You do like to have it both ways don't you? Whenever we debate the xMac and I use the Mini as a comparison, I state that a larger motherboard would cost about $20 more. Then you say, "no, a bigger motherboard would be much more than that".
So which is it? If you want to be consistent, you have to tell me that my -$10 for a smaller PCB is an underestimate, not over. Or would you like to re-open discussions on the costs of an xMac and stick to your assertion that changing the size of a PCB doesn't do much to the cost of it?
I am. It has to do with the sophistication of the board, not just the size. Take a Mini, and make a slightly bigger board, with no more sophistication, and it won't cost too much more, but it could, if Apple adds to it.
Going the other way, if the board is just smaller because of less components, the price will be about the same. But, if the shrink required more sophisticated timing, sheilding, etc, it could cost a fair amount more.
It depends.
Quote:
Bull. Total bull. If that's accurate, why did the price of the 15" MacBook Pro (which presumably would be more by virtue of being larger) not increase when it switched to L.E.D. backlighting from CFL?
It's not bull, and you know it.
Why are you saying something that is so obviously wrong?
Each generation, Apple lowers the cost of its machines by a bit as prices for technology comes down. The fact that they added LED without doing that shows that it cosr more.
But, you are arguing without answering why Apple wouldn't want the sales boost from its ENTIRE line if the cost was so low.
Quote:
Also, the 17" (which should be even more expensive again to switch from CFL to L.E.D.) has a high-resolution L.E.D. backlit display as an option. That screen costs $100 more than the standard version. The previous generation also had an optional high-res screen, but that wasn't LED backlit and IIRC, it cost $80 more. So that's $20 retail price of LED backlighting a 17" screen.
No, it's not. There are too many factors going into a switch of several parts at once to say that.
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I stand by my $5 estimate.
Good.
Quote:
I'm 100% confident that the next MacBook revision will see a switch to L.E.D. backlighting with no increase in price.
I'd love that. As Apple finds lower priced components, they could afford to do it.
Quote:
R&D has got nothing to do with margins.
Margin % = ((retail price - cost of manufacture)/retail price)*100
R&D doesn't figure anywhere in that.
A large R&D expenditure might require high margins in order for you to make an overall profit, but it does not intrinsically cause high margins, and it's the margins of the machine that we're discussing.
Like it or not, R&D is added to the selling price of goods.
Quote:
Even if we take your cost estimates instead of mine, we're left with cost of manufacture increases of $350 Vs. a $700 increase in price. If you think the $1099 MacBook has a 50% margin, then that means the MacBook Air has the same margin as the MacBook. However, we know that Apple's usual computer margins are in the high twenties, so the MacBook Air is higher than this.
I don't think the MB margin is 50%. Parts are only part of the cost You can't use that number and come up with margins.
Quote:
What it comes down to is that this "analyst" is totally wrong. Apple's overall margin reduction has nothing to do with the MacBook Air, since its margins are at least as high as Apple's other machines, and likely much higher.
You really don't know. Your guesses are likely no better than his.
Each generation, Apple lowers the cost of its machines by a bit as prices for technology comes down.
What do you mean by "generation"? Because Apple haven't ever changed the price of the MacBook or the MacBook Pro. The MacBook price points have always been $1099, $1299 and $1499, and the MacBook Pro price points have always been $1999, $2499 and $2799. In fact, the price points of the bottom two PowerBook G4s were $1999 and $2499 for quite a few iterations. The price of the 17" model has fallen.
I ask you again (third time now): if L.E.D. backlighting is so much more expensive (+$100 for a 13" screen means +$140 for a 15.4" one, the screen area of a 15.4" being 40% more than a 13" one), how come the 15.4" MacBook Pro didn't increase in price when they switched to L.E.D. backlighting?
Quote:
Originally Posted by melgross
Like it or not, R&D is added to the selling price of goods.
Sure. And that makes their margins higher because margins having nothing to with R&D costs added to the price of the machine.
Quote:
Originally Posted by melgross
I don't think the MB margin is 50%.
