Apple Takes 104% of All Smartphone Profits Following Galaxy Note 7 Recall

[0lf]

To me apple have always represented poor value for money, but I'm still an iphone user as I like the product - recognising I pay a significant premium for the privilege

You are contradicting yourself here.

 

[kdarling]

However, I would argue that MacRumors hasn't been an Apple fan sit for a very long time.

On the contrary, it's the Apple fan demographic that's changed over time.

• Before the iPod and iPhone, the only people buying Apple products were dyed in the wool Apple fans.
• 
  
• After the iPod became PC compatible, tens of millions became minor Apple fans with major Microsoft ties.
• 
  
• After the iPhone became popular, hundreds of millions became Apple fans with either no PC or likely to be Microsoft ties.

Basically, by selling devices that don't require an Apple computer to work, plus the majority use of non-Apple computers, made it inevitable that more people on an "Apple fan site" would also have other ties and knowledge enough of other devices, that they will criticize what makes no sense to them.

Moreover, Apple themselves have angered a lot of old time Mac fans during the past few years.

So if anything, what's happened is that Apple fans are no longer wearing rose colored glasses all the time. That doesn't make them any less of a fan. One doesn't have to have blind allegiance for that.

 

[Michael Scrip]

Apple doesn't even sell more phones than everyone, either, so that ain't it.

So, how does Apple actually make such profits?

That is where they are better than everyone else.

Anyone care to explain what "that" is?

It's quite simple:

Apple makes A LOT of money on every phone they sell.

Meanwhile... the other guys tend to lose money on every phone they sell.

That's the basic difference between Apple and the other guys.
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At the end of the day, market share is more interesting to developers and maybe component suppliers than it is to the manufacturers themselves. Profit share is what matters to the manufacturers because it's what keeps them in business.

It may be interesting... but it shouldn't be a primary focus for developers.

The iPhone has NEVER had a significant amount of market share across the entire smartphone industry. It peaked at about 20% market share a few years ago... but it's below 15% today.

Yet look at all the developers who build apps for the iPhone. Some of them only build apps for the iPhone.

If market share really mattered to developers... no one would have ever built apps for the iPhone since it has always been SIGNIFICANTLY behind other platforms in term of market share. And yet the iPhone ecosystem is actually quite massive.

You have to look at other factors to explain why.

While the iPhone represents a smaller percentage of the broader smartphone market... iPhone USERS actually spend a lot of money on apps and things.

And THAT'S what developers, accessory makers, and other 3rd-party companies are interested in: the money they'll make from iPhone users.

Not raw market share.

Think about it. The iPhone is at 12.1% market share right now. Low number, right?

So do you think it would make sense for Uber to discontinue their iPhone app because the iPhone doesn't have enough market share?

Hell no! Many (most?) of Uber's customers are using iPhones.

So to Uber... the iPhone's "low market share" isn't a factor.

And this would be true for any up-and-coming developer too.

Hell... there were probably 100 apps submitted to the iPhone app store as I typed this comment. Those developers obviously aren't concerned that the iPhone only has 12.1% market share at the moment.

Again... it's not the market share number itself... it's what that market share can produce.

And the iPhone has always been able to produce great results for developers.

 

[BlargKing]

Hey, it's cool that you don't care. It's your choice, just that your brother might choose differently if he knew and not want the government to be able to serve a subpoena on Google to get every message or email he's ever sent or received or some employer in the future to potentially get a copy of every photo he's taken or post he's made, etc,

I sent him screenshots of all your replies. Needless to say, he doesn't care, and agrees with me about you needing a foil hat.

Also, who's government? We're Canadian and I'm highly skeptical that our government has the resources to spy on all of us. People of interest? Probably, but the whole country? The vast majority of us are still using slow and outdated DSL and Cable internet so I doubt our government is doing much spying.

 

[macUser2007]

Profit is revenue minus costs.
Apple makes a consistent profit because they keep their revenues sufficiently higher than their costs.

One of the ways they do this is by managing their supply chain costs *extremely* well....

Another way, which is equally important, but apparently less obvious (even to others within the industry), is that they avoid playing in the low-margin space of the industry.....

And yet another way is by reducing R&D costs, which is rather evident by the stagnant line of Apple products.

 

[truthertech]

I sent him screenshots of all your replies. Needless to say, he doesn't care, and agrees with me about you needing a foil hat.

Also, who's government? We're Canadian and I'm highly skeptical that our government has the resources to spy on all of us. People of interest? Probably, but the whole country? The vast majority of us are still using slow and outdated DSL and Cable internet so I doubt our government is doing much spying.

Ok, good luck to you all

 

[Analog Kid]

And yet another way is by reducing R&D costs, which is rather evident by the stagnant line of Apple products.

 

[SchneiderMan]

Apple is making bank, but only raises prices/cuts down on included accessories with premier products.

 

[5105973]

This is why users should be mad at users, not Apple. We continue to pay a high premium (hence high profit) for products with user experience compromises. If consumers spoke with their wallets, Apple would backtrack on some of these design decisions that don't benefit the user. Case in point was the iPod Shuffle with no buttons.

