I wish they had put the iPhone 5 up also just for relative comparison (since that's all this kind of vague info is good for). So I grabbed both. Looks like the display and sensors are the big extra expense.
It's quite doubtful that iSuppli or whoever's BOM estimate is accurate to ±$25 or even ±$50. [The second significant digit is likely no more accurate to ±2, maybe not even ±5.] The USA SGS4 BOM of $229 and the iPhone 5 BOM of $207 is for intents and purposes the same BOM.
You would think the SGS4 would cost more through sheer physical size. There's just more there: glass, display, battery, chips, etc. But it's basically all immaterial as the major driver in profitability also includes how it much costs to sell and maintain the devices and how effective they are at selling the device. The BOM is ~$200. The ASP for Apple's iPhone is ~$650. Apple made about 12b profit out of 54b of revenue in Q4 12. iPhone's profit margin is pretty large, so it's likely north of 20%. So, $200 in profit, $200 for BOM, leaves $150 for the cost of selling the device. All these numbers vary quarter to quarter.
So, quibbling over the estimating BOM differences of the two devices is way over analyzing it. You really can't say one is more expensive then the other. And just looking at the BOM is only 1/3 of the problem. Drilling further down, the small differences here are only 10% of the BOM. So, people are quibbling over about 3% of the money here.
It's quite doubtful that iSuppli or whoever's BOM estimate is accurate to ±$25 or even ±$50.
Yep, that's why I said they're only good for relative comparisons, not exact ones.
Quote:
The ASP for Apple's iPhone is ~$650. Apple made about 12b profit out of 54b of revenue in Q4 12. iPhone's profit margin is pretty large, so it's likely north of 20%. So, $200 in profit, $200 for BOM, leaves $150 for the cost of selling the device. All these numbers vary quarter to quarter.
I think that's pretty darned close, although you're missing $100 on the BOM, which is why your numbers don't add up to $650. Otherwise, that's almost exactly what I came up with not long ago:
$640 average iPhone price x (widely reported 53%) average iPhone gross profit margin
= $340 gross profit per iPhone + $300 to build each iPhone (manufacturing, shipping, license fees).
Of the $340 gross profit, Apple's average reported expenses take up:
$20 - R&D (6%)
$54 - selling, admin (16%)
$68 - set aside for taxes (20%)
Leaving a total net profit per phone of: $198 or ~30% net profit margin.
So, roughly, $300 for the phone, $140 cost of selling, $200 profit... same as what you came up with.
The interesting part comes when you use those cost percentages with lower numbers to try to figure out how Apple can make a lower priced phone. But that's a thread for another day.
I think that's pretty darned close, although you're missing $100 on the BOM
Ouch. My quick mental math was quite meandering there. I'd put the not accounted for $100 into cost of doing business though, not the BOM. You have to pay for customer service, warranties, replacement inventory, etc. So 200 for BOM, 200 for profit, and 200 for cost of doing business. There'd be 0 to $50 of variance in the 3 figures quarter to quarter, year to year.
Quote:
The interesting part comes when you use those cost percentages with lower numbers to try to figure out how Apple can make a lower priced phone. But that's a thread for another day.
Every time I do that, the inevitable conclusion is to wonder why Apple would even try. They have to double their current unit sales numbers to really make a dent. There would be inevitable cannibalization, so it's quite the tricky proposition. And a $300 wrist computer? They'd have to sell 20s to 30s of millions per quarter just like the low cost iPhone to really make a dent as well. They are all side shows to iPhone and iPad revenue and profits. Apple has grown so huge that the "next big thing" for them has to be so huge that it'll encompass the entire population of the Earth. I'm not even sure being in the energy or public-sized utility business can make a big dent.
CO2 scrubbing robots?
Water collecting windmills?
Consumer power plants and energy storage?
Space power and weather control?
Buying out Bloom Energy, buying/developing CO2 capture techniques, water extraction are about the only billion, trillion dollar level blue sky businesses I can think of that allow Apple to be a 0.5 to 1 trillion per company a decade down the road.
Otherwise, they are going to meander along with an up and down business, fluctuating between 80b to 160b per year as a company. That might just be perfectly fine. Becoming more than that seems exceedingly hard to me.
