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MacRumors
Jan 18, 2007, 10:35 AM
http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Market analyst group iSuppli (http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=196901711) put out some preliminary numbers as the component costs for the Apple iPhone. Typically, these component breakdowns are performed on a physical device, so this analysis was done with a best-guess on many of the suppliers.

According to the analysis, the manufacturing cost for each 4GB iPhone is about $230, offering Apple nearly a 50% gross margin on the iPhone. This is reportedly in line with previous Apple margins in the iMac and iPod nano, and suggests there is room for price drops in the future.

Of interest, the supplier of the 3.5" Touch screen remains a mystery, but iSuppli estimates it's cost at $33.50.



ero87
Jan 18, 2007, 10:37 AM
wow so their profit isn't even that huge! considering that "included in the price is a 2-year plan", whatever that means...

Sdashiki
Jan 18, 2007, 10:39 AM
wow so their profit isn't even that huge! considering that "included in the price is a 2-year plan", whatever that means...

um, included in the price is the DISCOUNT of signing for a 2 year plan.

thats the correct wording.

you arent getting 2 years of service for $600, though it seems like thats the wording presently.

Sean7512
Jan 18, 2007, 10:39 AM
So really, Cingular is probably paying $600 and $700 for a $230 phone and a lil more for the other. Apple is gonna make tons of money on these things...At least we don't have to pay full price, as we get that 2 year contract discount :rolleyes:

edge540
Jan 18, 2007, 10:40 AM
that really is a large profit margin. This means that even if they sold without the 2 year contract, which usually makes phones a heck of a lot cheaper to buy, they will be making a killing off of them. Maybe once we get the actual device out we will get a better estimate on the manufacturing costs. But as it stands now, they could sell an unlocked version of the phone for 300 dollars and still make like 70 dollars off of each one. Thats what im waiting for.

chaslam
Jan 18, 2007, 10:41 AM
However, one has to remember all the costs involved with the production of the phone. All the developers that made the software, all the people that have taken years to develop the phone and the designers. So actually, its probably not a high a profit margin as we think, taking off all the R&D costs.

OhEsTen
Jan 18, 2007, 10:43 AM
But, this does'nt account for their R&D. What does it cost to have a team of engineers, designers, developers, (developers, deveoplers) and lawyers running for 2.5 years.

Digital Skunk
Jan 18, 2007, 10:45 AM
Glad I am not buying one until it has the Sprint name and logo on it. :D

Maybe by then the phone will be replaced by one with newer features that are way beyond my comprehension. Then I can get the regular iPhone at a discount price in the Apple Store reburb bin. Not the 32GB model with brainwave recognition. :D

twoodcc
Jan 18, 2007, 10:46 AM
But, this does'nt account for their R&D. What does it cost to have a team of engineers, designers, developers, (developers, deveoplers) and lawyers running for 2.5 years.

that is a good point....but it's still pretty expensive.....

czeluff
Jan 18, 2007, 10:46 AM
thats NOT high. Yes, computers is generally an area where margin isnt very high (buy from newegg.com, theyre getting about 11% margin. i know, i worked there). 50% sounds like alot, but when u count R&D time, thats very little.

Compared to the normal iPod, the 8gb nano costs $90, and they sell it for $250. the R&D costs arent as high either. the Nanos make the most money for them in terms of percentage.

cz

slffl
Jan 18, 2007, 10:47 AM
These cost analysis' are the dumbest thing ever. Do they take into consideration R&D? Or anything else beside raw component cost? And it's not just the iPhone, these numbers are equally being pulled out of someones butt for the PS3, 360, Wii, etc. etc.

cheunghy
Jan 18, 2007, 10:47 AM
How about their effort in development? How much does it cost...?

JoeG4
Jan 18, 2007, 10:48 AM
Uhhh....

No!

When you pay $499 for the iPhone, you also commit to a 2 year contract with cingular for $XX a month. Probably something in the whereabouts of $69 per month without including taxes.

It costs Apple $230 to make the phone. Cingular will charge you $499 for that phone WITH the discount since you HAVE to sign up for 2 years of service with them (which is NOT free). They make a **** TON just like Apple so they pay Apple (thus the discount) - that discount is called a subsidy.

The subsidy on cellphone service varies with how much you commit - FWIW I think cingular recently dropped theirs significantly on $40 contracts, but I don't know about $60 ones.

