iPhone X Responsible for 35% of Total Worldwide Phone Profits in Q4 2017

[apolloa]

Don’t listen to this guy, it’s common for him to come here and bash apple, as a couple others here do.


Meanwhile - many of us love our X’s to death. Pretty awesome for a first generation design.

Haha like anyone will take any notice if you.. People who read my posts outside of this click bait articles know otherwise.

Markups in the high 30% range are very common and hardly "massive." Try and educate yourself on that before criticizing.

My last job as a design engineer for a Fortune 200 company targeted 80% GPM. If I proposed a product that did not have a path to get there, or at least very close under some circumstances, the project I proposed would not move forward. Simple as that.

Thanks for your work experience but as it’s not at Apple it can be discounted from any argument.
Also I think considering the low sales of the iPhone X, according to endless reports on this site for one of production being halved, it’s pretty clear the mark up in the X is a lot higher then 30%, I don’t need to ‘educate’ myself in anything thanks.

 

[fairuz]

Too much profit = greedy. iPhone X could have been $749.

They'd be stupid to sell it for $749.

 

[Constable Odo]

I don't believe anyone claimed Apple devices weren't selling well. I certainly didn't.

You might not have said iPhones weren't selling well, but there were certainly plenty that did say that. The news media bent over backwards to spread the the word how Apple was massively cutting back iPhone X orders (20%, 30%, 50%?!). That news definitely went viral and I'm sure it made an awful lot of "I told you so" people happy. Supposedly, only a handful of people on the planet would be buying an iPhone X and that was because they were brainwashed Apple addicts. The usual tone was, "Hell, why buy an iPhone X for $1000 when you could get a much better Android smartphone for half that price without a notch." Such great reasoning.

 

[DakotaGuy]

Too much profit = greedy. iPhone X could have been $749.

Why lower it if people are willing to pay the price? If anything they should raise the price even more and maximize profits. You can criticize Tim Cook for a few business decisions, but you can’t criticize him when it comes to leveraging the Apple brand for maximum profit. When you’ve got a brand this popular use it for all it’s worth. People will pay it.

 

[ActionableMango]

Where is the line then? Is $1500 too much for an iPhone? $2000? $5000?

Well the "normal" model line is the iPhone 8. They also sell the SE model line for "budget" customers. In between they also sell the iPhone 7 and 6S. So there are many model lines for many types of budgets.

The iPhone X is a separate model line for "upscale" customers. I don't see why Apple shouldn't go after more affluent buyers. So why not a $5000 iPhone? Why is this greedy or evil?

Casio has a $6000 watch line. Why not? If they can extract $6000 from rich people, more power to them! They still have $40 watches for us normies.

 

[Misuteri]

Too much profit = greedy. iPhone X could have been $749.

You have the option of going Android or flip phone.

If the market will bear it, it is not greedy. The fact that you have taken it upon yourself to wish to impose a price and determine what greed is makes you more dangerous than a company that makes money for its shareholders.

You don’t need a $1,000 phone to text, make calls and take pictures. That’s for sure. However if people are willing to pay for all the engineering they will never, ever use... who are we to call the company that makes those phones greedy.

I also don’t consider the SE a “budget” phone. I miss iPods, I never text, I sometimes need a camera and want a phone to *GASP* use as a phone. The rest of what an iPhone can do I don’t need in a phone. I see the SE as a niche product in the US and a key developing market phone for Apple’s lineup. It’s biggest selling point to most people is it size, not what it can/can’t do.

 

[genovelle]

Too much profit = greedy. iPhone X could have been $749.

Apple aims for 30-40% profit margin. This ensures they remain healthy even during downturns and can continue to invest in their future while providing a return for their stockholders. Once the special parts they developed are built in enough volume to push down cost, you will see them release them at a lower price.

 

[tubular]

That chart makes me like my SE all the more.

 

[oneMadRssn]

You can always leave the Apple ecosystem if it is too much to bear. And whether it is bid or MSRP, the customer decides and pays. Maybe another analogy would be if you could find a job at a new workplace that increases your income by 20%, but doesn’t increase your workload at all. Would anyone turn it down if all other factors were equal? Apple decided to make a premium tiered phone, and they essentially priced it to make more money per unit and sell it to fewer people, as opposed to making it cheaper to sell it to more people. Apple has always priced themselves in the top tier. They never made a netbook. They don’t infect their OS with ads and heavy tracking. They count on selling hardware and for-pay services to make money.

Another possibility is that if they manage to sell a high margin device well, then maybe they can afford to offset a low-margin product. Base iPad is cheap now.

Apple has always been top-tier, but they have nevertheless always been consistent with the rest of the industry in terms of general price trends. As all computers got cheaper, so did iMacs. As all laptops got cheaper, so did Macbooks. The iPhone is the first thing I can think of at Apple where Apple is trying (successfully it seems) to raise the ASP while the rest of the industry lowers the ASP. This is a new thing for Apple.

