Components for 4G LTE iPad estimated to cost $310, netting Apple 51% margins - Page 2

My bad, went a little overboard with the hyperbole. A Qualcomm MDM9600 chip costs 40 dollars, including licensing. Generic 3G chips are around 5 dollars.

But then figure in the support chips, including GPS*, and other costs and I think we're looking at about a 50 to 65% profit margin. That sounds about right for a higher-end option.

WOW!!! Right on topic!

Unless things have changed since my college days,

Gross Margin = (Revenue-COGS)/Revenue. That COGS are direct costs only.

But nonetheless, I agree that the layperson reads 50%+ and thinks Apple is ripping everyone off.

That 51% is what's left to pay off everything else and hopefully eke out a profit.

Well, Apple is doing slightly better than 'eke'ing out a profit. Apple's net (after taxes, after R&D, after EVERYTHING) profit margins are more than double those of any other smartphone manufacturer.

Multiples over most. Several aren't even turning a profit. I suppose we can say Apple is greedy but I think the more correct answer is to say the others are incompetent. If you can sell a device like the iPad at less money than your competitors and still generate a healthier profit than they can muster while getting customers to see your product as being better you are doing something very right in business.

Let's take, HTC, a very profitable, healthy company who makes only smartphones (and a few tablets). Their gross profit is only 27 percent, and net profit a mere 12 percent (compared to around 50 percent and 25 percent for Apple).

We're ignoring total revenue, and just focusing on the financial numbers that illustrate what each company sells devices for. Fact is, for hardware, Apple charges significantly more than equivalent hardware from competitors. What it comes down to is, how much is the 'Apple experience' derived from it's software worth from a financial standpoint?

You'll have to prove that.

There's nothing to prove. Look at the hardware Apple offers, then HTC or Samsung, then look at their quarterly results to see how much each makes from the hardware. It's all easily search-able, public information.

Also keep in mind Apple uses hardware produced by Samsung, LG, Sharp, Toshiba, PowerVR, etc... Not their own.

Like I said, the differentiating factor is the software. Which boils down to personal taste.

Again, you'll have to prove that. What you think is evidence is no evidence at all as stated. You're trying to paint a picture that Apple's revenue and profits are from price gouging without considering the market segments they deal with, their economics of scale, and their efficiency as a company.

You stated that "Apple charges significantly more than equivalent hardware from competitors" so you'l have to make a case by defining what is equivalent HW and then proving that Apple's product cost the customer more money.

Note that saying RAM is equivalent if it's the same amount or that CPUs are equivalent if they are they same cycles per second are singular and narrow views of what can actually make a component equivalent, much less what makes a product equivalent.


By that logic we should start calling all Apple product Foxconn products because they are hired by Apple to produce their HW. Now it's certainly true that individual components are either designed and/or assembled by other companies and then put in Apple's products but to imply this takes away from Apple's products or makes them worse because they let ARM make the reference design for the ARM chips that they then design to their needs and then have Samsung or TSM manufacturer is disingenuous at best.

By your reckoning Apple has never made a smartphone or changed the smartphone market because it licenses cellular tech from other companies, including Nokia and Qualcomm. Once people find Apple has never really made a smartphone there stock is gonna drop¡


It's 'a' differentiating factor. If you were being honest with your "analyse" you'd be asking yourself if there HW is superior and/or at lower prices with the differentiator being SW then why aren't they making better SW since Apple has the lion's share of the profits in every arm of their business: PMP, PC, tablet, and handset.

If that's the view you take, then no proof could be proof of anything.

But maybe start by looking at Samsung's margins, since their Exynos chipset with Mali GPU would be considered the 'closest' to Apple's chipset (especially since Samsung makes both). And then maybe look at how much LG charges for a phone with a 4.5 inch 720p IPS LCD screen (330dpi resolution), since they make the iPhone's screen as well.

But from your past posts, it seems as though you think the Apple logo makes something 'better' the same way a Catholic priest's blessing makes water 'holy'.

Don't puss out. If you actually believe your position and aren't just trolling, put up or shut up.


Margins are revenue minus costs. Again, you need to consider how a company can lower their costs of a product thereby increasing their profit. It's a pussy position to think that other companies aren't trying to make more of a profit.