Usually, part of that subsidy goes to discount the phone, and the rest goes to whoever sells it to you - that's how all those dealers in the malls work - they sign you up for a contract and get ~$250, half of that they allow for a "discount" on the phone and the other half they stick in their pocket. [well, the owner does, and then they pay their employees - it's not as lucrative as it may sound].

So there you have it.

cr2sh
Jan 18, 2007, 10:48 AM
Glad I am not buying one until it has the Sprint name and logo on it. :D

You just better hope you don't do anything crazy.. like die. (http://consumerist.com/consumer/complaints/sprint-refuses-to-cancel-dead-brothers-cellphone-229520.php) :)

The 3.5" touch screen most certainly costs more than $33... right? It seems like they low balled that part to make Apple seem more greedy.

Object-X
Jan 18, 2007, 10:48 AM
Whatever, when can I order one?

ender78
Jan 18, 2007, 10:51 AM
I find this number unreasonable at this point due to the fact that iSupply likely has ZERO knowledge of the product components. Until they have disassembled one, their pricing is not even worthy of being called "speculation".

bigbossbmb
Jan 18, 2007, 10:54 AM
um, included in the price is the DISCOUNT of signing for a 2 year plan.


I'd be interested to know what the discount is, if any.

I wouldn't be surprised if there was no discount and the 2-year agreement was just a stipulation made by cingular.

adamberti
Jan 18, 2007, 11:02 AM
I find this number unreasonable at this point due to the fact that iSupply likely has ZERO knowledge of the product components. Until they have disassembled one, their pricing is not even worthy of being called "speculation".

Bingo. iSuppli? I can't see a serious market analyst group calling themselves that. And no dissasembly means they're shooting in the dark.

This sounds to me like iSuppli just wants some advertising time, which they got. How many people went out to see who iSuppli was (myself included)? They're just jumping on the Apple bandwagon.

TheBobcat
Jan 18, 2007, 11:15 AM
You would think since Apple is trying to break into this market they'd settle for a lower profit margin. If iPhone was $399/$499, I bet you'd see sales much higher than what they will be. However, Apple may also be wanting to set a tone for iPhone to be seen as a premium device through its price in addition to features. Either way, it is what it is, and these people really have no idea.

SciTeach
Jan 18, 2007, 11:17 AM
that really is a large profit margin.

Not really. The average retailer will jump up the price of a product they purchased to sell 20-40%. I was actually expecting more of a profit margin.

And if you want a comparison to what a consumer pays vs. what a seller sells, look at Starbucks!!:eek:

(I know, I know....apple vs oranges.....or coffee beans:D )

FattyMembrane
Jan 18, 2007, 11:19 AM
1. the specs of the iphone are still unknown, so calling this bill of materials anything more than a "wild guess" is pushing it.

2. i would be surprised if apple is doing anything more than breaking even on this thing - it's been in development for 3 years. r&d is part of the cost of the phone as well. during the keynote, i was expecting at least an $800-$900 pricetag.

BigPrince
Jan 18, 2007, 11:25 AM
that really is a large profit margin. This means that even if they sold without the 2 year contract, which usually makes phones a heck of a lot cheaper to buy, they will be making a killing off of them. Maybe once we get the actual device out we will get a better estimate on the manufacturing costs. But as it stands now, they could sell an unlocked version of the phone for 300 dollars and still make like 70 dollars off of each one. Thats what im waiting for.

I think your going to wait a long time.

dashiel
Jan 18, 2007, 11:31 AM
apple's language with regards to the cingular contract have so far been strange. their wording makes it seem like the contract is included in the price which i can't imagine is true, but it certainly provides an interesting opportunity for both cingular and apple.

apple has always maintained a strict pricing policy -- one it keeps them profitable, but two it's about brand perception. apple doesn't want their products to appear as cheap. i don't ever see a time when the iphone is given away for free with a 1-year contract, but i can see apple/cingular saying $599 two-year contract included. it's semantics, but i can see it happening. cingular would lose some money in the first year on a $60 plan, but they make it back in the following year.

now if they were smart cingular would do that now while they have the two-year exclusive contract. give everyone a free year of service for the price so that when year-two comes up they can't just cancel and move on if they want to use their iphone.

NorCalLights
Jan 18, 2007, 11:31 AM
However, one has to remember all the costs involved with the production of the phone. All the developers that made the software, all the people that have taken years to develop the phone and the designers. So actually, its probably not a high a profit margin as we think, taking off all the R&D costs.

