Apple COO Jeff Williams 'aware' of iPhone, Mac price concerns
Apple COO Jeff Williams delivered a brief speech at at Elon University where he touched on a variety of topics including the rising cost of the company's products and inaccuracy of analyst cost estimates.
Apple COO Jeff Williams
The short speech took place Friday, February 22 at Elon University where he talked about Apple's incredible growth since he joined two decades ago.During a question and answer session following the speech, Williams was asked by a student regarding Apple's plans to lower product prices. The student also cited a recent report that claims an iPhone only costs $350 to manufacture.
"The stories that come out about the cost of our products [have been] the bane of my existence from the beginning of time, including our early days," said Williams. "Analysts don't really understand the cost of what we do and how much care we put into making our products."
The Times News, who covered the speech, describes the lengths Apple has gone to for its product development. Citing the Apple Watch as an example, instead of just mimicking fitness trackers that existed prior to Apple's wearable, the company built an entire physiology lab with 40 licensed nurses and enlisted the help of 10,000 participants to further study how calories are burned in various fitness exercises.
Williams did admit he understands the concern of Apple's rising price points -- which has been especially noticeable on the iPhone models that now can sell for well over $1000.
"It's something we're very aware of," Williams said. "We do not want to be an elitist company. That's not -- we want to be an egalitarian company, and we've got a lot of work going on in developing markets."
Apple COO Jeff Williams
The short speech took place Friday, February 22 at Elon University where he talked about Apple's incredible growth since he joined two decades ago.During a question and answer session following the speech, Williams was asked by a student regarding Apple's plans to lower product prices. The student also cited a recent report that claims an iPhone only costs $350 to manufacture.
"The stories that come out about the cost of our products [have been] the bane of my existence from the beginning of time, including our early days," said Williams. "Analysts don't really understand the cost of what we do and how much care we put into making our products."
The Times News, who covered the speech, describes the lengths Apple has gone to for its product development. Citing the Apple Watch as an example, instead of just mimicking fitness trackers that existed prior to Apple's wearable, the company built an entire physiology lab with 40 licensed nurses and enlisted the help of 10,000 participants to further study how calories are burned in various fitness exercises.
Williams did admit he understands the concern of Apple's rising price points -- which has been especially noticeable on the iPhone models that now can sell for well over $1000.
"It's something we're very aware of," Williams said. "We do not want to be an elitist company. That's not -- we want to be an egalitarian company, and we've got a lot of work going on in developing markets."
Comments
Meanwhile, our puny minds can comprehend the balance sheet, and profit is obscene. The same old story doesn’t fly.
Dont get get me wrong I think it’s perfectly fine for Apple to have a wide line of iPhone, but they’ve pushed the envelope on what a flagship model can cost and they’re not doing anything they weren’t doing 5 years ago when a flagship iPhone was $650.
What has changed is our experiences and expectations. We never had any expectations of what personal and truly portable technology could be, the iPhone changed that and made us aware. Now, 10 years later, we realize that we had hit the seven year itch and things have not been the same since then. I mean I still love my iPhone and I cannot see my life with out it but it’s just not doing what it once did for me. So what to do? I could leave and get a new phone. I mean they look different and sexy, but I suspect that it will not fill that preceived void. After a few months the excitement I longed for fades, leaving me regretting my decision to leave in the first place.
20 years ago you could still get a revolutionary idea out of a single nerd getting inspired and just putting something together; and now you more often than not need whole teams producing and analyzing a ridiculous amount of data to get things right. You need to get the hardware right, and then the software for the underlying platform/APIs, and then get a lot of internal development going to explore what your developers can do with it all etc.
Plus everything they develop that never sees the light of day.
Whoch by some very basic rules implies that if you want to sell products, of a certain level of quality and a certain level of innovation, your product is going to cost more than another of of lesser quality/level of innovation.
Now regarding making profit, as SJ already pointed out that customers will vote with their wallets. They’re doing this now like they did in the past. And it’s now Apple’s job to respond this this by either eating up some margin, lowering the costs, etc.
TL;DR - Innovation is getting more expensive.
It is not unpredictable. It has been the case ever since we finally see the end of Moore's law. It is just most people 1. Did not bother to google and known enough about the topic, 2. Media did an absolutely appalling job, not only did they not understand it themselves, they didn't bother to report it since it is not click baiting enough.
