Dumb question but if an iPod touch is $250...why is an iPhone $650?

Kendo · Sep 30, 2014

I understand the iPod touch has an older generation A series chip, but fundamentally the iPod touch and iPhone are the same aluminum build with a retina touch screen display. Yes the iPhone has more premium materials, and an LTE chip, but does that warrant a $400 increase in price? Wouldn't a $150 increase be more reasonable so that the iPhone costs $400 total and not $650?

This isn't limited to iPhones, most smartphones are the same crazy prices. But do they simply charge so much because they can? Similar to a $5 hot dog at a baseball game when you can get them for $1 anywhere else?

I just don't understand how these phones cost the same as a MacBook Air?

phillies3429 · Sep 30, 2014

Carriers I would think and phone radios, could be completely wrong.

Zxxv · Sep 30, 2014

Used to be less of a price difference. Do some googling you'll see.

Ramio · Sep 30, 2014

I'm guessing better screens, better internals, cell radios, Gps and things like that.

Jalopybox · Sep 30, 2014

Because they can.

iMacaque · Sep 30, 2014

Typically better cameras on iPhone vs. iPod Touch. GPS has been mentioned already.

heisenberg123 · Sep 30, 2014

whats the cost to make an iPod?

I read the iPhone was $229

talmy · Sep 30, 2014

Kendo said:
This isn't limited to iPhones, most smartphones are the same crazy prices. But do they simply charge so much because they can?

Yes. First rule (?) of business -- you set the price to maximize profits. Manufacturing cost has surprising little to do with it. If the price is above the optimum, sales fall off and overall profits drop. If the price is below the optimum, sales increase but the profit per unit drops and overall profits drop.

So the iPhone is $650 because they can set that high a price and still sell 10 million the first weekend. Since it is supply constrained, if they sold it for less, that would just mean lower profits -- drop the price $100 and they've just lost a billion dollars!

antiprotest · Sep 30, 2014

Dumb question but if an iPod touch is $250...why is an iPhone $650?

heisenberg123 said:
whats the cost to make an iPod?

I read the iPhone was $229

Of course It would end up costing Apple much much more than that with R & D, manufacturing, salaries, marketing, etc etc. The profit margin might not be nearly as high as some people think. They just sell a lot of them.

Ramio · Sep 30, 2014

antiprotest said:
Of course It would end up costing Apple much much more than that with R & D, manufacturing, salaries, marketing, etc etc. The profit margin might not be nearly as high as some people think. They just sell a lot of them.

Actually with the billions in cash money they have, I think they're making a killing.

geoffm33 · Sep 30, 2014

Kendo said:
I understand the iPod touch has an older generation A series chip, but fundamentally the iPod touch and iPhone are the same aluminum build with a retina touch screen display. Yes the iPhone has more premium materials, and an LTE chip, but does that warrant a $400 increase in price? Wouldn't a $150 increase be more reasonable so that the iPhone costs $400 total and not $650?

This isn't limited to iPhones, most smartphones are the same crazy prices. But do they simply charge so much because they can? Similar to a $5 hot dog at a baseball game when you can get them for $1 anywhere else?

I just don't understand how these phones cost the same as a MacBook Air?

A phones (or any consumer electronic products) cost is not a direct relationship to the cost of the internal components. In addition to the additional components, there is far more engineering to fit it all in the same form factor. Then there is the cost of research and development, marketing, distribution, etc that is greater for an iPhone release than an iPod.

jkozlow3 · Sep 30, 2014

Jalopybox said:
Because they can.

I agree that this probably has more to do with it than anything. Because they can.

Realistically, the iPhone probably has something like a $20-30 higher component cost than the iPod Touch to account for the cellular radios, etc. I'm certain that Apple doesn't have to pay very much for the components with the volume that they purchase. As a result, Apple's "real" cost to build these phones is probably much lower than the numbers that get thrown around from time to time.

antiprotest · Sep 30, 2014

Dumb question but if an iPod touch is $250...why is an iPhone $650?

Ramio said:
Actually with the billions in cash money they have, I think they're making a killing.

This is irrelevant to what I said.

Of course they are making huge total profits, but not because of huge margin per unit, but margin plus volume.

I've seen some who talk about this as if

Price - Cost of materials = Profits (thus Apple must be super greedy for charging so much per unit)

Not true.

