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16 GB iPhone 4 Component Costs Estimated at $187.51
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Read the actual post. The monthly Fee includes a service component and a subsidy component. If you think your getting a phone for $199 or whatever your fooling yourself.
You guys are only talking about the Gross profit. Once you take into account all the software development, R&D, and all the man hours the designers and engineers put in to it, the Gross profit gets slashed considerably.
Really, you don't think so?
http://www.toptenz.net/top-10-biggest-price-markups.php
As far as markup goes, I find electronics/computers to be some of the least marked up goods out there. Consider the fact that most video game consoles are actually sold at a loss for the first few years of their life span.
And that's just the price of the physical components. Imagine how much R&D goes into every product you use. Coca-Cola's R&D is minimal in comparison.
Your equation (monthly cost * number of months = price of phone) would only be true if the cell phone service itself was free. You've got to pay AT&T to maintain those cell towers somehow.
Books have a much higher markup, using iSuppli's analysis. Paper and ink cost pennies, but new hardbacks cost $20-30.
And yet with AT&T, you can buy the phone unsubsidized and still pay the same on the service. You don't save money by buying the iPhone unsubsidized. You're still paying the same rates as the people who buy the subsidized iPhone 4. So for us who buy the 16 GB iPhone 4 at $199, we are buying it at cost of components. Until AT&T lowers their rate plans for the unsubsidized buyers, the subsidized buyers are getting the better deal on the hardware.
I'm not complaining by any means. I'm just pointing out that if somebody can get away with it it's Apple because they make great products. Why do you think they can get away with selling $1000+ laptops when their PC equivalent with all the bells and whistles costs about half that?
That's COMPONENTS cost only. There's also the cost of R&D (hardware and iOS).
In the end I doubt they make that much money designing and selling the actual device. Apple's actual net profit comes from AT&T exclusivity agreement (in the US), percentage of monthly subscriptions (US and everywhere else) and App Store sales.
A bit off-topic but you'd be surprised. Coca-Cola's R&D unit, the Venturing and Emerging Brands, invests millions every year, I don't know the exact figures, but it could be as much as Apple if not more.
How generous of them to be selling for such a low price in comparison with component cost. Just exemplifies the quality and thought that goes into the apple experience
As usual: $187.51 (if that number is correct) buys you a bag full of parts in a factory in China. That's far less than the cost of putting a tested and working iPhone into the hands of a customer in Europe or the USA. And that still doesn't include the costs for development, warranty repairs or replacements, advertisements, etc. etc. etc.
According to iSuppli, the parts for Windows 7 (one thin piece of optically clear plastic) cost less than ten cents. So Microsoft gets more than 200,000% markup.
This is not even close to gross profit. For gross profit, you would calculate the actually cost that Apple incurs because you decided to buy an iPhone and subtract that from the purchase price. That cost is: Component cost (the number $187.51), the total cost of building the phone, cost of testing, a percentage for phones that fail testing and cannot be sold, transporting to the shop, a percentage for losses due to theft, salary for the sales people, shop rent, heating etc., cost of handling the payment (credit card fees etc. ), cost of handling returns for customers changing their mind, warranty (phones that Apple has to repair or replace for free), support cost and lots of things that I forgot.
And then of course you are right, Apple has to pay software development, R&D, designers and engineers, but also advertising, cost of more or less stupid lawsuits and so on which reduces gross profit to net profit.
As was mentioned before, my plan costs the same no matter which phone I own or how much I've paid for it. Sure, there's an early-termination fee that could potentially come into play... but if I just keep on keeping on, then yeah, it did cost me $199.
With margins like this, I see a glimmer of hope for the next iPod touch.
I see them taking the current 32GB model and making it the $199 model.
Then making the $299 model be a 16GB iPhone4 case design with Retina display and camera. Everyone will want a 64GB model but that will go away making lots of people unhappy yet feel compelled to buy the 32GB model for $399. Then a year later, they will bring back the 64GB model as a small
incremental change.
They always have a way to teasing you with something and then snatching it back all while distracting you with new features to make you feel just good enough to buy what they currently offer even though you still want what it is missing.
I see them taking the current 32GB model and making it the $199 model.
Then making the $299 model be a 16GB iPhone4 case design with Retina display and camera. Everyone will want a 64GB model but that will go away making lots of people unhappy yet feel compelled to buy the 32GB model for $399. Then a year later, they will bring back the 64GB model as a small
incremental change.
They always have a way to teasing you with something and then snatching it back all while distracting you with new features to make you feel just good enough to buy what they currently offer even though you still want what it is missing.
So we're pretty much buying the 16 GB iPhone 4 at cost of the components( for those who are upgrade eligible). Pretty good deal when strictly talking hardware and not the service provider, IMHO. And yet people will still complain the iPhone is expensive/overpriced.
if you negate contract costs
Popcorn, soda, etc.....
You either don't know much about the world or you didn't think that through.
Take for example american texting, where the markup is in the 1,000% + range, aka rape out the ass.
You're comparing 2 different things.
If you want to know how much just the phone costs up front, then find the lower price of either the no-commitment iPhone or the subsized phone + early-termination fee.
If you want to know how much the phone can be, then it's the fully subsidized price ($199). The price of your phone has no effect on the price of your service.
Many of the parts might be the same, but Apple's machines do cost more to make. Apple's net margins are about 20%, not 65%.
They aren't necessarily ignoring them. It's the general public that's misunderstanding the numbers, and these articles aren't helping, these articles distill investor reports down to what they think is the most interesting parts. All this figure gets you is a pile of parts, and iSuppli are well aware of that.
The part I don't get is reporting the estimate to the penny. The articles usually don't say what the margin of error is, but I would be very surprised if they can get the total cost of the pile of parts within $5.
Okay, not going to research your price plans etc.
I am not sure what your monthly plans are. If every month you are using your allocated minutes/SMS and data, they your getting value. Here in the UK i was paying for a £35 and using the allocation that came with a £20 plan. No point paying for stuff you do not need to get a "cheaper" phone. The companies that do the subsidies are on a win win with these plans. they give you a cheaper phone, and charge you a monthly cost, if you do not use your allocated minutes etc, they are benefiting, if you go over they benefit. Most people stay under this allocation, meaning the company comes out ahead. Now its an expansive phone, so you better get insurance with that
yet again they benefit, you do not have insurance and something goes wrong or gets lost, more profit for them in the replacement.... AT&T are doing just fine from the Iphone.
Okay, so that means for 1.7 million iPhones, it took them $3,187,670,000 to make all of those. (17000000 x 187.51).
Let's say Apple gets $599 for every phone, in an imaginary world everybody got the 16 GB model. That's $10,183,000,000. (17000000 x $599)
Apple made around 7 Billion Dollars off this launch. ($10,183,000,000 -$3,187,670,000 = 6,995,330,000).
And that's not thinking at all about the 32 GB Model.
When the quarterly reports come out, stocks are going to soar.
Let's say Apple gets $599 for every phone, in an imaginary world everybody got the 16 GB model. That's $10,183,000,000. (17000000 x $599)
Apple made around 7 Billion Dollars off this launch. ($10,183,000,000 -$3,187,670,000 = 6,995,330,000).
And that's not thinking at all about the 32 GB Model.
When the quarterly reports come out, stocks are going to soar.
That's actually more than I would have thought--seems like a pretty good deal to me as far as what we pay.
If you are using up all your minutes/sms/data on that plan. Then yup its a good deal for you.