Originally Posted by asdasd
But clearly they can sell phones at $350-$450 and make 45%-60% profit.
Funny how people read things differently. I was thinking " margins on the 5S are HUGE" , others are thinking "there is no way they can se a device costing $173 for less than $550.
Not so queer as folk.
Well, as you can see from my previous post, Apple "earns" more than 65% on every phone they sell, but that's only taking into account the cost of manufacturing that phone (component and direct labor costs). Factor everything else in that I listed (the REST of 'cost of goods sold') and the margin reverses to roughly 68% total costs, 32% profit (altough Apple is currently guiding more like 36 ~ 37%).,
After taking into consideration ALL costs (manufacturing, distribution, payrolls, running the company, etc. etc.) their NET profit margin as a company is in the low 30-pecentile. Very respectable!
Most of Apple's net profit comes from the iPhone. Imagine for a moment that they took your "they could discount the iPhone 5C to $350" number and ran with it. Could they remain profitable? Nope. Probably not.
First, let's use the $100 baseline example: Apple sells one iPhone 5C for $100, it cost about $68 including all costs of goods sold, leaving $32 in profit. Good!
Using the same baseline, what you're suggesting looks more like this:
Apple sells one iPhone 5C for $65 (the difference between $550 and $350 is about 35% less), but it STILL costs about $68 including all costs of goods sold to sell that iPhone! Oops! That's a loss.
Here's the same perspective using full numbers:
ACTUAL: iPhone 5C (16GB): retail $550, manufacturing cost $175, OTHER costs of goods sold $199, NET profit: $176 (32%)
ALTERNATE : iPhone 5C (16GB): retail $350, manufacturing cost $175, OTHER costs of goods sold $199, NET profit: MINUS $24
And that's why my answer to you is no, Apple can't sell the iPhone 5C, in its current configuration, for $200 less, and still remain profitable.
Open to corrections and different perspectives if my maths or POV is wrong. Thanks.