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

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

#21

Post by JofArnold » Sun, Oct 31, 2010, 9:49 AM UTC

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 I can as like a number of startups our future heavily depends on smartphones.

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

#22

Post by JofArnold » Sun, Oct 31, 2010, 9:52 AM UTC

baddox wrote: post #9

ptomato wrote: post #7

Earlier quoted context omitted.

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

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.

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

#23

Post by JofArnold » Sun, Oct 31, 2010, 9:54 AM UTC

ptomato wrote: post #7

sliverstorm wrote: post #6

All this tells me is what I already knew- Apple products are priced with a very large profit margin included. They are the only ones who've been able to get away with it. (I think it's safe to surmise that when one company is making 25x the profit as other manufacturers per device, it's not because they have figured out how to manufacture product more efficiently)

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

Additionally, note that in effect Apple decides the price of smartphones. Must hurt being a competitor who's making a quality product and knowing you need to price similar to them in order for your customers to understand what level of quality they are buying. Too high and people will buy an iPhone, too low and people may feel you are lower quality.

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

#24

Post by tjogin » Sun, Oct 31, 2010, 10:13 AM UTC

Herring wrote: post #8

I am shocked the copy-everything-apple-does-a-year-late-and-compete-on-price business model isn't very profitable.

I think it's because those who try to do that don't realize the full spectrum of things that Apple does right, seeing only the most superficial fraction of it.

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

#25

Post by aditya42 » Sun, Oct 31, 2010, 11:06 AM UTC

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…

Innovation is always important. The iPhone was innovative. iOS was innovative. Without those two, we wouldn't be having this discussion. We would still be using Nokias and Blackberries, or Android phones which would be like Blackberries -- not the iPhone.

As far as paying for R&D goes, how much does it take to replicate something? I'd say a fraction of the cost since you already have the product in front of you. All you need to do is duplicate it.

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

#26

Post by maximilian » Sun, Oct 31, 2010, 11:46 AM UTC

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.

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 equal weight with the actual aesthetic.

I've also read that they require all parts to be doubly sourced, so that if one source fails, they have a backup. I don't know how common this is, but seems like an interesting point in their process.

[1] He doesn't design them himself, but I couldn't think of a better word.

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

#27

Post by DrJokepu » Sun, Oct 31, 2010, 11:47 AM UTC

aditya42 wrote: post #25

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…

Innovation is always important. The iPhone was innovative. iOS was innovative. Without those two, we wouldn't be having this discussion. We would still be using Nokias and Blackberries, or Android phones which would be like Blackberries -- not the iPhone. As far as paying for R&D goes, how much does it take to replicate something? I'd say a fraction of the cost since you already have the product in front of you. All…

And that's exactly where the much hated patents (software or otherwise) would have a role, in my opinion; protecting hard-earned innovation. That's what they're supposed achieve, but due to the completely broken patent system, they're only good for "patent trolling".

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

#28

Post by JofArnold » Sun, Oct 31, 2010, 12:23 PM UTC

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…

It's an amazing team. Not just Ives but Cook, Mansfield and others too. I've seen teams with similar complementary personalities and skills in industry before, and provided they have project control and/or are in high-level positions they tend to do extremely well.

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

#29

Post by apl » Sun, Oct 31, 2010, 12:23 PM UTC

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?

No, not necessarily. Apple will sell more iPhones on one carrier priced at 200$ (+ subsidy) than iPhones that work on all carriers for 750$. So I suspect that AT&T doesn't even pay close to the actual price difference.

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

#30

Post by [deleted] » Sun, Oct 31, 2010, 12:37 PM UTC

ptomato wrote: post #7

sliverstorm wrote: post #6

All this tells me is what I already knew- Apple products are priced with a very large profit margin included. They are the only ones who've been able to get away with it. (I think it's safe to surmise that when one company is making 25x the profit as other manufacturers per device, it's not because they have figured out how to manufacture product more efficiently)

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

[deleted]