Exactly. Apple likely spent millions on R&D for this product... not to mention the R&D that Cingular put towards improving their network. Add in shipping and physical plant costs, and suddenly these margins don't look so huge.

arn
Jan 18, 2007, 11:32 AM
You would think since Apple is trying to break into this market they'd settle for a lower profit margin. If iPhone was $399/$499, I bet you'd see sales much higher than what they will be.

This is all speculation though... you really think Apple is going to have a surplus of iPhones in the first 6 months?

If Apple is going to sell as many iPhones as they can make in the first few months, there's no reason to charge less. You're leaving money on the table. There's plenty of time to drop prices. Is Apple charging too much for iPods? The fact they sold 21 million of them last quarter indicates they are not charing too much for them.

arn

steelfist
Jan 18, 2007, 11:33 AM
i hate it when apple's obsessed with gross margins.


it does make them more expensive than the competition. so, it really is 250 $ and 300$ for no profit ? gotta lower that price before you attempt to sell any.

it should be, 280 for 2 GB and 350 $ for profit and including the software and operating system. after all, apple does spend money to develop the software.

ChrisA
Jan 18, 2007, 11:33 AM
wow so their profit isn't even that huge! considering that "included in the price is a 2-year plan", whatever that means...

No, No, No. It's the other way around. First you pay $500 for the phone then you sign a contract agreeing to pay like $50 a month for 24 months. So the total cost to own one of these for two years is $1,700. Unless you want the $100 a month plan then you pay $2,900. Owning one of these little gadgets is as expensive as buying a new Mac Pro every two years.

What you should ask is why does it cost $50 to supply 30 days of airtime? It doesn't. What you pay for with a cell contract is financing on the "free" phone

Rocketman
Jan 18, 2007, 11:33 AM
These cost analysis' are the dumbest thing ever. Do they take into consideration R&D? Or anything else beside raw component cost? And it's not just the iPhone, these numbers are equally being pulled out of someones butt for the PS3, 360, Wii, etc. etc.

Actually they are not dumb. They focus on parts cost alone so other folks with other areas of interest and expertise can more meaningfully layer on other costs. THEN do an analysis.

Rocketman

gwangung
Jan 18, 2007, 11:34 AM
Glad SOMEBODY around here has a sense of real world economics.

"really large profit margins", my butt....

macrumors12345
Jan 18, 2007, 11:35 AM
http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Market analyst group iSuppli (http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=196901711) put out some preliminary numbers as the component costs for the Apple iPhone. Typically, these component breakdowns are performed on a physical device, so this analysis was done with a best-guess on many of the suppliers.

According to the analysis, the manufacturing cost for each 4GB iPhone is about $230, offering Apple nearly a 50% gross margin on the iPhone. This is reportedly in line with previous Apple margins in the iMac and iPod nano, and suggests there is room for price drops in the future.

Of interest, the supplier of the 3.5" Touch screen remains a mystery, but iSuppli estimates it's cost at $33.50.

LOL - they all but admit that they completely pulled the $230 number out of their collective a**es, given that they haven't even touched the phone let alone looked inside it, but many of the people on this board treat it as if it actually means something.

Using the same methodology I compute that the Samsung Blackjack costs $97 in components. I don't know who supplies the 2.2" non-touch screen, but I estimate it costs $14.50. Samsung is making nearly a 50% gross margin on the Blackjack, plus whatever kickbacks Cingular gives them.

Bonte
Jan 18, 2007, 11:37 AM
I'd be interested to know what the discount is, if any.

I wouldn't be surprised if there was no discount and the 2-year agreement was just a stipulation made by cingular.

Cingular did change there network for the iphone, allow free push email, usable wifi and music synching via iTunes. I think cingular is paying nothing but we'll see different pricing with different contracts, before 2008 we'll see a good price drop from cingular.

Rocketman
Jan 18, 2007, 11:40 AM
This is all speculation though... you really think Apple is going to have a surplus of iPhones in the first 6 months?

If Apple is going to sell as many iPhones as they can make in the first few months, there's no reason to charge less. You're leaving money on the table. There's plenty of time to drop prices. Is Apple charging too much for iPods? The fact they sold 21 million of them last quarter indicates they are not charing too much for them.

arn

In fact the 50% increase in sales indicates they are slightly underpriced. Probably to put the final nail in the Zune coffin.

