They don't touch on the biggest offender I've ever seen. I worked at Pier 1 Imports in the nineties. The markup on wicker baskets over wholesale averages 15000% (no, I didn't add too many zeroes). That's wholesale, meaning the wholesaler has already taken a cut over what the manufacturer charged.
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16 GB iPhone 4 Component Costs Estimated at $187.51
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They don't touch on the biggest offender I've ever seen. I worked at Pier 1 Imports in the nineties. The markup on wicker baskets over wholesale averages 15000% (no, I didn't add too many zeroes). That's wholesale, meaning the wholesaler has already taken a cut over what the manufacturer charged.
Apple "made" 7 billion dollars... less whatever costs were associated with all the R&D, marketing, etc, etc, etc. This is similar to the argument that people use to complain that Blizzard is making 11 million * $15 = $165 million per month of profit for running WoW. There are so many other costs that the component cost is practically useless for anything other than trivia.
iPhone 4 8GB
Apple easily could have made the iPhone 4 8GB for $499 but decided against it and went for up sell 16Gb for $599
it could been more hit if iPhone 4 8GB was offered $99 (may be kill switch -> to kill the android 😛 )
iPod touch going to change another page this September - i am guessing
Apple easily could have made the iPhone 4 8GB for $499 but decided against it and went for up sell 16Gb for $599
it could been more hit if iPhone 4 8GB was offered $99 (may be kill switch -> to kill the android 😛 )
iPod touch going to change another page this September - i am guessing
gnasher729
Suspended
No, it didn't. Unless Apple created a magical process that turns parts into working iPhones with no cost involved.
BlondeBuddhist
macrumors 6502a
Ever heard of Nike?
Air Jordans cost over $150 a pair. They are assembled for nearly nothing.
I was actually quite impressed with Apple when I saw this post. I figured the phones to be a mere $50 or less.
Blonde Buddhist
notjustjay
macrumors 603
Right. 7 billion dollars minus:
- Foxconn's cut for assembling the phone
- the salaries of all of the engineering staff, manufacturing staff, testing staff, art design staff, publications, marketing, website designers, IT, telephone support staff.
- the cost of certification and regulatory hurdles in countries all over the world
- the cost of the prototype manufacturing (including Gray Powell's 🙂 )
- the cost of the packaging
- the cost of shipping 1.7 million iPhones from China to a million different addresses in the country
- the cost of training employees to handle support, sales, of the new phone
- the cost of the marketing campaigns, including filming, paid actors, editing, and distribution
Consultant
macrumors G5
Actually, it's determined that the cost of Windows is $0.27.
http://obamapacman.com/2010/02/micr...component-costs-leave-room-for-pc-price-cuts/
jamesryanbell
macrumors 68020
The cost of the components of the phone is NOT the total cost of what Apple spent. Think about the labor, R&D, etc. You just take one set of parts and say "oooh, look how big of a markup that is". You have to take all of the costs into consideration.
Rajani Isa
macrumors 65816
Even with the contract they tend to lock you into, are you sure they pay Apple the full retail price of the phone?
My favorite is I heard that places like Cinemark get the Coca-Cola for free, so they just have to pay for water and the cups... Not sure how true that is.
I do know that places like the mini-marts and 7-11s pay at most pennies on the ounce for fountain drinks.
Books are tricky. You have to consider things like shelving room vs. building (rent, utilities, etc) costs, the fact that some people will just absolutely have to have a hardback version of X series's new book, and that generally that once a paperback version of a book is released many retailers (especially department store types, like Wal-Mart) have arrangements to send the hardback back.
And while the costs of materials are low, in publishing they are not the main hurdle. The writers must be paid and make a profit. The editors, who may send it back and forth to the writers to clear things up. The publishing house also wants a profit. Shipping costs, warehousing (which for hardbacks is more per book than softbacks). Hell, warehousing and shelving costs are high enough that dedicated bookstores, and even department stores, tend offer near-50% discounts to pre-orders because they won't have to store them.
That's ignoring the fact that they are explicitly calling it hardware (parts) cost, though. Now, if they tried to say the *cost*, not *parts cost*, was only $180, then yes they would be brainless.
autrefois
macrumors 65816
If Apple is making even $10 per iPhone 4 sold, that's $17 million. Considering their current market capitalization, I'm not going to lose sleep over their profits.
If they pay their employees a decent wage, and those who are involved in the production, promotion, and shipping receive a decent wage, then I think the markup is justified. If someone could do a TOTAL cost of the iPhone 4 (not just the components) I think we could say better whether Apple is fleecing people or whether they're being a responsible corporate citizen. My guess is that like most companies, they're somewhere in-between...
bad comparison
Bad comparison.
Food at a restaurant does not have a high margin. Drinks especially soft drinks have a larger margin to compensate for the food and service.
