (it was even DRM'd at first, remember)

- iPhone: screw you, carriers, it's going down like this from now on

- iOS: we've got any app you can ever imagine - our devices will make you happy.

They also innovate by knowing what their customers truly want:

- Do you really want a keyboard on that phone? Wouldn't you prefer it thinner?

- Do you really need a CD drive with that laptop? Wouldn't you prefer a bigger battery and thinner?

- Do you really need that much RAM and CPU when apps instant-resume and you have a Flash system drive?

Plus, they innovate in manufacturing (unibody, advanced castings and extrusions, laser-machining) and marketing and sales (direct-to-consumer, store layouts, try-all-you-like).

Ok, so some of the approaches they use are bought/licensed (processors, casting tech, hardening tech) and many are out-sourced. But I really don't see anyone else in the public light who are pushing hard at so many new approaches right now. How many other companies are filing so many patents in everything from chip design to UI to manufacturing methods?

So... I think I basically disagree with you :P

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

#45

Post by JofArnold » Sun, Oct 31, 2010, 7:04 PM UTC

rmah wrote: post #32

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.

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).

That's an interesting figure - thanks. I'd really love to see the breakdown - the manufacturing geek in me is getting all excited thinking about whether or not they deburr, how processed the parts are when they arrive as Foxconn etc etc.

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

#46

Post by snom370 » Sun, Oct 31, 2010, 7:05 PM UTC

bbgm wrote: post #41

ergo98 wrote: post #38

Earlier quoted context omitted.

>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 th…

I partly agree. The design on MacBook Pros was not sufficient to make me switch, although it was very tempting. It was the combination of hardware and software that did the trick. However, I think you are underestimating their hardware prowess. There is a certain joy to using hardware (computers, musical instruments, name it). You get that with Apple hardware because of the little things. Apple things about the whole…

Agreed. Yet, to a lot of the readers here, it's impossible to understand why the "little things" make a big difference. They simply cannot understand why this attention to detail in a product is worth paying for.

And I think this is key to Apples success, because I suspect that a lot of CEOs and product managers in other companies simply don't see this either.

You see this with a lot of laptops where the only attention to detail is in the obviously visible parts. Compare this to Steve Jobs / Jony Ive that obsess over how their products look on the _inside_ (http://www.folklore.org/StoryView.py?project=Macintosh&s...)

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

#47

Post by aditya42 » Sun, Oct 31, 2010, 7:07 PM UTC

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…

So you're saying Apple hasn't innovated as much as we think.

1. They didn't create their processor: I admit, I'm not really into the hardware side of Apple, but really? http://en.wikipedia.org/wiki/Apple_A4 credits Apple as the designer of the processor (and Samsung as the manufacturer). Yes, they collaborated with another company (Samsung) and bought a third one (Instrinsity) to own the talent, but that's not the point. That's like saying EA didn't make its games because they bought other studios. Apple wanted to make their own processor, so it collaborated with the companies it couldn't/didn't want to buy, and bought the companies it could. The result is that A4 has an 'Apple' name and only Apple gets to use it. What is "though they managed to brand it" supposed to mean anyway?

2. By create, I assume you mean 'designed'. Nobody will argue that Apple didn't manufacture it. So can you tell me who did design the first retina display? And which phone first used it? (I understand that 'retina display' is just a branding of a very high resolution display, but for the sake of brevity, we'll call it 'retina display').

3. Yes, they're a software company. Yes, Samsung and LG are suppliers of their hardware. But Apple is the one putting those components together in a tight and neat little package that looks beautiful on the outside, and is powerful on the inside. Look at Samsung and LGs own phones. Why are losing share if they're so good at what they do? Apple is the architect, Samsung/LG the workers. Who deserves the credit?

---

Apple did what it does best - sell you a product. Not parts; product. Apple always sells you a product. So instead of looking at each part and saying that Apple hasn't innovated there, look at the product as a whole and see what Apple has created that no-one else did.

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

#48

Post by ergo98 » Sun, Oct 31, 2010, 7:13 PM UTC

aditya42 wrote: post #47

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…

So you're saying Apple hasn't innovated as much as we think. 1. They didn't create their processor: I admit, I'm not really into the hardware side of Apple, but really? http://en.wikipedia.org/wiki/Apple_A4 credits Apple as the designer of the processor (and Samsung as the manufacturer). Yes, they collaborated with another company (Samsung) and bought a third one (Instrinsity) to own the talent, but that's not the po…

"What is "though they managed to brand it" supposed to mean anyway?"

When the A4 was introduced a lot of the speculation regarding it was incredible. What was this amazing new processor, people asked?

Apple, it was widely perceived, was suddenly a world leader in IC with this amazing new technology.

Only it turns out that it was a last generation Hummingbird processor designed by Samsung, though that gives Samsung too much credit given that it was a standard ARM core with a standard PowerVR GPU.

Yet the myth persists.

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

#49

Post by ZeroGravitas » Sun, Oct 31, 2010, 8:06 PM UTC

YooLi wrote: post #43

ZeroGravitas wrote: post #40

Earlier quoted context omitted.

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…

Apple has said barely anything about A4. All the 'misleading' and 'deception' you mention comes from people speculating about what A4 is and isn't.

Apple feature the A4 regularly in keynotes, product introduction videos and websites.

They used Samsung ARM chips in every previous iPhone and were happy to leave it at that. Since the iPad they have been presenting the A4 as "custom-designed by Apple engineers to be extremely powerful yet extremely power efficient."

This could be considered flat out lies, at the very least it gives the wrong impression. If you want to be charitable then they could mean "engineers employed by a company later bought by Apple" when they say Apple engineers, custom-designed could mean simply "designed to achieve certain goals" rather than "specifically for Apple" or it could just mean that someone at Apple picked certain features from a Samsung catalog.

With that background it is understandable (though still faintly ridiculous) for people to take the hints that Apple is dropping and go off on flights of fancy about the A4.

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

#50

Post by lotusleaf1987 » Sun, Oct 31, 2010, 8:14 PM UTC

sbaqai wrote: post #17

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…

I think this is a great example of Apple's "design strategy" being completely end-to-end. They don't just focus on the tiniest details of industrial design; the aluminum chassis, the battery layout, the screws, friction coefficients on the trackpad, etc.. they have also designed their entire supply chain with the same attention to detail. There was a post on HN a while ago about Apple's patent on a new headphone jack…

To add another example of Apple's details of industrial design, Apple makes two keyboards from the space they stamp out for the iMac's screen. Apple is very efficient.