On the positive side the conference call indicated iPods were a major driver in margin increases. The cost of the materials experienced a decline below expectations and the price remained firm.

Rocketman

SplinterCell
Jan 18, 2007, 11:41 AM
http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Market analyst group iSuppli (http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=196901711) put out some preliminary numbers as the component costs for the Apple iPhone. Typically, these component breakdowns are performed on a physical device, so this analysis was done with a best-guess on many of the suppliers.

According to the analysis, the manufacturing cost for each 4GB iPhone is about $230, offering Apple nearly a 50% gross margin on the iPhone. This is reportedly in line with previous Apple margins in the iMac and iPod nano, and suggests there is room for price drops in the future.

Of interest, the supplier of the 3.5" Touch screen remains a mystery, but iSuppli estimates it's cost at $33.50.

Is doesn't really matter if it only cost 10 cents to make, it matters what the market is willing to pay, which we will find out when they are finally released…

ChrisA
Jan 18, 2007, 11:52 AM
A 100% gross profit is not unreasonable. Compare it to unrelated industries. For example the "standard" price to build a concrete block wall (8x8x16 inch blocks) is the cost of the block times two. For another example look at one of those stainless steel commercial stoves. The retail price is maybe $2,400 and the "parts" are bulk stainless steel from the mills at about $2 a pound. Here the gross is even higher then for cell phones or concrete walls. We could talk about Men's dress shirts or basketball shoes if you really want to see large grosses.

But the thing is that the "cost of parts" leave out the cost to assemble the parts and market the product and even leaves out the $12 per square foot per month cost of the retail space.

onlytobbe
Jan 18, 2007, 11:57 AM
No, No, No. It's the other way around. First you pay $500 for the phone then you sign a contract agreeing to pay like $50 a month for 24 months. So the total cost to own one of these for two years is $1,700. Unless you want the $100 a month plan then you pay $2,900.
Uhm, $50 and $100 a month, are you kidding me? :confused: :confused: :confused:
Sure we have expensive contracts in Sweden too, but then you get like 3000 minutes and 3000 sms/mms included. And thats nothing for average Svensson, a normal contract cost like $10 a month, and i can even use those $10 for phonecalls...

nagromme
Jan 18, 2007, 11:58 AM
I would suspect their years of R&D, plus their marketing costs, dig into that "huge" profit a bit... not to mention that "raw" parts cost excludes actually assembling the thing.

CmdrLaForge
Jan 18, 2007, 12:01 PM
People are always forgetting that these are the pure costs for the BOM. You have to add labour time, shipping costs, profit of the CM, material handling cost,... and SG&A then you come to the profit. On the other hand you have R&D costs that are compared to the profit over time by calculating the so called ROI or ROIC.

rhpixelfreak
Jan 18, 2007, 12:08 PM
I have an iMac... I kinda feel ripped off now :(

That's it, I'm making my own iPhone.

Hattig
Jan 18, 2007, 12:40 PM
But, this does'nt account for their R&D. What does it cost to have a team of engineers, designers, developers, (developers, deveoplers) and lawyers running for 2.5 years.

In some ways it does - the Mac OS X cost is factored in at $7 (= $70 million dollars of work to make it run on this new platform) and that will also be used on other devices too.

The patents (all 200 of them) probably cost Apple $20m, that's $2 per device, shrinking when Apple sells over 10m of them. Again, many of the patents will be used on other devices too.

Isn't it great how huge development costs come out to mere percentage costs in a device when you sell millions of them!

123
Jan 18, 2007, 12:41 PM
Of interest, the supplier of the 3.5" Touch screen remains a mystery

Yeah, right.
http://forums.macrumors.com/showthread.php?t=268732#19

whooleytoo
Jan 18, 2007, 12:54 PM
From here:

"The entry of innovative high-tech developer Apple into the market won't help matters, either.

While global handset sales will continue to rise - 1 billion phones are expected to be sold in 2007 -- profit margins are unlikely to follow suit. Indeed, companies such Nokia and Motorola will be hard pressed to maintain them at current levels.

Margins in Motorola's handset business, for instance, could fall to as low as 5% in the fourth quarter from 11.9% in the third quarter when the company reports results next week."