You cant compare manufactured goods to the service industry.
Same thing with electronics shops the cables and accessories are at a higher margin to make up for the loss in electronics that are heavily discounted.
Even luxury items, jewellery and watches at the most have something like a 50% margin. Even these are discounted nowadays.
300% for a phone is huge but thats the free market for you.
Apple can ask what it wants for a given item as long as their customer is willing to pay for it.
Bad comparison.
Food at a restaurant does not have a high margin. Drinks especially soft drinks have a larger margin to compensate for the food and service.
You cant compare manufactured goods to the service industry.
Same thing with electronics shops the cables and accessories are at a higher margin to make up for the loss in electronics that are heavily discounted.
Even luxury items, jewellery and watches at the most have something like a 50% margin. Even these are discounted nowadays.
300% for a phone is huge but thats the free market for you.
Apple can ask what it wants for a given item as long as their customer is willing to pay for it.
topmounter
macrumors 68030
Exactly.
I get sick of all the career burger-flippers and fry-guys on here complaining about how Apple's "profit" is $599 minus $187.51 🙄
Welcome to the Consumer Electronics industry, those components don't design, develop, ship, assemble, test, market, sell, package, sit in the warehouse, etc., etc. on their own (or for free) 😉
Besides, Apple can charge WTF-ever they want... why? Because you are under no obligation, legal or otherwise, to purchase it.
Not that it matters either way. There's no retail rule that states the price has to be relative to the cost in any sense. People know that movie popcorn and pop prices are extraordinarily absurd, but that doesn't stop them from buying it.
Rajani Isa
macrumors 65816
While they do have many more servers that other MMOs due to population, and anyone going "Accounts*subscription cost = profit for an MMO" is basically an idiot, at the same time WoW is only MMO I can recall ever seeing a TV ad for, much less endorsed TV ads. Ads that don't even advertise up coming changes/features (unless you count the recent "night elf mohawk grenades" bit), and instead just "We got So-and-So to play it".
Same here. Honestly, I looked at the BOM of the iPhone 4 from various sites and I don't see proper quotes for pre-ordering millions of units. Apple is brutal on manufacturing negotiations and parts procurement. They don't just hand over a BOM and diagrams to a CM and wait for a crates to be unloaded for distribution.
Many semiconductor houses take break even or loss lead just to get designed into an Apple product in exchange for bragging rights that their part is "proven" to other customers where the margins are much higher.
My guess is that the cost, at the million plus unit volume, is between $90 and $75. As far as R&D goes, I'm sure that cost has already been recovered in the initial units sold.
The margin is too low. Anyone in business knows how bad this is. Apple is practically giving away these phones considering the hundreds of millions of dollars they've spent in product development.
Compare this to the little bottles of water you purchase for well over a buck. It cost less than five cents to make. Development costs were next to nothing. Now that's a nice margin, and you keep buying it when you can get it out of a tap for free. And then, you throw away the most costly part of it, the plastic bottle.
gmcalpin
macrumors 6502
Why are there at least 6 different people chiming in to remind everyone else that "the component costs do not cover such expenses as software, research and development, distribution, and patent royalty costs that cut significantly into Apple's apparent profit margin"
just like it says in the article?
No ****, guys. We read the article. Did you?
No ****, guys. We read the article. Did you?
Xian Zhu Xuande
macrumors 6502a
An estimate of parts alone does not factor in anything like development, design, testing, wages, employee benefits, shipping, manufacturing, etc. There are plenty of companies which profit much more on their devices as a relative percentage. At least Apple is using high-quality parts and selling at competitive prices.
And...
Looks like I'm being redundant, but I might have an answer to your post above: perhaps they're responding to sentiments like the ones I responded to above? Relax and go outside. Get some sun. A productive person would be hard-pressed to actually read every page of discussion in a busy forum such as this one, but it would be a shame to use that as means to prevent them from contributing discussion.
And one more thing: we've been seeing iSupply notes like this for years now, and it has never stopped people from knee-jerking: "OMG! Apple i$ ripp1ing me off!!!!!!111!1!"
Even less. You can sometimes get a $4 HDMI cable at MonoPrice, for example, which will perform every bit as well as that $150 Monster Cable. And MonoPrice is turning a profit.
i've read that Acer's net margins are in the 2% to 3% range and they are trying to raise them to 4%. this is net profit. Apple is in the 10% to 15% range. Exxon is also around 10%.
Foxconn is probably close to Acer
emulator
macrumors 65816
True, I know idiots who buy HDMI cables at BestBuy. A $3 (@Meritline) cable for $40. 😀
Perhaps they are saying it because many people don't seem to have read the article and have jumped in here commenting on how large Apples profit margin is? Every single one of these iSuppli cost breakdowns has people complaining about Apple ripping them off, even though the articles clearly state that this is a material cost estimate only.