Great. So you concede that the MacBook Air has higher margins than the MacBook.
Quote:
Originally Posted by melgross
Parts are only part of the cost You can't use that number and come up with margins.
You need to factor in manufacturing cost as well as parts. That's it. Like I said above, margin % = ((retail cost - cost of manufacture (inc. parts))/retail cost)*100. That's the definition of gross margin. Which is what we're talking about.
Quote:
Originally Posted by melgross
Your guesses are likely no better than his.
He didn't provide any guesses. He just said "I know Apple gave all these sound, definitive reasons why their gross margins have dropped, but I think they're lying! It's all because of the MacBook Air!". He provided no reason whatsoever behind his accusation of low MacBook Air margins.
Just how low would the margins of the MacBook Air have to be for them to affect Apple's overall gross margins so considerably? Given the likely sales volume of the MacBook Air, they'd probably have to be selling them at a loss in order to result in the overall reduction in gross margin that we saw. I think we can at least agree that Apple aren't selling the Air at a loss.
I ask you again (third time now): if L.E.D. backlighting is so much more expensive (+$100 for a 13" screen means +$140 for a 15.4" one, the screen area of a 15.4" being 40% more than a 13" one), how come the 15.4" MacBook Pro didn't increase in price when they switched to L.E.D. backlighting?
Actually, this is an easy one. As you mentioned, Apple has kept its prices very stable accross their laptop lines. Suppose we talk about a $2K MBP and assume that at sometime in the past that computer had a (for example only) 20% profit margin. What did Apple do to the price when Intel lowered the chip costs? Nothing. And when RAM prices declined? Nothing. After 6 months, that 20% margin may have increased to 30% as componant prices have decreased.
Now I'm sure you have read as many threads as I have where people bemoan this and wail about Apple gouging their customers by not lowering thier prices in these situations, but it is what they do.
Now, when it is time for a revision, they can bump it to a faster, more expensive Intel chip and a nicer more expensive screen and keep the $2K price stable. Does that mean that the screen was the same price? Of course not! They just allowed the margin to drop back to (again still theoretical) 20%.
You cannot figure componant prices by Apples pricing--they do not work it that way as you well know.
Actually, this is an easy one. As you mentioned, Apple has kept its prices very stable accross their laptop lines. Suppose we talk about a $2K MBP and assume that at sometime in the past that computer had a (for example only) 20% profit margin. What did Apple do to the price when Intel lowered the chip costs? Nothing. And when RAM prices declined? Nothing. After 6 months, that 20% margin may have increased to 30% as componant prices have decreased.
Now I'm sure you have read as many threads as I have where people bemoan this and wail about Apple gouging their customers by not lowering thier prices in these situations, but it is what they do.
I agree. It is something that I myself have suggested Apple should cease to do. They should aim to keep their margins constant by lowering prices as a model ages, rather than start with low (for Apple) margins and let them grow larger and larger until the next refresh.
Having said that, if the screen was $140 more than the previous model, I don't think Apple would be willing to absorb that. It would have made the margins on the 15.4" with L.E.D. upon launch much smaller than when the previous model was launched, when you consider that the screen wasn't the only thing that got upgraded.
Having said that, if the screen was $140 more than the previous model, I don't think Apple would be willing to absorb that. It would have made the margins on the 15.4" with L.E.D. upon launch much smaller than when the previous model was launched, when you consider that the screen wasn't the only thing that got upgraded.
"LED backlights are about half as thick as CCFL backlights, according to Luke Yao, an analyst at DisplaySearch.
?The problem with LED backlights is still cost, but prices are coming down,? he said during a conference in Taipei.
The price of an LED backlight is still twice as much as that of CCFL or more."
Thanks for the link. Perhaps my +$5 estimate was slightly wishful thinking, but I still think it's significantly less than +$75-100 as suggested by Melgross. If L.E.D. adds $75 and L.E.D. is double the price of CFL, that makes the cost of CFL $75. And I don't believe that for a second. It also doesn't tally with the +$100 retail price for Apple's high-res L.E.D. screen for the 17" MacBook Pro.
