Half of Apple's iPhone Price Expected to be Pure Profit

Discussion in 'iPhone' started by donniedarko, Apr 4, 2007.

  1. donniedarko macrumors regular

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    #1
    Found this article, which has an iSuppli analysis.


    I am a mac to the core but I will not be swilling this Kool Aid.

    Pretty lame IMO.


    The link is here
     
  2. Turkish macrumors 6502

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    #2
    You're going to have to stop buying at least 75% of Apple's product line-up, then.

    I hate to have to be the one to tell you this, but Apple sells things to make money, not save the world.
     
  3. JNB macrumors 604

    JNB

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    #3
    Old news, and not a thoughtful analysis, anyway. Certainly demonstrates no understanding of real-world economics.

    Buy the parts for $250 (in massive lots sizes only, of course), and then wait for them to miracle themselves together into an iPhone that packages itself (with free packaging materials) and delivers itself through the wholesale/retail chain. Then it's a 100% profit. And still gross, not net. But it's still BS.

    The COGS is likely more like $375-425 per unit. Still a tidy (GROSS) profit, but not unreasonable in the least.

    Apple's true margian is fairly thin for most products. Look at their annual report. It'll take a little digging, but the numbers are there.
     
  4. donniedarko thread starter macrumors regular

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    #4
    No need to hate on me Turkish...

    75% of their product does not have a margin like this, thats a false statement ...

    Electronics should not have a keystone margin.
     
  5. JNB macrumors 604

    JNB

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    #5
    It's NOT keystoned. iSuppli takes NOTHING into consideration except cost of materials.
     
  6. PlaceofDis macrumors Core

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    #6
    lets not forget packaging, advertising, and building, but the fact that this went through two years of Research and Development costs that need to be recouped.
     
  7. WildCowboy Administrator/Editor

    WildCowboy

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    #7
    iSuppli does this for lots of Apple's things. I believe they found that the 4 GB nano ($199 MSRP) contains about $72 worth of parts. The previous generation nano (2 GB at $199 MSRP) had about $90 worth of parts.

    Of course, as JohnNotBeatle so eloquently pointed out, Apple's real margins aren't nearly that high once everything else is taken into account.
     
  8. donniedarko thread starter macrumors regular

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    #8
    OK, I get you. I work in retail though. We look at the unit cost, not the marketing and such with it. I stand corrected, but as a buyer I look at unit cost. My bad.

    A friend of mine is an independent Apple dealer, Ill ask him onece released what the unit cost is.
     
  9. zap2 macrumors 604

    zap2

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    #9
    1) You need to add the price of develupment...its a brand new device, into a market were Apple has to start all new. They never made a cell phone, so they had to start from the ground up.


    2) Ya, the profit is hight...check iMac and iPod, its a similar percent. However with iPod and iMac they have things to base the new products on, therefor cutting down develupment cost. The iPod w/ videod didn't half of what iPhone did to make.

    3) Date of the articel is January 19, 2007...I think there are been post about this before.

    4) Marketing and Research also cost $$
     
  10. balamw Moderator

    balamw

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    #10
    You might not be able to get a real answer for a while since it seems unlikely that Apple will distribute the iPhone through anyone other than itself or Cingular until supplies are plentiful. (A Cingular employee even told me that the retail locations won't have them you'll have to order online at first).

    B
     
  11. Turkish macrumors 6502

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    #11
    Why not?
     
  12. dsnort macrumors 68000

    dsnort

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    #12
    The price of any product is determined by one factor only: what people are willling to pay for it. What it costs to build is only marginally relevant.
     
  13. WildCowboy Administrator/Editor

    WildCowboy

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    #13
    Oh, and if you'd like to see the article MacRumors did on this way back when this info came out, have a look here.
     
  14. JNB macrumors 604

    JNB

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    #14
    Ooh, we would love to hear the wholesale price!