It's interesting you bring up the LG Spectrum. It just came out in 2012. That's 1.5 years AFTER the iPhone 4 introduced to the world the 326 PPI IPS display. This is LG's tech but backed by Apple. Can you guess where that tech would be today without Apple's perseverance in getting it developed and mass produced? Most likely quite a ways off. How about Corning's Gorilla Glass? That might also be a shelved 50yo tech they had no application for. What about the CULV processors from Intel or the milled aluminum chassis for a notebook that everyone is following? Probably not even on the map. And on and on and on...


Good one. Those debating skills will server you well¡

There is, finally, a journalist who gets it:
http://blogs.computerworld.com/19855...015_and_beyond

You do understand that Apple makes things other than iPads, don't you? You also understand that HP is not a significant actor in the mobile tablet industry, don't you? Apple's market capitalization relative to HP has virtually nothing to do with its margins on iPads.


You stated that margins are all that matters. To the English-speaking among us, this means that customer preference matters not at all. If you would like to amend your post to comport with reality, then feel free to do so.

He certainly does. NIce thorough analysis of a company operates.

So true. If Apple sold everything they made for one year at the margins their competitors do (i imagine Apple could afford it too) there would be no competitors left. Then what would the tech landscape look like?

No, it has to do with its margins on everything they sell, which are very high. It has to do with its net profits, which are way ahead of the industry. If Apple was just making small, industry average profits on their products like some people seem to think, their market cap would be probably around 150-200B, not 500+B.

What I find fascinating is the continual reference in the quote you posted from that article, to the fact there is 'no point in doing anything other than the best' to paraphrase. Why I find this fascinating is that before Apple in the Jobs / Ives era, most products were manufactured with built in obsolescence and shoddy parts were considered par for the course. We shopped for the least shoddy ... Check out your washing machine, fridge, stove ... I have rust coming throu on a two year old stove and an ice maker crapping out on a one year old fridge ... It's all basically junk these days.

We have to thank Apple for not only re inventing so many industries but for actually making excellence in manufacturing to be considered a virtue again and proving it is actually profitable. I know it's often said as a joke, but boy I wish Apple made other stuff too some times.

As an aside it also shows stuff made in China can be of excellent quality. The issue of quality is obviously controlled by more than where it is made. Don't blame being made in China next time you find a shoddy product, look at the label.

What I hate is the vendors on worrying about components they can advertise on a spec sheet and begrudgingly worrying about the rest even if can positively affect the user experience. Apple is certainly in a position will every little thing will be measured and counted but they earned that position from repeated excellent and focus. So far we've seen a lot of companies try to copy Apple... but it's always in the last important way.

The reason why Apple has higher margins has a lot to do with efficiency. They have large volumes that they can leverage to lower costs of their components. Almost 10-15% of the price of the competition products is lost to Retail - whereas most of it is retained by Apple as they sell at their own stores - brick and online. Apple sells pretty much all it can make - so they don't have blocked inventory and fire sales adding to costs. Apple's upfront focus on quality and customer satisfaction ensures that their support and warranty costs are lot lower. Apple has a tight product portfolio and a very relaxed product launch cycle - so they don't face enhanced costs associated with launching dozens of products every year. Apple gets tons of free publicity because of which their marketing costs as a percentage of their revenues would be the lowest in the industry.

But you have a valid point - the Apple logo DOES make products better - because of the extremely high standards that Apple holds itself to - they will not slap on their logo on anything and everything. As a customer, that gives me the confidence to buy Apple products - even if I have a to pay a slightly higher price!

Economics disagrees with you to some extent. If they sell 50M tablets at an average of about $600 each, then they have $30B in tablet revenue. If we assume that the average tablet with ALL costs included come out to $400, then we're talking $10B in profit.

If they lowered the price to $550, they would sell some amount of extra tablets; lets say 52M tablets. Economies of scale might mean that that extra 4% in tablets sold knocks of a percent from their costs, $8B in total profit.

Lets chop off another $50, now maybe 54M tablets sold = ~$5.8B in profit.

I don't think $4.2B in lost profit is what turns them from a $500B company into a $200B company.

In any case, I assume that they've set prices based on supply and demand curves, just like nearly every other major company on Earth

Chopping off that $50 or $100 or more would likely mean sacrifices to iPad quality, at which point you can forget about selling 50+ million tablets.

Case in point: There are already plenty of tablets at the pricepoints you are hoping for. How are they selling?

Or another angle. MMI seems quite content to sell phones and tablets at a loss. They'll only survive because Google is buying them for strategic purposes, their business model is otherwise not sustainable. How many tablets do you suppose Google will let them sell at a loss before they have to pull the plug? 50+ million?