Apple's Share of Smartphone Industry Profit Rises to 92%, Despite iPhone Representing Less Than 20% of Sales

[balconycollapse]

in the corporate world iOS is 80% of the market with Android and the other bottom feeders taking the last 20%. That's something I have to constantly battle with when people assert iOS has only 20% of the market in meetings to justify buying Samsung Galaxies over iPads for our workers data capture -- yes in the personal cellphone world. They are dominating the corporate world because an iDevice is a perk, a symbol of competency by those who chose it, secure and raises worker morale.

 

[mnosdev]

we don't need local storage, not really, only for large app installation. Everything else should be in the cloud. If you want infinite local storage for your stuff, plug your phone into your computer and store everything locally.

apple has large profit margins, yes. However, they test their products to a level that raises the overall cost of their devices dramatically. They spend a small fortune testing each hardware component rigorously.

http://recode.net/2014/09/25/inside-apples-secret-testing-labs-where-phones-are-bent-all-day-long/


“If I had asked people what they wanted, they would have said faster horses.”
Henry Ford

 

[kcamfork]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

I wonder what would happen if the entire audience yelled out "BOOOOOO!!!" when they announce that the iPhone 6S starts at just $199 for the 16 GB model. I think it was the iPhone 5S, when they were announcing the storage/prices, and the camera panned out to the audience (who had been applauding everything up until now), but with the storage/prices on the screen, I swear you could hear crickets.

 

[thekeyring]

This is even more incredible when you remember competitors like Samsung have none of Apple's software development costs: their OS, ecosystem etc is provided for free by Google.

 

[thekeyring]

we don't need local storage, not really, only for large app installation. Everything else should be in the cloud.

And then the internet goes down or you get on a flight and suddenly you can't work on that document on your iPad, listen to any music on your phone, etc.

People seem to love this idea... Like, they have a weird affinity with it. Why can't we just love good products?

I personally like local storage. Most of my Apple Music is saved offline. I made sure I got a 32gb iPhone. Judging by everyone who buys 16gb iPhones and fills them up, I'm not alone in liking some things saved locally.

 

[mpavilion]

This is even more incredible when you remember competitors like Samsung have none of Apple's software development costs: their OS, ecosystem etc is provided for free by Google.

Well, not really... Samsung, LG, HTC, etc. still employ their own UI; they don't use stock Android.

 

[thekeyring]

Well, not really... Samsung, LG, HTC, etc. still employ their own UI; they don't use stock Android.

Okay, their costs aren't 0. But they don't code an OS, development tools, hire software engineers, run a developers conference, etc.

 

[blackcrayon]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

But they don't make you buy their devices.

The only thing that matters is if I think a device is worth the cost, not how much profit the manufacturer made. If not, don't buy it. An iPhone, for the use I get out of it, is well worth the percentage of my income it represents. What else matters?

 

[mnosdev]

And then the internet goes down or you get on a flight and suddenly you can't work on that document on your iPad, listen to any music on your phone, etc.

People seem to love this idea... Like, they have a weird affinity with it. Why can't we just love good products?

I personally like local storage. Most of my Apple Music is saved offline. I made sure I got a 32gb iPhone. Judging by everyone who buys 16gb iPhones and fills them up, I'm not alone in liking some things saved locally.

why wouldn't you be able to listen to music or work on a document over 4g?

 

[oneMadRssn]

I said this in another thread, but it seems more on-point here. It makes no sense to me why the iPhone costs as much as it does.

An iPad with the same CPU, same flash storage, same cellular chip as an iPhone, but with a bigger battery, bigger screen, and more RAM costs usually ~$20 less than the iPhone. Why does a device that has a more expensive display and more expensive battery, but is otherwise equivalent cost less? This makes no sense. Further craziness happens when you figure in the iPhone 6 Plus, where increasing battery and screen size drives prices up, until it doesn't and then it drives prices down?