Ever since the Smartphone Revolution, which kicks off a whole lots of other advancement in every computing industry ( or arguably in every industry ), the engineering cost of components and products has been steadily rising. From the Machines that design and Manufacturer the Chips, Engineers wages that has sky rocketed, to Tools required for QA and design, every single part of the process has shoot up in price. That is not including the fact R&D are getting harder as we reach some fundamental limits. It is likely to cost $1B to Fab an TSMC 5nm Chip. That is excluding the cost to ARM and other IP Price. You can literally count with your fingers Companies that has this budget and a market to sell these chips.
Consumer don't see these price increase because most of these R&D were spread to a much larger usage base, 1.3B Annual Smartphones sales compared to ~250M PC, a total of 10-100x increase in Global Mobile Revenue that drives the innovation in 4G and 5G as well as other advancement in the backend. Because the market were so much larger these technologies manage to recoup their R&D and made a handsome profits while charging you tiny amount of money.
But now the Smartphone Market has reached the end of its growth curve and a stage of saturation. Smartphone has reached roughly 80% of the total addressable market, that is world population minus infants and elderly. With the rest concerning more about Food and Water. Smartphone cycle are now longer than 3 years, and trending towards 4. There will be less Smartphone sold every year. ( And one reason why the media and marketing are trying to hype up 5G to force a upgrade cycle )
So what used to be an $1B R&D that spread over 400M iPhones in 2 years time, will now cost $3B R&D that spread over 300M iPhones in 3 years time. That is $0.25 / Unit as compared to $1 / unit. The numbers are not absolute, they just shows the scale of differences. ( The 400M unit were with respect to most of the early iPhones sold were cutting edge model, the recent iPhone has a much wider spread on older model, which means R&D cost on leading model and spread over a lower volume )
Of Course some of these are over simplified. For example with a 5% decline on Smartphone unit sold causes an avalanche to NAND and DRAM Price ( No, there isn't a cartel in recent NAND and DRAM pricing despite what ever that makes you believe ) Display Prices from OLED and LCD are dropping fast as well due to capacity needed to fill. So some of these will off set the cost of rising R&D. But as a general trend, Tech innovation is only going to get more expensive, and the industry now worries at their 5G investment will take longer to recoup.
Apple is insanely greedy these days. I remember the days when Steve Jobs stood up and say "And it's still $ xx," where xx was the same price was last year. Not anymore. Add a 30% premium and that is the new price these days.
I make a lot more money now than what I did a few years ago, but cannot stomach seeing a $129 wireless keyboard when I can buy the same thing for $40 at some other place. Sure there may be minor issues between the two, but the issues are minor and not worth the 3x premium I have to pay.
Yes, those are costs that customers must bear, otherwise the company is running below-cost, essentially losing money.
There are far more costs beyond just $350 worth of physical parts for an iPhone. Think about all the man-hours in every department, plus the cost of supporting devices after they sell. The costs that Apple must bear are astronomical! It's amazing they are reporting a profit year after year, if you ask me.
People expect to get wage increases, including Apple employees. But the product we are buying can't go up in price?
Hey, I'm not rich. I'd love Apple products be cheaper, and I do think they are missing the mark some on some (ie. an affordable Mac mini), but I'm not going to claim that Apple is screwing their customers for no reason. They do have enormous costs to cover, and they need to have money in the bank to keep investing into their products and services. Yes, they need to work harder to bring costs down. And Apple has acknowledged that. Let's keep the pressure on them, but let's also stay realistic about it.
Does Apple not report on their gross "margins" each quarter? Have you analyzed those margins and concluded that they are unrealistically inflated?
If you look closely, you'll see that Apple has been _spending_ far more on research and development. Those costs needs to be covered. I am confident their margins have not increased anywhere near the levels that you claim in your comment.
This is coming from an ex apple customer and a Steve Jobs fan. You people have a choice and you could get a phone or computer that will do anything that apple promises to do and much more for literally one tenth the price.
They even have the worst customer service, I sent my old imac to be fixed at their stores and due to several wrong diagnosis so they can start charge me to replace the most expensive part without actually listening to me or acknowledging the real problem, they ended up stealing it because I was late a week for picking it up and told me they threw it in the trash to be recycled and I lost $2500 and a life time of memories and hard work.
They should have an ‘introductory’ line of devices. Lower cost laptop macs for teens. They sort have already with iPhones with iPhone 7 and 8.