Motorola's phone margins were at 11.9% last quarter. Searching for Nokia's margins, the latest I could find was 13.2% (from Jan '06). 50% to me sounds excessively high for a phone, given profit margins are being squeezed, and the phone is also locked to a carrier for 2 years.

TheBobcat
Jan 18, 2007, 12:56 PM
Ultimately Apple will price to the highest point where they can still sell iPhones and meet their goals. If doing that means they make a 46% magin, good for them.

koolcolors
Jan 18, 2007, 01:50 PM
It's asinine to believe that the consumer price on ANYTHING will be just a hair above its actual manufacturing cost! Obviously, you HAVE to factor in the research & development, and the sales & marketing costs as well, besides a reasonable profit. It costs Intel ~$40 to manufacture a chip, yet they charge upwards of $600 for some of them! Why don't you complain about that? Another stupid point - it costs maybe $1.00 to manufacture an audio cd, yet we're willing to dish out $10-$20 for it! In the same vein, it might cost Microsoft $1.00 to manufacture and package an Office or Windows OS cd, yet we gladly dish-out hundreds of dollars for the same!

Dale_Nx26
Jan 18, 2007, 01:56 PM
You'd expect that with contract, the iphone would be cheaper but nooo. You HAVE to be with cingular in order to use the iphone (properly). I have no problem with the cost of the phone itself. but why make us be with cingular/make the phone locked if you're not giving a discount on the phone? It's not like without the contract the phone will decrease or increase in profit much. I still wonder why the phone is locked, with a $500-600 price tag.

whooleytoo
Jan 18, 2007, 02:17 PM
It's asinine to believe that the consumer price on ANYTHING will be just a hair above its actual manufacturing cost!

50% is one big, scary hair!

As Hattig points out above, the R&D costs become less relevant the more devices are sold, whereas the build costs scale with volume. Being able to spread the R&D costs out over 10m devices in the first year alone means the (fixed) R&D costs aren't likely to be a massive factor in the iPhone's price.

xDANx
Jan 18, 2007, 02:23 PM
that really is a large profit margin. This means that even if they sold without the 2 year contract, which usually makes phones a heck of a lot cheaper to buy, they will be making a killing off of them. Maybe once we get the actual device out we will get a better estimate on the manufacturing costs. But as it stands now, they could sell an unlocked version of the phone for 300 dollars and still make like 70 dollars off of each one. Thats what im waiting for.

i keep seeing this misconception over and over again...the 2 year contract is not two years of included service...it's two years of being legally bound to pay for service...on top of the price of the phone (think $50-70/month for an unlimited data plan, really the only worthwhile type of plan with this phone). without the 2 year contact the price goes up, not down. buying on unlocked phone costs more because the service providers (i.e. cingular) aren't guaranteed to have your business (and therefore won't subsidize the cost of the phone)...however, in return for paying more you can pop in whatever sim card you want, wherever you are in the world. i would be willing to pay a slight premium on the iphone to get it unlocked...but i'm not holding my breath on that option being offered any time soon.

Maestro64
Jan 18, 2007, 02:29 PM
Look like LG was planning a similar product

http://www.lge.com/download/general/press/front%20flat1_20070118104240.jpg

Read more (http://www.engadget.com/2007/01/18/lgs-ke850-prada-official-iphone-says-wha/)

Maestro64
Jan 18, 2007, 02:31 PM
Margins in Motorola's handset business, for instance, could fall to as low as 5% in the fourth quarter from 11.9% in the third quarter when the company reports results next week."

Motorola's phone margins were at 11.9% last quarter. Searching for Nokia's margins, the latest I could find was 13.2% (from Jan '06). 50% to me sounds excessively high for a phone, given profit margins are being squeezed, and the phone is also locked to a carrier for 2 years.

This because most of the market growth last year was in the countries like India and china which do not have money to spend. Motorola is trying to become a dominate player in those markets. Apple going after us rich americans.