Comments
Quote:
Originally Posted by KDarling
I wish they had put the iPhone 5 up also just for relative comparison (since that's all this kind of vague info is good for). So I grabbed both. Looks like the display and sensors are the big extra expense.
It's quite doubtful that iSuppli or whoever's BOM estimate is accurate to ±$25 or even ±$50. [The second significant digit is likely no more accurate to ±2, maybe not even ±5.] The USA SGS4 BOM of $229 and the iPhone 5 BOM of $207 is for intents and purposes the same BOM.
You would think the SGS4 would cost more through sheer physical size. There's just more there: glass, display, battery, chips, etc. But it's basically all immaterial as the major driver in profitability also includes how it much costs to sell and maintain the devices and how effective they are at selling the device. The BOM is ~$200. The ASP for Apple's iPhone is ~$650. Apple made about 12b profit out of 54b of revenue in Q4 12. iPhone's profit margin is pretty large, so it's likely north of 20%. So, $200 in profit, $200 for BOM, leaves $150 for the cost of selling the device. All these numbers vary quarter to quarter.
So, quibbling over the estimating BOM differences of the two devices is way over analyzing it. You really can't say one is more expensive then the other. And just looking at the BOM is only 1/3 of the problem. Drilling further down, the small differences here are only 10% of the BOM. So, people are quibbling over about 3% of the money here.
Quote:
Originally Posted by THT
It's quite doubtful that iSuppli or whoever's BOM estimate is accurate to ±$25 or even ±$50.
Yep, that's why I said they're only good for relative comparisons, not exact ones.
Quote:
The ASP for Apple's iPhone is ~$650. Apple made about 12b profit out of 54b of revenue in Q4 12. iPhone's profit margin is pretty large, so it's likely north of 20%. So, $200 in profit, $200 for BOM, leaves $150 for the cost of selling the device. All these numbers vary quarter to quarter.
I think that's pretty darned close, although you're missing $100 on the BOM, which is why your numbers don't add up to $650. Otherwise, that's almost exactly what I came up with not long ago:
$640 average iPhone price x (widely reported 53%) average iPhone gross profit margin
= $340 gross profit per iPhone + $300 to build each iPhone (manufacturing, shipping, license fees).
Of the $340 gross profit, Apple's average reported expenses take up:
$20 - R&D (6%)
$54 - selling, admin (16%)
$68 - set aside for taxes (20%)
Leaving a total net profit per phone of: $198 or ~30% net profit margin.
So, roughly, $300 for the phone, $140 cost of selling, $200 profit... same as what you came up with.
The interesting part comes when you use those cost percentages with lower numbers to try to figure out how Apple can make a lower priced phone. But that's a thread for another day.
Quote:
Originally Posted by KDarling
I think that's pretty darned close, although you're missing $100 on the BOM
Ouch. My quick mental math was quite meandering there. I'd put the not accounted for $100 into cost of doing business though, not the BOM. You have to pay for customer service, warranties, replacement inventory, etc. So 200 for BOM, 200 for profit, and 200 for cost of doing business. There'd be 0 to $50 of variance in the 3 figures quarter to quarter, year to year.
Quote:
The interesting part comes when you use those cost percentages with lower numbers to try to figure out how Apple can make a lower priced phone. But that's a thread for another day.
Every time I do that, the inevitable conclusion is to wonder why Apple would even try. They have to double their current unit sales numbers to really make a dent. There would be inevitable cannibalization, so it's quite the tricky proposition. And a $300 wrist computer? They'd have to sell 20s to 30s of millions per quarter just like the low cost iPhone to really make a dent as well. They are all side shows to iPhone and iPad revenue and profits. Apple has grown so huge that the "next big thing" for them has to be so huge that it'll encompass the entire population of the Earth. I'm not even sure being in the energy or public-sized utility business can make a big dent.
CO2 scrubbing robots?
Water collecting windmills?
Consumer power plants and energy storage?
Space power and weather control?
Buying out Bloom Energy, buying/developing CO2 capture techniques, water extraction are about the only billion, trillion dollar level blue sky businesses I can think of that allow Apple to be a 0.5 to 1 trillion per company a decade down the road.
Otherwise, they are going to meander along with an up and down business, fluctuating between 80b to 160b per year as a company. That might just be perfectly fine. Becoming more than that seems exceedingly hard to me.