Perhaps my +$5 estimate was slightly wishful thinking, but I still think it's significantly less than +$75-100 as suggested by Melgross.
If you go to Dell website and configure an XPS M1330 to have a LED backlit screen it ups the price by $150 so I think Melgross's estimate is more likely to be correct than yours.
It's usually done to pay the R&D off up front. It's decided that a certain number of machines will bear the brunt of the costs. Once that number has been sold, and most of the R&D paid down, the priced is dropped by that amount. There may be another price drop later as a manufacturing price drop approaches. Then the cycle starts again with the next model.
I agree with Mel and would also like to add that the higher prices are also used to control the supply/demand curve at the initial launch. I think this is especially the case with the iPhone launch. Apple has not been able to keep up with demand for many products including iPods in the past. If you can sell all your stock at $600, it would be foolish for any company to price those same units at $400 and not be able to make enough units to fulfill demand. When they realized that the demand wasn't large enough to meet the supply at that price point once a few months past, they lowered the price. The $100 gift certificates they gave out cost them less than $60 each and probably actually made them money as I am sure many customers used them toward a computer or other purchase much greater than $100. Overall, I believe it was brilliantly executed.
Comments
You do like to have it both ways don't you? Whenever we debate the xMac and I use the Mini as a comparison, I state that a larger motherboard would cost about $20 more. Then you say, "no, a bigger motherboard would be much more than that".
So which is it? If you want to be consistent, you have to tell me that my -$10 for a smaller PCB is an underestimate, not over. Or would you like to re-open discussions on the costs of an xMac and stick to your assertion that changing the size of a PCB doesn't do much to the cost of it?
I am. It has to do with the sophistication of the board, not just the size. Take a Mini, and make a slightly bigger board, with no more sophistication, and it won't cost too much more, but it could, if Apple adds to it.
Going the other way, if the board is just smaller because of less components, the price will be about the same. But, if the shrink required more sophisticated timing, sheilding, etc, it could cost a fair amount more.
It depends.
Bull. Total bull. If that's accurate, why did the price of the 15" MacBook Pro (which presumably would be more by virtue of being larger) not increase when it switched to L.E.D. backlighting from CFL?
It's not bull, and you know it.
Why are you saying something that is so obviously wrong?
Each generation, Apple lowers the cost of its machines by a bit as prices for technology comes down. The fact that they added LED without doing that shows that it cosr more.
But, you are arguing without answering why Apple wouldn't want the sales boost from its ENTIRE line if the cost was so low.
Also, the 17" (which should be even more expensive again to switch from CFL to L.E.D.) has a high-resolution L.E.D. backlit display as an option. That screen costs $100 more than the standard version. The previous generation also had an optional high-res screen, but that wasn't LED backlit and IIRC, it cost $80 more. So that's $20 retail price of LED backlighting a 17" screen.
No, it's not. There are too many factors going into a switch of several parts at once to say that.
I stand by my $5 estimate.
Good.
I'm 100% confident that the next MacBook revision will see a switch to L.E.D. backlighting with no increase in price.
I'd love that. As Apple finds lower priced components, they could afford to do it.
R&D has got nothing to do with margins.
Margin % = ((retail price - cost of manufacture)/retail price)*100
R&D doesn't figure anywhere in that.
A large R&D expenditure might require high margins in order for you to make an overall profit, but it does not intrinsically cause high margins, and it's the margins of the machine that we're discussing.
Like it or not, R&D is added to the selling price of goods.
Even if we take your cost estimates instead of mine, we're left with cost of manufacture increases of $350 Vs. a $700 increase in price. If you think the $1099 MacBook has a 50% margin, then that means the MacBook Air has the same margin as the MacBook. However, we know that Apple's usual computer margins are in the high twenties, so the MacBook Air is higher than this.
I don't think the MB margin is 50%. Parts are only part of the cost You can't use that number and come up with margins.
What it comes down to is that this "analyst" is totally wrong. Apple's overall margin reduction has nothing to do with the MacBook Air, since its margins are at least as high as Apple's other machines, and likely much higher.