In terms of leaving the Apple ecosystem, yes one can do that. And plenty of people do. Your analogy is a bit wrong though. It would be if you find a job at a new workplace that increases your income by 20%, but doesn't increase your workload at all, but you have to pay to relocate yourself which would cost half a year salary. Eventually you end up on top, but the initial strike is unpleasant enough to make some people pause.

 

[KanosWRX]

Wow... not sure this is a good thing.. just goes to show the insane markup on these phones from Apple!! Apple doesn't sell anywhere near the majority of cell phones in 2017.. but they rack up almost all the profits...

 

[oneMadRssn]

Well the "normal" model line is the iPhone 8. They also sell the SE model line for "budget" customers. In between they also sell the iPhone 7 and 6S. So there are many model lines for many types of budgets.

The iPhone X is a separate model line for "upscale" customers. I don't see why Apple shouldn't go after more affluent buyers. So why not a $5000 iPhone? Why is this greedy or evil?

Casio has a $6000 watch line. Why not? If they can extract $6000 from rich people, more power to them! They still have $40 watches for us normies.

In terms of comparing prices, I think only the iPhone 8 is an apt comparison as it's the only other iPhone with the 2017-gen SoC in it. Even so, they raised the price of this tier of phone from $650 to $700 this year. While everything else is becoming less expensive, what gives?

 

[firewood]

Where is the line then? Is $1500 too much for an iPhone? $2000? $5000?

The line is where so few customers buy a particular model that product revenues decline or even go negative. Maybe because those customers decide to take their money elsewhere (gold android devices, Rolex watches, or new Tesla Model S’s, etc.)

 

[Michael Scrip]

It should be obvious that 'standard' GPM varies wildly by industry. Clearly automakers aren't anywhere close to 80%, or even 30% for that matter. As far as it relates here to the smartphone industry, 30% is higher than everyone else, judging by the data in the article.

Exactly.

I was shocked to hear that there are 600 companies selling smartphones these days?!?!

But I'm guessing only the top 2 or 3 actually make money selling those phones.

You can't blame Apple for trying to make money selling phones.

The story should be how bad everyone else is doing.

 

[Darmok N Jalad]

Your analogy is a bit wrong though. It would be if you find a job at a new workplace that increases your income by 20%, but doesn't increase your workload at all, but you have to pay to relocate yourself which would cost half a year salary. Eventually you end up on top, but the initial strike is unpleasant enough to make some people pause.

Yes, but I put in the qualifier of "all other things being equal." There are many pitfalls to a different employer, but if the work environment was the same, and you didn't have to move or anything. My point is that it's easier to call such behavior other than our own as greedy, but it's a pretty rare site to see someone take a pay cut or more work for no more money. There's lots of ways to look at it. My point is most of us want to maximize the reward for our efforts.

 

[vipergts2207]

The math doesn’t support your claims of “greedy”, “absurd”, “crazy price level”, “massive markup” etc.

By your own accounting, if Apple had sold the X for $943 instead of $999, it would have had the same 19% profit share as the 8.


No, because every other iPhone Apple sold—the SE, 6, 6 Plus, 6S, 6S Plus, 7, 7 Plus 32GB and even 7 Plus 128GB at $769—all sold for less than Apple’s reported ASP of $796. That’s tens of millions of iPhones, all pulling down ASP.

The X sold well, probably even better than Apple themselves thought it would, considering they beat even the upper end of their $87 billion revenue guidance for Q1.

So in that scenario Apple is pulling an extra $56 from consumers for each phone, which is exactly what I'm pointing out. That comes out to more than the cost of a Apple leather case.

Sure other older phones would be included in the ASP, but that figure is for Q4 and how many older models sell in Q4 compared to newly launched models? I don't know that the data for that is out there, but obviously Q4 iPhone sales are going to lean very heavy toward new models. Anyone not buying a brand new model could just as easily by one the other 9 months of the year.

It doesn't show that at all. You're making an assumption (to fit your narrative) that the profit is made up on markup and not on volume, and adjusted your numbers to fit your theory. You have absolutely ZERO evidence to back up what you just said.



The US accounted for 40% of Apple revenues last quarter. So you're taking numbers from a study done on 40% of the market and assuming it applies to the other 60% as well?



Wow. So you're conveniently forgetting that Apple also sold the 7 (starting at $549), the 6S (starting at $449) and the SE (starting at $349) to come up with that ridiculous ASP? You think Apple ONLY sold those 3 models?

Let's say Apple sold equal volumes of the 8, 8 Plus and X. And they sold one 7 as well. That brings our ASP down to $762. Replace that 7 with a 6S and ASP drops down to $737. Replace that with an SE and it's down to $712.

Amazing how much of an impact a single cheaper iPhone can have on your ASP.

What I find really funny is all the naysayers trying to claim Apple sold a ton of their cheaper models to try and diminish the sales of the X. It's impossible to have a significant number of sales of the cheaper models and also an ASP of $800. It doesn't matter how you try to spin the numbers, there's no magical combination of iPhones sold that can give you an ASP of $800 AND also poor iPhone X sales. That said, I'd LOOOOOVE to see you come up with a mix that shows that and prove me wrong.