Carriers are to blame as well. If it weren't for the free iPhone 7 trade-up offer from AT&T, I would have kept my iPhone 6 for another year, mainly because I didn't want a phone without a headphone jack. But I caved because I wanted 32GB, better camera, and better processor for no additional cost to me. Apple still got their full profit too I'd imagine. One more example of the "not good, but trying to get used to it" cycle that we rarely had with Apple products, but is now all too familiar for me (dongles, 12" Macbook keyboard, Apple TV 4 remote, etc.).

Well stated. I did finally get off the Apple bandwagon. I voted with my wallet and ended up with a Note 7. (Facepalm). But I don't regret it. I learned a lot about the competition and I am glad I broke free. Sadly I feel like the girl in the Apple 1984 Commercial. Like I threw the hammer and broke out to freedom from the walled garden.




I think it would make Steve sad but not shocked to know that one of his customers came to feel that way about his company. But he knew and warned of the dangers of big companies and their way of looking at consumers and markets. I think he would have grown Apple anyway. But differently.

I still have hope for Apple to do some wonderful things. Perhaps their interest in health and fitness will spark the next revolution. They could change the way we take care of our health for the better. That would be a positive way to make the kind of difference Steve seemed interested in making. Even Steve could not have sustained Apple's trajectory. Tim does have to look for the next big thing. That's not an easy thing to do and it doesn't seem to be his natural strength, but we can see if he rises to the challenge now that he's made Apple a lot of money and has some impressive resources.

 

[Elijen]

If we are in the same industry and I make $100 but you lose $50 (or make a -$50 profit), the total profit across the entire industry (your "profit", and my profit) is $50, because your loss pulls the total profit for the industry backwards. So my percentage of the industry's profit is the profit I made divided by the industry profit times 100 (to convert from decimal to percent) or ($100/$50)*100=200%. Therefore I made 200% of the industry profit. In this case the iPhone is almost the ONLY phone that actually makes money. Samsungs profit share was 0.9% and HTC and LG lost money. That's what happens when you sell millions of devices at a loss.

I still think this kind of calculation does not make much sense. We should only compare profits of profitable companies (100% being the max).

 

[macUser2007]

BLEH

Apple spends little on R&D relative to revenue. From the tech giants, Samsung spends the most on R&D.

Notably, in the same year that Microsoft spent 13.9% of sales on R&D, Apple managed to spend only 3.3% on R&D. And it shows....

In fact, Apple is nowhere to be seen among the top dozen R&D spenders:

The uptick in Apple's R&D spending was largely focused on the now dead Project Titan ('An incredible failure of leadership': Apple's car project seems wracked with internal strife) and on the Apple Watch ("Apple Watch is a FLOP: Sales of the gadget have fallen by 90%...").

An incredible failure of leadership, indeed. But marketing still seems to work. Past laurels eventually wilt, however....

 

[AppleScruff1]

Only Apple could get more than 100% of something.

 

[Analog Kid]

Apple spends little on R&D relative to revenue. From the tech giants, Samsung spends the most on R&D.

That's not what you started by saying. You said they had reduced R&D spending. The chart I replied with, showed they have not. Your data is also a couple years old. Apple grew R&D by 30 percent from 2014 (the year of your data) to 2015 and was estimated to grow it by close to another 30% from 2015 to 2016. Nobody on your chart was growing at that rate.

 

[Tech198]

So, my take is "who can beat he other" type system..

Lets see how many smartphones we can sell and the looser gets drastically humiliated by the media... Its like a game

If it wasn't for Samsung recall Samsung would probably still be ahead.

Only Apple could get more than 100% of something.

That's true.. Other company's actually know what 100% mark means, but Apple can go over that.. aka 102, 105%

 

[amingr]

This is Apple and it really deserves more profit

 

[Abazigal]

This is a rather silly statement. While the iPhone is a very good phone, it's arguably not the "very best," if we measure by camera quality, or features, or AI assistant, or even in terms of advanced OS.

But, be that as it may, unless you are a short term investor, why would you be happy to read such a headline?!!

As a consumer, such a headline tells you mainly that Apple is charging far more for its mobile products than the market norm. In other words, the headline translates into "
WE ARE OVERPAYING FOR APPLE PRODUCTS!"

To achieve such level of profits, it also means that Apple is spending a smaller portion on R&D than others, which one can argue is evident in the rather stagnant Apple line up.

But you are right about Tim Cook. He is placing a priority on short-term profits and Board-engratiating, which makes him smart, if one cares only about Tim Cook and the select few around him. His bonuses will grow in the near future and when Apple slips into an IBM-like curve, Tim Cook will retire happily someplace and will join a few more boards, where he will push for the same results.

But as a consumer, you should feel at least a little bit screwed.

I don't and here's why.

A few years ago, I developed a skin allergy issue. Initially, I visited several clinics near my house and they either couldn't diagnose the cause of my problem, or gave me medication that didn't work. So even though their rates were cheap, I was in effect wasting my money on treatments that were ineffectual.