Here's a handy chart I made up of starting prices and specs, that shows that as batteries and screens get bigger, price gets lower (except for iPhone6 to 6plus):

$650 - A8 CPU - 1GB RAM - 4.7" Screen - 1810 mAh Battery - iPhone 6
$750 - A8 CPU - 1GB RAM - 5.5" Screen - 2915 mAh Battery - iPhone 6 Plus
$630 -A8x CPU - 2GB RAM - 9.7" Screen - 7340 mAh Battery - iPad Air 2 Cellular

$550 - A7 CPU - 1GB RAM - 4.0" Screen - 1560 mAh Battery - iPhone 5S
$530 - A7 CPU - 1GB RAM - 7.9" Screen - 6470 mAh Battery - iPad Mini 3 Cellular

*worth noting, all of the above devices have Touch-ID, LTE capabilities, and all of those prices are for the starting 16GB models, though as the flash memory capacities increase, the relative price differences stay the same. It's possible to include more devices in the chart, but I picked these to highlight their many similarities and to highlight the few but important differences.

The reason I chose the CPU, RAM, screen size, and battery capacity specs is because those are typically the most expensive components and logic dictates those should influence price the most.

It makes even less sense when you figure in large fixed costs, such as R&D. Apple sells ~6x more iPhones than iPads, according to recent earnings reports (correct me if I'm wrong). I doubt iPad R&D is 1/6th of iPhone R&D - I bet they're about equal, or maybe iPhone is 2x more, but certainly not 6x more. Thus, the R&D cost per unit is less with the iPhone.

Thus, on every single measure I can think of, the iPhone should cost less than an otherwise equivalent iPad. And not just a bit less, but significantly less. If iPad prices are the "correct" baseline, then the latest iPhone should start at ~$450.

How many more iPhones would Apple sell, and how much more revenue would their various digital Stores make for app developers and musicians, if the iPhone6 started at $450?

 

[mnosdev]

I said this in another thread, but it seems more on-point here. It makes no sense to me why the iPhone costs as much as it does.

An iPad with the same CPU, same flash storage, same cellular chip as an iPhone, but with a bigger battery, bigger screen, and more RAM costs usually ~$20 less than the iPhone. Why does a device that has a more expensive display and more expensive battery, but is otherwise equivalent cost less? This makes no sense. Further craziness happens when you figure in the iPhone 6 Plus, where increasing battery and screen size drives prices up, until it doesn't and then it drives prices down?

Here's a handy chart I made up of starting prices and specs, that shows that as batteries and screens get bigger, price gets lower (except for iPhone6 to 6plus):

$650 - A8 CPU - 1GB RAM - 4.7" Screen - 1810 mAh Battery - iPhone 6
$750 - A8 CPU - 1GB RAM - 5.5" Screen - 2915 mAh Battery - iPhone 6 Plus
$630 -A8x CPU - 2GB RAM - 9.7" Screen - 7340 mAh Battery - iPad Air 2 Cellular

$550 - A7 CPU - 1GB RAM - 4.0" Screen - 1560 mAh Battery - iPhone 5S
$530 - A7 CPU - 1GB RAM - 7.9" Screen - 6470 mAh Battery - iPad Mini 3 Cellular

*worth noting, all of the above devices have Touch-ID, LTE capabilities, and all of those prices are for the starting 16GB models, though as the flash memory capacities increase, the relative price differences stay the same. It's possible to include more devices in the chart, but I picked these to highlight their many similarities and to highlight the few but important differences.

The reason I chose the CPU, RAM, screen size, and battery capacity specs is because those are typically the most expensive components and logic dictates those should influence price the most.

It makes even less sense when you figure in large fixed costs, such as R&D. Apple sells ~6x more iPhones than iPads, according to recent earnings reports (correct me if I'm wrong). I doubt iPad R&D is 1/6th of iPhone R&D - I bet they're about equal, or maybe iPhone is 2x more, but certainly not 6x more. Thus, the R&D cost per unit is less with the iPhone.

Thus, on every single measure I can think of, the iPhone should cost less than an otherwise equivalent iPad. And not just a bit less, but significantly less. If iPad prices are the "correct" baseline, then the latest iPhone should start at ~$450.