AHDuke99
Jan 18, 2007, 02:41 PM
hmmm, i think apple should sell it at $299/$399 or $399/$499 if it costs $230 to manufactuer. often time companies have to cut profits to develop a marketshare. look at M$, they had to make a loss for a while on their xbox to get it sold into people's homes, and look how it worked. its now a better seller than the playstation 3. i dont know if $599 for a phone with 2 years of service will fly like people on this site believe it will. most people may not feel like it's worth it to pay that for a phone that is reletively closed to any software. what about java apps for mobile phones? the iphone, as of now, cant run them. i just dont see it being a runaway success like many others do with the pricetag. just look at the PS3, sony prices it so high that people arent buying it no matter how superior it may be to nintendo and xbox360. i hope the same doesnt happen to apple.

randomlinh
Jan 18, 2007, 03:01 PM
hmmm, i think apple should sell it at $299/$399 or $399/$499 if it costs $230 to manufactuer. often time companies have to cut profits to develop a marketshare. look at M$, they had to make a loss for a while on their xbox to get it sold into people's homes, and look how it worked. its now a better seller than the playstation 3. i dont know if $599 for a phone with 2 years of service will fly like people on this site believe it will. most people may not feel like it's worth it to pay that for a phone that is reletively closed to any software. what about java apps for mobile phones? the iphone, as of now, cant run them. i just dont see it being a runaway success like many others do with the pricetag. just look at the PS3, sony prices it so high that people arent buying it no matter how superior it may be to nintendo and xbox360. i hope the same doesnt happen to apple.

The simple solution would be for people not to buy it then. I agree that even w/ R&D, if they want in, they should chop $100 off the price tag. $200 if they're willing.

My bet is, they still aren't too sure. They are just dabbling in and seeing what the results are. As you can already tell, it seems like there's a decent enough demand for it initially... that high cost and those early adopters will be the R&D cost.

If Apple sees a positive response, they unleash iphone mini, iphone nano, and iphone shuffle (call people at random!). If not, they hang around for a little, and bail. I have a feeling they will find a way to make this work unless it goes HORRIBLY wrong.

GFLPraxis
Jan 18, 2007, 03:15 PM
thats NOT high. Yes, computers is generally an area where margin isnt very high (buy from newegg.com, theyre getting about 11% margin. i know, i worked there). 50% sounds like alot, but when u count R&D time, thats very little.

Compared to the normal iPod, the 8gb nano costs $90, and they sell it for $250. the R&D costs arent as high either. the Nanos make the most money for them in terms of percentage.

cz

This seems very unlikely to me. I know the prices stores get them at, as I work at CompUSA; we get very little margin at all. While the possibility Apple hordes ALL the margin did occur to me, the fact that Microsoft is selling the Zune at a *LOSS* and its capacity is not significantly better than the iPod, I doubt it.

If Apple was marking up the iPod 300% over cost, then Apple's competitors could be selling 8 GB flash players for $150 and raking up Apple's marketshare.

thejadedmonkey
Jan 18, 2007, 05:35 PM
If Apple was marking up the iPod 300% over cost, then Apple's competitors could be selling 8 GB flash players for $150 and raking up Apple's marketshare.
http://cgi.ebay.com/Brand-New-MP3-MP4-Music-Movie-FM-Video-Player-8GB_W0QQitemZ270080671678QQihZ017QQcategoryZ94930QQtcZphotoQQrdZ1QQcmdZViewItem

suneohair
Jan 18, 2007, 05:41 PM
http://cgi.ebay.com/Brand-New-MP3-MP4-Music-Movie-FM-Video-Player-8GB_W0QQitemZ270080671678QQihZ017QQcategoryZ94930QQtcZphotoQQrdZ1QQcmdZViewItem

Do you check into things before you attempt to show someone up?

http://feedback.ebay.com/ws/eBayISAPI.dll?ViewFeedback&userid=hongding-1688&myWorld=true

Fake,8GB player has512MB,Offer 100% satisfaction&warranty and dont answer3emails

SCAM!! hacked the firmware & stuck fake 8GB label on player, ACTUAL MEMORY 483MB

Follow-up by berea1978berrym: SEARCH GOOGLE FOR "CHINESE MP4 SCAM" TO SEE WHAT THEY DO! PLEASE DONT BUY ! SCAM

It would seem that is not a 8GB player.

Music_Producer
Jan 18, 2007, 06:18 PM
50% margin is negligible. Many manufacturers have a 100-200% profit margin. Everyone forgets that the major cost Apple (or any manufacturer) has to face, is marketing. Sure, there are developer, licensing costs, etc.. but marketing beats everything.

A manufacturer has to factor in the cost of marketing.. which can go into billions and make what seems like a huge profit - into almost break even. Most posts I see which claim 'Ahhh.. Apple should have priced this lower' are nothing but people who have no idea how a company does business. You don't think Apple wanted to price this lower? Sure they did, that's why its a 50% margin rather than a 100% one.