I posted a link earlier saying the 8 outsold the X in 2017. However, which ever one technically sold more doesn't matter because they were likely somewhat close is numbers. The X didn't sell so many more units that Apple makes 83% more profit from the X than the 8. Regardless of how you want to slice volume vs margin, it's a guarantee that some of the extra money Apple made from the X comes from a higher than usual margin for Apple.

Using only the U.S market, actually puts the X at the most favorable possible advantage for this comparison, as the U.S is easily among the top countries with the most disposable income. In fact, according to this link the U.S. is behind only Switzerland, Australia, and Denmark when it comes to disposable income. However, those countries only have a combined population of a little more than 10% of the U.S. population. So you're idea that the global market as opposed to just the U.S. market, will somehow make X numbers look better is extremely misguided. If anything global numbers will only worsen the numbers for the X, as poorer countries' citizens aren't going to be shelling out for a $1000 phone. Of course that's also before the exchange rates are accounted for, which generally causes Apple's products to be even more expensive in those countries.

I already addressed above, older models and Q4 data. Certainly older models bring the ASP down some, but a large portion of people buying in Q4 are there for the new stuff. Here, you can see how Apple's ASP skyrockets during launch quarters and takes big dips in between, evidence that large numbers Q4 customers are there for the newest (most expensive) stuff, not the older, cheaper stuff.

 

[rocknblogger]

No, the X is reasonably priced. That does not mean, however, that everyone can afford one.


"One hell of a markup."

GPM is likely in the high 30% range, and certainly not unusual.

No, it’s not reasonably priced. From the information presented here you can say the price is artificially inflated. They can sell it for $849 and $999 and still have a very respectable profit margin.

No this phone is not anything special. It’s just the next generation of what the iPhone will be designed like for the next 4-5 years and maybe more.

I respect Apple for keeping pricing in the upper echelon of premium devices but this profit report clearly shows that Apple’s primary motivation is to squeeze out as many dollars possible out of their users. Plain and simple.

 

[tl01]

#winning

 

[usarioclave]

Here's a blast from the past, as to what to look for when your platform dies.

http://mobileopportunity.blogspot.com/2010/10/whats-really-wrong-with-blackberry-and.html

Apple doesn't have to worry about this yet.

It's strange to realize that RIM/Blackberry was the king only a little while ago. From Hero to Zero in under 10 years.

Here's his followup 2 months later:

http://mobileopportunity.blogspot.com/2010/12/rims-q3-financials-tale-of-two.html

 

[PickUrPoison]

So ... this simply confirms what we already knew: Apple made a lot of money on the iPhone X but Apple did not sell as many as they anticipated (cut OLED order from Samsung).

So what is success?

Market share or profit?

Apple beat their guidance in Q1, so iPhone X sales could well have exceeded their forecasts. If they miss their Q2 numbers, maybe rumors of poorly selling iPhone X could be valid.

But if when Apple reports in a couple weeks, they make their numbers, it will be all the proof we need that the rumored OLED production cut was evidence of nothing more than the typical Q1–>Q2 demand-based production cut we’ve seen for many, many years. And maybe someday people will actually believe Cook regarding trying to derive meaning from random supplier reports.

 

[Cloudkicker]

Exactly.

I was shocked to hear that there are 600 companies selling smartphones these days?!?!

But I'm guessing only the top 2 or 3 actually make money selling those phones.

You can't blame Apple for trying to make money selling phones.

The story should be how bad everyone else is doing.

Uh... an overwhelming majority making phones (99%?) are making a profit, or else it wouldn't make sense for them to still do it. That's why the Zune was discontinued as iPod ate Microsoft's lunch 12-something years ago. Companies like Huawei are like Walmart. They make plenty of money selling to the masses of China at a lower price point. Doesn't mean they aren't bad at how they do it; just different.

Graph source:
http://www.patentlyapple.com/.a/6a0120a5580826970c01bb098fbc63970d-pi

 

[dogslobber]

You're making a mistake in assuming the cost to produce the iPhone X is the same as every other phone. It's not. The iPhone X packed tech no other phone has and the development costs were more because of it.

But those costs won't be included here. The profit here is taken as ASP - BOM/phone so it doesn't consider the sunk design costs which other manufacturers don't need to bear as they copy Apple's design because Apple's exhaustive research would conclude this is the best design.

 

[MarkB786]

In other words, once they have you trapped in their ecosystem they're gonna screw you. Nice business model. Seems to be working quite well!

 

[rafark]

I don’t think you understand how margins work. The iPhone X has similar margins to other flagships (like the Galaxy S or Note Series).

For the last quarter ending 2017 (when the X was launched) Apples gross margin was 38.4% while Samsung was 45.8%.

Who’s overpriced?

Apple.

 

[lederermc]

Nice, proof of how massively overpriced the X is. Lucky I returned mine.

"overpriced"ness is subjective.

 

[usarioclave]

In other words, once they have you trapped in their ecosystem they're gonna screw you. Nice business model. Seems to be working quite well!

I'm still using my 7, and family's 5s, 6+, and SEs are still going strong. And I don't have to worry about malware, spyware, the lack of security updates, crappy apps, and a bad UI. I think that's a great business model!