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iPhone 6s Plus Component Costs Estimated to Begin at $236, $16 More Than iPhone 6 Plus
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Rather, you'd think that by now, people reading the report would realize that ALL that iSuppli intended to give, is the component piece. iSuppli knows that it's not the entire cost.
Other reporters only mention R&D, or raw profits, or shipping costs, or patent royalties, or advertising expenditures. No one complains that they don't give all the details.
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The reason they leave out R&D expenses from the calculations is because they are practically immaterial to the profit that Apple is making. Apple's R&D is miniscule as a percentage of revenue compared to their competitors. About the same as Proctor & Gamble.
Let's do some simple math. Apple had $50B in revenue last quarter of which 63% was the iPhone which gives you about $32B in iPhone revenue.
Apple's R&D budget for the entire company is about $2B per quarter. Let's say all of that is spent on iPhone R&D (which it obviously is not), that still leaves $30B in revenue at 50%+ margins.
Even if you throw in every other expense that Apple has, iPhone profits are obscene.
Tell me one other technology company that makes these kinds of margins.
Software companies like Microsoft? They have practically no hardware costs to speak of. You just develop once and every copy that ships is pure profit.The reason they leave out R&D expenses from the calculations is because they are practically immaterial to the profit that Apple is making. Apple's R&D is miniscule as a percentage of revenue compared to their competitors. About the same as Proctor & Gamble.
Let's do some simple math. Apple had $50B in revenue last quarter of which 63% was the iPhone which gives you about $32B in iPhone revenue.
Apple's R&D budget for the entire company is about $2B per quarter. Let's say all of that is spent on iPhone R&D (which it obviously is not), that still leaves $30B in revenue at 50%+ margins.
Even if you throw in every other expense that Apple has, iPhone profits are obscene.
Tell me one other technology company that makes these kinds of margins.
True. This also applies to Google and Oracle, too.
Of course, I meant hardware companies. I can only think of one that is better than Apple and that's Cisco. Certainly not known for prices.
You're rolling many points into one.
- Do all people need 128GB? No.
- Would people like 128GB for the same price as 16GB? Sure.
- Does it make business sense to offer all your customers 128GB when there is a decent percentage that can get by fine with 16GB? No, it's crazy.
- Do all people need (or even want) 5.7" screens? No.
- Would people like 5.7" screens for the same price as 4.7"? Sure.
- Does it make business sense to offer all your customers larger screens for no added cost? No, it's crazy.
As I mentioned, my other half has no need for anything more than 16GB. Myself, I'd love more than 16GB as basic. I'm not a Joe Average user though. She is. And there are more of her than type of user than there are me.
Also I mentioned I wouldn't want a 5.7" screen. If Apple offered the 6s and 6s Plus for the same price I'd get the smaller one. The large screen just isn't right for me.
Again, not sure how Googgle's pricing has to do with Apple's. They have 2 wildly different business model.
- Apple = Hardware
- Google = Ads
Apple makes it's money of it's users up front - when the sale is made. Google starts making its money once you start using its software and services. That's why they're all free: email, web search, social media platforms (plus and Bloggr) etc. That's why the hardware is so cheap.
I value Apple's privacy policies, I'm happy to pay Apple a premium just for that.
Also the Nexus 5x user cheaper materials for the body. I'll also have to wait for detailed reviews to see how performance is and how the camera compares to the 6/6s.
I said in almost every post that Apple is a business, they make money. It's pretty much rule 101 Supply and Demand: http://www.env-econ.net/supply_demand.html.
Apple's demand for the iPhone has risen every year. They don't need to lower their prices. I've mentioned in my other posts - as a business if you can't even meet current demand why would you lower the price?
That's your opinion about the iPad and Mac - I think they are similarly priced to the iPhone. There are cheaper Windows and Android alternatives - in some case way cheaper.
You admit yourself the experience is better with an iPhone - that alone is worth more money. How much more? There is no magic formula.
And it's not the same ecosystem. As I've mentioned Google makes a lot of money off you, the user, when you use their ecosystem. Apple does not. Check both companies financial reports to see that.
I get all your points but you haven't really addressed mine.
True, Google makes money off the user but there are a large percentage of iPhone users who use Google services like search and Gmail. Apple doesn't really offer a competitive email or search service so many people go to Google anyway. That kind of obviates the reason to avoid Nexus doesn't it?
The other point I'm making about the iPad and Mac is that even with the ecosystem, the iPhone is much more overpriced than its competition. While the iPad and Mac are not.
The iPhone 6S+ is $400 more than an equivalent Nexus 6P while the iPad is about the same price as the new Pixel which is Google's Nexus tablet.
Again, why is the iPhone so much more expensive when it has the same ecosystem as the iPad? And why are the margins so much higher than the iPad when the feature set, ecosystem, performance, build quality almost exactly the same?
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It must be hard inserting a sarcastic comment into a discussion only to have people quote it with exactly the opposite meaning you meant. If it makes you feel better, I diagnosed everybody who misunderstood your remark with high functioning autism (formerly known as Asperger's syndrome). You see, they lack the Theory of Mind which allows them to understand irony and sarcasm, not to mention day to day social cues.
To stay on topic, I don't think R&D for the iPhone comes out to as much as one would think. I bet it adds at most $15 per phone in terms of cost. Apple is a company that rakes in a lot of money and their cost for employees (even the CEO) are minuscule compared to their profit.
I have. But you keep treating the iPhone and other Apple devices as black and white. Running a business is grey, product strategies involve a mix of decisions. There are dozens of factors at work. I've explained the main ones which you acknowledge individually but fail to put together.
There is no set price for the iPhone because of the margins on a MacBook or iPad. That's not how you run a business. You can't compare the Nexus and an iPhone because you get different things for your money (even if the headline features appear the same):
- There are numerous pricing strategies (https://en.wikipedia.org/wiki/Pricing_strategies).
- There is supply and demand (iPhone 6s is still backordered http://www.apple.com/shop/buy-iphone/iphone6s/4.7-inch-display-16gb-silver-att).
- There is the value add over your competitors (Stores, Privacy).
- Ultimately it's what people are willing to spend.
If this was a sales graph for your product, would you reduce the price:
http://static.amigobulls.com/articles/wp-content/uploads/2014/06/iPhone-sales-per-quarter.png
You use the term overpriced. That's incorrect. Overpriced = too high. Sales say otherwise, every year they have increased.
Maybe when sales slow down or even drop they will reduce prices. Until then if I was running Apple I would not reduce prices on the iPhone.