Then I went to see a skin specialist upon recommendation of my friend. He was good. One look and he was able to diagnose what why problem was - Hives triggered by heat. He issued me a bottle of amphihistamines which solved the problem. His rates was higher than the previous 3 doctors combined, and the medication probably cost just a few dollars, but it solved my problem. And to me, it was money well spent.

That led me to a startling revelation - I wasn't so much paying for the medicine as I was paying for the doctor's expertise in knowing precisely which medicine to prescribe in my situation.

Same thing here with Apple. Only Apple is able to integrate their software and hardware together in a manner which offers me that unique user experience which best meets my needs. It doesn't matter that there are android smartphones which go at ½ to ⅓ the price of an iPhone, because 3 android phones combined still can't do the things I do on an iPhone, be it browse twitter via Tweetbot, or play media through my Apple TV, or get timely software updates.

That's what I am paying for when I buy an iPhone - not just raw parts, but also Apple's expertise in knowing how to put those parts together in the way I want. For example, the iPhone wasn't the first phone with a fingerprint sensor, but it's arguably the first to work right. That's what I am paying for, and I pay for it happily and willingly.

The value I get from the iPhone and the accompanying Apple ecosystem is well worth the high sticker price that I pay, both in terms of better productivity and fewer problems overall.

So no, I don't feel the least bit screwed.

 

[5105973]

Deleted accidental quote

 

[gim]

Anyway, Apple's investment in R&D is a joke.
But why should they research and develop, if they can make bazillions with outdated technology.

 

[Abazigal]

No hate. I like Apple just fine. Own LOTS of Apple stuff. I was simply poking at how we celebrate a corporations growing riches like our own riches are growing. Nothing more than that.

Sometimes, it's just fun to celebrate how completely and utterly an entity dominates in the field it competes it. The same way you cheer when an athlete like Usain Bolt or Serena Williams utterly trounce their opponents in competitions. Or when a South Korean Starcraft player wrecks a less skilled player so masterfully it makes you wince.

I don't benefit at all when these people win, but it's no less fun to marvel at how completely and utterly they win.

 

[macUser2007]

That's not what you started by saying. You said they had reduced R&D spending. The chart I replied with, showed they have not. Your data is also a couple years old. Apple grew R&D by 30 percent from 2014 (the year of your data) to 2015 and was estimated to grow it by close to another 30% from 2015 to 2016. Nobody on your chart was growing at that rate.

Here is what Apple's R&D spending looks like as percent of sales:

So, it has been dropping steadily, until a few years ago.

The recent increases in R&D focused on Project Titan (now officially dead) and Apple Watch.

But even with the recent (poorly allocated) increases in R&D spending, Apple spends way below what many competitors spend as percent of sales:

 

[Abazigal]

Here is what Apple's R&D spending looks like as percent of sales:

So, it has been dropping steadily, until a few years ago.

The recent increases in R&D focused on Project Titan (now officially dead) and Apple Watch.

But even with the recent (poorly allocated) increases in R&D spending, Apple spends way below what many competitors spend as percent of sales:

So...it's Apple's fault that other companies' R&D efforts aren't paying off for them?

 

[normanfox]

To put is simply... the carriers are giving you a phone so you will give them $2,000 over the next two years!

to put it simply... I have to have a cell plan for the next two years, regardless of this promotion.

 

[Stenar]

... and highly overpriced MacBook Pro's!!!

Apple is setting record sales for their new MBP, so obviously not everyone agrees that they're overpriced.

 

[Michael Scrip]

to put it simply... I have to have a cell plan for the next two years, regardless of this promotion.

Correct... but you might get that plan from another carrier.

You even mentioned that in the earlier comment: "if ATT did not offer the trade-in promo, they would lose customers to tmobile."

I was just explaining why the carriers give such awesome promos and discounts... it's because they'll get money from you over time as long as you stay their customer.

As you know... the carriers don't make much money on the hardware itself... that goes to Apple, Samsung, etc. The carriers instead make their money on the monthly service.

So they gotta keep you for as long as they can!

 

[Analog Kid]

Here is what Apple's R&D spending looks like as percent of sales:

So, it has been dropping steadily, until a few years ago.

The recent increases in R&D focused on Project Titan (now officially dead) and Apple Watch.

But even with the recent (poorly allocated) increases in R&D spending, Apple spends way below what many competitors spend as percent of sales:

Look, you're just grabbing pictures that you think make your point... Sales grew 50% in 2012, so no surprise that R&D vs. Sales appears to drop-- R&D didn't decrease that year, it increased but at a rate less than 50%. You're showing a 2013 EU report when there's a 2015 available (Apple is now 18 after having doubled R&D since 2013).

"The 5 companies showing the largest increase in R&D are Tata Motors, India (108.9 % - but most of this R&D is at its UK subsidiary, Jaguar Land Rover); Facebook, US (88.4 %); Total, France (42.6 %); SK Hynix, South Korea (37.2 %) and Apple, US (35.0 %)."

That doesn't sound like a reduction in R&D to me.

You have no way of knowing what Apple is focusing that R&D on because Apple obviously doesn't report it, and you have no way of knowing what is successful and what isn't.

I realize none of this matters because it all runs counter to the narrative in your head, but there it is.