How many more iPhones would Apple sell, and how much more revenue would their various digital Stores make for app developers and musicians, if the iPhone6 started at $450?

Can you add a row for a.) OS development b.) hardware testing c.) proprietary form factor design for components d.) apple marketing e.) packaging, so it's a little more granular for your comparison? You only show a couple out of several dozen cost evaluations here for each product. The reason the costs don't make sense to you is because you are basing your evaluation on what only provides a warranty/utility bonus for your needs... which is normal for a consumer. If you want the cost to make sense, perform more analysis on what is actually spent : )

 

[keysofanxiety]

But they don't make you buy their devices.

The only thing that matters is if I think a device is worth the cost, not how much profit the manufacturer made. If not, don't buy it. An iPhone, for the use I get out of it, is well worth the percentage of my income it represents. What else matters?

In a sense they do. They know how invested people are in the ecosystem. I personally didn't want a new iPhone, but my iPhone 4 running iOS 7 was practically unusable. I have many Macs and I know how to use iOS. Moving to Android out of spite will give me an experience that isn't vaguely suited for my needs. I then bought a used 5S and I'm more than happy with that. Apple also know that 16GB isn't suitable for most uses, so that forces people to pay the extra to upgrade to the 64GB (if they're insistent on an iPhone of course).

As mentioned all of this is somewhat synonymous with the RIM/Blackberry issues. They knew people were so invested in the ecosystem (BBM and stuff like that), wherein they wouldn't really buy anything else. So they had larger markups, a decline in quality, and other issues which contributed to their demise.

Of course Apple isn't anywhere near that. We're only talking about base storage here, not a massive decline in quality and general specs. But if Apple had a much smaller marketshare and top-of-the-range Android phones were generally significantly cheaper/a larger base storage, would Apple still be selling 16GB at these prices? I fear not. Losing to the competition should not be the main motivation to improve specs and quality on products.

 

[CEmajr]

In a sense they do. They know how invested people are in the ecosystem. I personally didn't want a new iPhone, but my iPhone 4 running iOS 7 was practically unusable. I have many Macs and I know how to use iOS. Moving to Android out of spite will give me an experience that isn't vaguely suited for my needs. I then bought a used 5S and I'm more than happy with that. Apple also know that 16GB isn't suitable for most uses, so that forces people to pay the extra to upgrade to the 64GB (if they're insistent on an iPhone of course).

As mentioned all of this is somewhat synonymous with the RIM/Blackberry issues. They knew people were so invested in the ecosystem (BBM and stuff like that), wherein they wouldn't really buy anything else. So they had larger markups, a decline in quality, and other issues which contributed to their demise.

Of course Apple isn't anywhere near that. We're only talking about base storage here, not a massive decline in quality and geenral specs. But if Apple had a much smaller marketshare and top-of-the-range Android phones were generally significantly cheaper/a larger base storage, would Apple still be selling 16GB at these prices? I fear not. Losing to the competition should not be the main motivation to improve specs and quality on products.

That's just the nature of business. Despite how much people love Apple products, they're still all about their money at the end of the day. That means they're going to offer as little as they can for the highest price that they can. The only way it changes is when sales decrease due to dissatisfaction or competition. No company increases specs (or costs on their end) unless they feel like not doing so would hurt sales. As of right now Apple knows that many consumers are satisfied with 16GB and the current specs of the iPhone.

 

[Abazigal]

You have a twisted understanding about how the market works.
Of course a company has to please its customers. Otherwise the same customers will eventually stop buying.

Company's exist to make profits, that's a fact. But maximizing profits is not done by optimizing costs in the short term but also by making sure customers keep buying and thus maximizing revenue in the long term.

And Apple seems to be doing a pretty good job of balancing the two, imo.

Apple's proposition is clear - you get nice things, so long as you are willing to pay. Likewise, because I am willing to pay, I get blessed with nice things.

I would rather spend more on something which I know will work well for me (Apple products in this case) then spend less on alternatives which I know I won't enjoy using.