Arran · Sep 30, 2014

Pricing what the market will bear. That's how you make money.

bmms8 · Sep 30, 2014

antiprotest said:
Of course It would end up costing Apple much much more than that with R & D, manufacturing, salaries, marketing, etc etc. The profit margin might not be nearly as high as some people think. They just sell a lot of them.

I agree 100%

Margins aren't as high as people think. They make so much on services like App Store and healthy profits on hardware too, but not at the high margins people think by reading articles like this.

mooblie · Sep 30, 2014

Pricing is based on what the market will bear, not the costs of the items.
---
Edit: nearly "snap!", with Arran.

antiprotest · Sep 30, 2014

jkozlow3 said:
I agree that this probably has more to do with it than anything. Because they can.

Realistically, the iPhone probably has something like a $20-30 higher component cost than the iPod Touch to account for the cellular radios, etc. I'm certain that Apple doesn't have to pay very much for the components with the volume that they purchase. As a result, Apple's "real" cost to build these phones is probably much lower than the numbers that get thrown around from time to time.

I am guessing that iPod Touch benefits from the R & D for iPhone. And it received much less marketing. Thus lower cost to Apple and priced lower.

----------

mooblie said:
Pricing is based on what the market will bear, not the costs of the items.

But it must be based partly on the cost because it will almost never be priced below cost, and that cost would include costs far beyond the cost of materials. Then it would be priced beyond that to as high as people will pay.

cfedu · Sep 30, 2014

Kendo said:
I understand the iPod touch has an older generation A series chip, but fundamentally the iPod touch and iPhone are the same aluminum build with a retina touch screen display. Yes the iPhone has more premium materials, and an LTE chip, but does that warrant a $400 increase in price? Wouldn't a $150 increase be more reasonable so that the iPhone costs $400 total and not $650?

This isn't limited to iPhones, most smartphones are the same crazy prices. But do they simply charge so much because they can? Similar to a $5 hot dog at a baseball game when you can get them for $1 anywhere else?

I just don't understand how these phones cost the same as a MacBook Air?

Simply answer is,

Because then can.

The BOM of the iPad is more than the iphone. The market dictates what the sell for. If people stopped buying iPhones, apple would reduce their price.

mnsportsgeek · Sep 30, 2014

Ramio said:
Actually with the billions in cash money they have, I think they're making a killing.

You can sell 10 million water bottles and make a killing. The profit margin has little to do with them making a "killing"

joeblow7777 · Sep 30, 2014

The price discrepancy is even more puzzling when you compare smart phones to tablets with similar specs. Why does an iPad Mini Retina with cellular cost so much less than an iPhone 5s with basically the same internals if you buy it off contract?

The only reasons I can think of is to encourage people to buy in contract so that the carriers get a cut, and simply because they can get away with it.

andyw715 · Sep 30, 2014

Dumb question but if an iPod touch is $250...why is an iPhone $650?

Allot has to do with the current subscription model of the carriers. Subsided phones.
Once more people go to as NEXT type plan our whatever Verizon offers maybe the price will go down.

Cellular and gps are a149$ option to an iPad.
Is that the big difference between a iPhone and iPod?

deeddawg · Sep 30, 2014

Don't get suckered into a simplistic view of product pricing.

With non-commoditized products, manufacturers charge what the market will bear. People already line up to pay the prices asked. Apple would be stupid, and going against its shareholders best interests, to not charge what people are willing to pay.

alent1234 · Sep 30, 2014

iphones carry a higher patent licensing cost, more testing, certification, capital expenses to buy the new manufacturing machinery.

ipods are like the iphone 5C, not the 6

TRC-WA · Sep 30, 2014

heisenberg123 said:
whats the cost to make an iPod?

I read the iPhone was $229

I read something last night about the labor cost in iPhone manufacturing is like $1.75 an hour?

No wonder companies move their operations to China!

frankdogg · Sep 30, 2014

cause people gotta get paid, departments need to continue their R&D and stay funded, people gotta get paid some more, and other stuff.

and someone said earlier that the iPod touch benefits from iPhone R&D (probably true) and all of the other stuff that goes into the iPhone that distinguishes it from an iPod touch.

Dumb question but if an iPod touch is $250...why is an iPhone $650?

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