    As a side note (not to be repetitive, honestly), but I thought this was interesting, particularly as I was actually pretty conservative in my estimate:

    (Source: http://qualitydigest.com/IQedit/QDa...&-session=ACCESS:456F5DED1d9da145F3XYugwlg1EF)

    Which means that if the revenue for one iPhone is $599 (assuming we buy the 8GB model. And we will...) then the COGS is between $419.30 and $569.05!
     
  15. synth3tik macrumors 68040

    synth3tik

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    #15
    The standard mark up for any company is 50%. See the article is forgetting a lot of stuff. Here is a brief list of what would go into the phone that Apple will have to pay for

    1)iPhone R&D, Yes the R&D budget is not connected, but w/o return future products may not be developed.

    2)Employees, Apple had to (and still is ) hire a lot of new employees to work on the phone, this Also includes HR hours spent reviewing resumes and doing interviews.

    3)Advertisement,No one would know about the iPhone if Jobs never showed it off.(Fan fare costs money) Websites as well as other advertising they might do after the release, as well as in store displays.

    4)Legal Fees, Cisco was not the first to and they will not be the last people to sue Apple. Apple has approx. 15 open lawsuits (one with Apple bundled in as a defendant with the company I work for)

    5)Actual cost of parts, What Apple has to pay to get the parts they need.

    6)Labor, Apple needs not only R&D, but software engineers, Hardware engineers, direct labor, and QA.

    7)Facilities, Apple has to pay for a place to design and make the phone. This means everything from the cost of the building, utilizes, grounds, maintaince, and taxes.

    8)Transportation, They have to find a way to get the phone to you.
     
  16. princealfie macrumors 68030

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    #16
    Who cares? if you want it, get it. if you don't, don't get it.
    remember that we have to pay for the R and D costs to make that iPhone :D
     
  17. CanadaRAM macrumors G5

    CanadaRAM

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    #17
    The meal you paid $24 dollars for in a sit-down restaurant was made from $2.75 worth of groceries.
    The $3.95 Starbucks latte has $0.15 worth of coffee and milk in it.
     
  18. szsiddiq macrumors 6502

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    #18
    THANK YOU! :)
     
  19. mac17 macrumors regular

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    #19
    That has to be one of the dumbest statements i ever heard its like saying a visit to a dentist or doctor is a ripoff because they charge alot of money for a few minutes of their time. When you buy something your paying for development and research that went into it not just the actual parts, do you think that apple is not paying all those people that helped with research and development? or the cost of production and shipping? :confused:
     
  20. GoCubsGo macrumors Nehalem

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    #20
    You are a mac to the core? Hmm ok. Well friend, be mac to the core as you say it but stay away from business in the future because if you think a company should not earn a profit then you're silly.
     
  21. princealfie macrumors 68030

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    #21
    The main difference between Apple and Starbucks is that the latter is corrupt. Not a good comparsion example.
     
  22. Max Payne macrumors 6502a

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    #22
    Most of the money goes for R & D.

    I once got the XDAII. It was $350 after network subsidiary. It was rubbish. Now tell me, doesn't the iPhone deserve a higher price (It's not higher btw).

    Apple spent 3.5 years designing the iPhone. DId all the designer & coders do the development for free?

    It's not a Zune. Apple did not take a Nokia, copy it and change the colour.
     
  23. JNB macrumors 604

    JNB

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    #23
    OK, guys, he admitted to going off with a limited understanding. Not many folks out there will admit to posting a forum entry with less than total foresight. I think he's been beaten thoroughly... ;)
     
  24. herr_neumann macrumors 6502

    herr_neumann

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    #24
    No, the difference is after spending $1000 with apple you usually have something to show for it, unlike spending roughly the same for your yearly latte supply.

    p.s. I would watch the libelous statements like that, I know I wouldn't open myself up to litigation that way. Corruption is a serious crime.
     
  25. taylorwilsdon macrumors 68000

    taylorwilsdon

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    #25
    Starbucks has found a niche and they enjoy it. Turns out people WILL buy expensive coffee. That doesn't make them corrupt, they're welcome to charge whatever they please. I would watch what you say about that.
     

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