 

[gotluck]

I said this in another thread, but it seems more on-point here. It makes no sense to me why the iPhone costs as much as it does.

An iPad with the same CPU, same flash storage, same cellular chip as an iPhone, but with a bigger battery, bigger screen, and more RAM costs usually ~$20 less than the iPhone. Why does a device that has a more expensive display and more expensive battery, but is otherwise equivalent cost less? This makes no sense. Further craziness happens when you figure in the iPhone 6 Plus, where increasing battery and screen size drives prices up, until it doesn't and then it drives prices down?

Here's a handy chart I made up of starting prices and specs, that shows that as batteries and screens get bigger, price gets lower (except for iPhone6 to 6plus):

$650 - A8 CPU - 1GB RAM - 4.7" Screen - 1810 mAh Battery - iPhone 6
$750 - A8 CPU - 1GB RAM - 5.5" Screen - 2915 mAh Battery - iPhone 6 Plus
$630 -A8x CPU - 2GB RAM - 9.7" Screen - 7340 mAh Battery - iPad Air 2 Cellular

$550 - A7 CPU - 1GB RAM - 4.0" Screen - 1560 mAh Battery - iPhone 5S
$530 - A7 CPU - 1GB RAM - 7.9" Screen - 6470 mAh Battery - iPad Mini 3 Cellular

*worth noting, all of the above devices have Touch-ID, LTE capabilities, and all of those prices are for the starting 16GB models, though as the flash memory capacities increase, the relative price differences stay the same. It's possible to include more devices in the chart, but I picked these to highlight their many similarities and to highlight the few but important differences.

The reason I chose the CPU, RAM, screen size, and battery capacity specs is because those are typically the most expensive components and logic dictates those should influence price the most.

It makes even less sense when you figure in large fixed costs, such as R&D. Apple sells ~6x more iPhones than iPads, according to recent earnings reports (correct me if I'm wrong). I doubt iPad R&D is 1/6th of iPhone R&D - I bet they're about equal, or maybe iPhone is 2x more, but certainly not 6x more. Thus, the R&D cost per unit is less with the iPhone.

Thus, on every single measure I can think of, the iPhone should cost less than an otherwise equivalent iPad. And not just a bit less, but significantly less. If iPad prices are the "correct" baseline, then the latest iPhone should start at ~$450.

How many more iPhones would Apple sell, and how much more revenue would their various digital Stores make for app developers and musicians, if the iPhone6 started at $450?

I wager they charge more for the iPhone simply because they can.

 

[sofila]

we don't need local storage, not really, only for large app installation. Everything else should be in the cloud. If you want infinite local storage for your stuff, plug your phone into your computer and store everything locally.

apple has large profit margins, yes. However, they test their products to a level that raises the overall cost of their devices dramatically. They spend a small fortune testing each hardware component rigorously.

http://recode.net/2014/09/25/inside-apples-secret-testing-labs-where-phones-are-bent-all-day-long/


“If I had asked people what they wanted, they would have said faster horses.”
Henry Ford

Hallo Phil, nice to hear from you again...

 

[Loucifer]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

I don't think you sound petulant at all, actually a nearly perfectly balanced comment. I am fanboy and I have no complaints in wasting cash (or more precisely debt) in overpriced loveliness, but there must surely be a moral question as far as Apple is concerned. If I may use my fallible self as an example, I try to temper my wastefulness by giving to charity more than I can afford, as I do with gadgets, holidays, booze, and partying, and I recycle and compost everything. It is pathetic of me to think that it makes me a better person, but it comforts me that at least my wastefulness produces a tiny bit of good. Apple should up the stakes in charity/social improvement donation, as they have with their carbon footprint reduction efforts, address more aggressively the work exploitation issues in its manufacturing supply, and of course give us more memory and processing power!!!