Pro-musicians are a different category of customer. The manufacturers know that they will pay for quality.. so pro-audio manufacturers make 200-300% profit on their gear. And yes, we pay for it without complaining.

biturbomunkie
Jan 18, 2007, 06:24 PM
Do you check into things before you attempt to show someone up?

http://feedback.ebay.com/ws/eBayISAPI.dll?ViewFeedback&userid=hongding-1688&myWorld=true





It would seem that is not a 8GB player.

own3d LoL :D

anyways, to be fair, i think we also have to consider hidden costs such as support, R&D, etc. ppl are basically gonna be paying the whole "apple experience."

cgc
Jan 18, 2007, 07:53 PM
How much do ya figure 2+ years of R&D on that phone cost Apple? I think the cost is well worth it.

Counterfit
Jan 18, 2007, 09:44 PM
You'd expect that with contract, the iphone would be cheaper but nooo. You HAVE to be with cingular in order to use the iphone (properly). I have no problem with the cost of the phone itself. but why make us be with cingular/make the phone locked if you're not giving a discount on the phone? It's not like without the contract the phone will decrease or increase in profit much. I still wonder why the phone is locked, with a $500-600 price tag.

There is most likely no subsidy on the phone. This is so Apple controls the iPhone, and Cingular has pretty much no say in it (in regards to software and logos on the phone). Notice how there was no Cingular name or logo except next to the cellular signal bar on the phone?

As for the cost of data on Cingular, T-Mobile's smartphone plan is $29.99 per month, which includes unlimited data and hotspot access (I can't tell if their $5.99 plan includes any kind of data, or just through the supplied WAP browser.). The most similar plan from Cingular, which doesn't include hotspot access, as Cingular doesn't have any, is $19.99 per month. I can attest to this working with any application as well (both Google Maps and Opera Mini).

GregA
Jan 19, 2007, 12:08 AM
If Apple is going to sell as many iPhones as they can make in the first few months, there's no reason to charge less. You're leaving money on the table. There's plenty of time to drop prices.Agreed - Apple should charge at a level that has them pushing the speed they can supply iPhones.

If they charge too much, they may make 50% on it but there'll be phones lying around unsold. Charge too little and there'll be a huge waitlist and upset buyers.

Recoup some of the R&D!

GregA
Jan 19, 2007, 12:42 AM
the Mac OS X cost is factored in at $7 (= $70 million dollars of work to make it run on this new platform) and that will also be used on other devices too.Ah, I missed that. Good.

I don't know how much Apple spends on their R&D, prototypes, setting up construction etc - I would be surprised if they didn't have multiple iPhone potentials (& possibly separate teams), all of which has to be factored into the design costs. I wonder how much it really is.

why make us be with cingular/make the phone locked if you're not giving a discount on the phone? It's not like without the contract the phone will decrease or increase in profit much. I still wonder why the phone is locked, with a $500-600 price tag.Do you know that for a fact?

I definitely agree - if Cingular isn't subsidising it, why lock people in? Of course, perhaps Cingular says it's the cost of altering their voicemail (if so, I'd guess Cingular has made a VERY good deal - the voicemail is a great idea but not that revolutionary)

Look like LG was planning a similar productI doubt it. No more than Windows 3.0 & MacOS6 were similar (both had screens, keyboards, etc). The LG is just a touch screen - how it works we've no idea.

leezly
Jan 19, 2007, 04:23 AM
IMHO a contract with a phone always means that they will get the discount you get for the phone back through the contract. Usually a contract causes more costs for you than you would have without it. True? Sure you have all those useful schemes where you save money on calling your girl friend or grandmother. But this just keeps you calling more and thus spending more.

Anyhow, recently Amazon was offering the iPhone for sale for 1000 Euro. Though, it cancelled that offer again. Maybe due to complains of Apple or unreliability. But this should give you a clue of the real price aimed by APPLE. Meaning a profit of about 75% (without research an stuff), doesn't it?

leezly

BuzWeaver
Jan 19, 2007, 08:36 AM
Since this thread is talking about money. This is a good little article on the profit margin. Not to mention if as Job's illustrated that there are 1 billion cell users world wide, though I heard just yesterday those numbers are more like 2 billion cell users world wide, but who's splitting hairs when it comes to profit margins right? If Job's is getting 1% of that 1 billion he's still going to make a cool 100 million dollars.



http://www.macworld.com/news/2007/01/19/iphonemargin/index.php

Speedracer04
Jan 19, 2007, 01:48 PM
But, this does'nt account for their R&D. What does it cost to have a team of engineers, designers, developers, (developers, deveoplers) and lawyers running for 2.5 years.