 

[benjitek]

More and more, consumers are just realizing iPhones are the clear choice when it comes to their smartphone purchases

 

[oneMadRssn]

Can you add a row for a.) OS development b.) hardware testing c.) proprietary form factor design for components d.) apple marketing e.) packaging, so it's a little more granular for your comparison? You only show a couple out of several dozen cost evaluations here for each product. The reason the costs don't make sense to you is because you are basing your evaluation on what only provides a warranty/utility bonus for your needs... which is normal for a consumer. If you want the cost to make sense, perform more analysis on what is actually spent : )

Obviously no one outside of Apple knows what was actually spent. We don't need to know exact amounts though, my point is only about how they are relative to one another. Even if we did know, some of the things you listed aren't easily attributable to a single product (e.g., what percent of an iPhone commercial promotes iPhone sales, and what percent promotes the Apple brand in general? what perfect of OS X development is for iPad, iPhone, or AppleTV - how much of it is overlap shared by 2 or 3 of the products?).

I listed the known specs that are also the biggest contributors to total cost. For example, you say packaging, not sure whether you mean the cardboard box or PCB design / chip packaging, but either way, both types are pennies compared to the component cost of a the CPU itself or a battery - especially in the sales volumes that Apple has.

Also, almost all those costs you listed are fixed, meaning the costs are mostly the same regardless of how many units are actually sold later. Thus, the more units sold, the less the per unit cost is. We know that iPhones outsell iPads by a lot (6x seems like the most recent report I read). While no one outside of Apple knows for sure, from my real and relevant experience in consumer electronics, I highly doubt software and hardware R&D, testing, marketing, etc., for the two product lines differ by as much as 6x. At most in my estimation, iPhone might cost 2x more than iPad for those fixed expenses (and even that is generous; due to the huge overlapping between the products, most likely it's closer to 1:1). Thus, no matter how you slice it, the per unit cost of those things you listed on an iPhone will be MUCH less than on an iPad. Indeed, on a per device level, I can't think of a single thing that would cost more on an iPhone than an iPad - enough to overcome the HUGE difference in component cost of battery and screen.

 

[CrAkD]

32gb minimum storage and 2GB OF RAM for Christ sakes!

 

[2457282]

These analysis are interesting even if they are incomplete. Usually they are based on the price of the components which shows the iphone costing only a couple hundred dollars and then being sold for 600 dollars or more. Of course this is not reality as R&D, Marketing, Overhead, Spillage, Software, and Licenses all are factored into the final cost. One could assume (incorrectly) that these cost are comparable across all the companies, but in reality those costs are different, as companies prioritize very differently. In the end, it probably is still true that Apple is making most of the profit - if only because it is clear that Apple makes a profit while most others do not. In the latest financials release, Apple continues to show a profit increase and a revenue increase, but most others show decreasing revenue/profits.

 

[anomie]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

This is capitalist reality. Doesn't make sense at all but everyone believes it is the best that could ever happen to mankind. History's end.
At least we should keep in mind that Apple is not there to make great products but great profits.
From that point of view it would be plain stupid to replace the 16gb iPhone and to kill many of the 64gb sales by doing so.

 

[Benjamin Frost]

Tim Cook: "It's not about the blood ROI."

Apple share of worldwide smartphone profits: 92%.

I guess the Apple Watch is the first example of Tim Cook's focus away from return on investment.

 

[coolfactor]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

Ah, the inevitable "give us more specs because the competition does" viewpoint. Well, stand back and realize that specs don't matter, but performance does. And many tests have proven how much more efficient iPhones are, so you've got a better device already. As soon as Apple competes based on beating the competition on "big RAM, big storage", then they've lost the true focus of value for their customers. If Apple upped the base storage by 2x, would it really change things? I just think the competition would up theirs, and Apple would have less again. And then you'd be bitter, and on it goes.

It's about true performance, true experience, not just specs. iPhone has it. Don't you agree?

(And if you want more storage, you have that available.)

 

[coolfactor]

Part of the reason apple has issues with ramping up flash storage is that there isn't actually enough of it being made and they have issues getting enough.

I believe this is a factor. Those that disagree fail to realize that Apple rejects sub-standard components. That's a fact.