A team of 10 engineers, 5 designers,10 developers and 10 lawyers I would estimate at 8.75 million dollars at an average salary of $100,000 each per year. Considering apple is projecting to sell 10 million iPhones by the end of 2008 with an average price of $550 (($600+$500)/2)....this puts their gross sales at 5.5 billion dollars. Subtracting the cost to produce the iPhone (2.3 Billion)...this gives them a gross profit of 3.2 Billion dollars

I could be off with the number of engineers, designers, devlopers and lawyers...but I think you get my point. The cost for them to develop the device is a small margin in the whole scheme of things...

GregA
Jan 19, 2007, 02:36 PM
I could be off with the number of engineers, designers, devlopers and lawyers...but I think you get my point. The cost for them to develop the device is a small margin in the whole scheme of things...That's a good salary estimate in many ways, I think. Need to at least double that salary to get the costs of supporting those same employees in the office (computers, real-estate, etc et) and add the costs of prototyping, setting up manufacturing facilities.

I would also assume that for every cool-new-product Apple releases, 4 more don't ever happen - so multiply the whole cost by 5? (since it needs to be paid for by the ones that work!)

gwangung
Jan 19, 2007, 02:48 PM
That's a good salary estimate in many ways, I think. Need to at least double that salary to get the costs of supporting those same employees in the office (computers, real-estate, etc et) and add the costs of prototyping, setting up manufacturing facilities.

I would also assume that for every cool-new-product Apple releases, 4 more don't ever happen - so multiply the whole cost by 5? (since it needs to be paid for by the ones that work!)


Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

Speedracer04
Jan 19, 2007, 03:21 PM
Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

After reading your posts I can easily understand that the cost for a single employee including health care, equipment, building costs and what not could possibly be much higher...but I think your missing my point.

Yes I came up with a number of 8.7 million in my post based off of a 100,000 annual salary...even if I came up with a number of 50 million or 200 million for R&D...my point was that if you look at the big picture it is still a relatively small amount.

Im not going to assume I can pinpoint the exact salary or budget things even close to what they really are. My point being that even with an R&D cost of 200 million (which is definitely possible) they are still netting a profit of close to 2-3 billion by the end of 2008. Not bad for a first year device. Apple posted a profit of 1.0 Billion for last quarter...

Neither of us will will be able to accurately project these numbers...Im sure apple has analysists that do this full time...so in the end this is all just basically for fun and to get some type of (large) ballpark idea.

GregA
Jan 19, 2007, 03:23 PM
Um, you better double it again, to cover benefit/health/etc. costs (roughly double the salary for every employee).

I dunno...I don't find these threads useful, because so many people have no idea how to budget or what things cost in the real world....

When I've compared contracting to employment, it's usually around the 1.5 multiple. Of course, both end up supplying the desk/computer/etc. I would have estimated that double an employee salary would cover all that (as I did) - you're saying it costs 4 times the salary?

That just doesn't gel with my experience at al.

gwangung
Jan 19, 2007, 04:05 PM
When I've compared contracting to employment, it's usually around the 1.5 multiple. Of course, both end up supplying the desk/computer/etc. I would have estimated that double an employee salary would cover all that (as I did) - you're saying it costs 4 times the salary?

That just doesn't gel with my experience at al.

I thought you were including the support personnel in your costs, and with projects like these, these personnel would be dedicated...and you'd have benefit and other overhead to cover them as well as the engineers.

But perhaps I misunderstood.

GregA
Jan 19, 2007, 05:11 PM
I thought you were including the support personnel in your costs, and with projects like these, these personnel would be dedicated...and you'd have benefit and other overhead to cover them as well as the engineers.

But perhaps I misunderstood.

Hell, it's all assumptions. Is 30 full time people at 100k for one project an accurate guess? What multiple on those people for benefits? and desks etc? How many failed projects need to be supported by the successful ones? What are all the other associated costs?

I just meant that the guess made (30ppl x 100k x 2.5years) showed a high figure, but even then needed to include much more.