You really don't know. Your guesses are likely no better than his.
Each generation, Apple lowers the cost of its machines by a bit as prices for technology comes down.
What do you mean by "generation"? Because Apple haven't ever changed the price of the MacBook or the MacBook Pro. The MacBook price points have always been $1099, $1299 and $1499, and the MacBook Pro price points have always been $1999, $2499 and $2799. In fact, the price points of the bottom two PowerBook G4s were $1999 and $2499 for quite a few iterations. The price of the 17" model has fallen.
I ask you again (third time now): if L.E.D. backlighting is so much more expensive (+$100 for a 13" screen means +$140 for a 15.4" one, the screen area of a 15.4" being 40% more than a 13" one), how come the 15.4" MacBook Pro didn't increase in price when they switched to L.E.D. backlighting?
Like it or not, R&D is added to the selling price of goods.
Sure. And that makes their margins higher because margins having nothing to with R&D costs added to the price of the machine.
I don't think the MB margin is 50%.
Great. So you concede that the MacBook Air has higher margins than the MacBook.
Parts are only part of the cost You can't use that number and come up with margins.
You need to factor in manufacturing cost as well as parts. That's it. Like I said above, margin % = ((retail cost - cost of manufacture (inc. parts))/retail cost)*100. That's the definition of gross margin. Which is what we're talking about.
Your guesses are likely no better than his.
He didn't provide any guesses. He just said "I know Apple gave all these sound, definitive reasons why their gross margins have dropped, but I think they're lying! It's all because of the MacBook Air!". He provided no reason whatsoever behind his accusation of low MacBook Air margins.
Just how low would the margins of the MacBook Air have to be for them to affect Apple's overall gross margins so considerably? Given the likely sales volume of the MacBook Air, they'd probably have to be selling them at a loss in order to result in the overall reduction in gross margin that we saw. I think we can at least agree that Apple aren't selling the Air at a loss.
I ask you again (third time now): if L.E.D. backlighting is so much more expensive (+$100 for a 13" screen means +$140 for a 15.4" one, the screen area of a 15.4" being 40% more than a 13" one), how come the 15.4" MacBook Pro didn't increase in price when they switched to L.E.D. backlighting?
Actually, this is an easy one. As you mentioned, Apple has kept its prices very stable accross their laptop lines. Suppose we talk about a $2K MBP and assume that at sometime in the past that computer had a (for example only) 20% profit margin. What did Apple do to the price when Intel lowered the chip costs? Nothing. And when RAM prices declined? Nothing. After 6 months, that 20% margin may have increased to 30% as componant prices have decreased.
Now I'm sure you have read as many threads as I have where people bemoan this and wail about Apple gouging their customers by not lowering thier prices in these situations, but it is what they do.
Now, when it is time for a revision, they can bump it to a faster, more expensive Intel chip and a nicer more expensive screen and keep the $2K price stable. Does that mean that the screen was the same price? Of course not! They just allowed the margin to drop back to (again still theoretical) 20%.
You cannot figure componant prices by Apples pricing--they do not work it that way as you well know.
Actually, this is an easy one. As you mentioned, Apple has kept its prices very stable accross their laptop lines. Suppose we talk about a $2K MBP and assume that at sometime in the past that computer had a (for example only) 20% profit margin. What did Apple do to the price when Intel lowered the chip costs? Nothing. And when RAM prices declined? Nothing. After 6 months, that 20% margin may have increased to 30% as componant prices have decreased.
Now I'm sure you have read as many threads as I have where people bemoan this and wail about Apple gouging their customers by not lowering thier prices in these situations, but it is what they do.
I agree. It is something that I myself have suggested Apple should cease to do. They should aim to keep their margins constant by lowering prices as a model ages, rather than start with low (for Apple) margins and let them grow larger and larger until the next refresh.
Having said that, if the screen was $140 more than the previous model, I don't think Apple would be willing to absorb that. It would have made the margins on the 15.4" with L.E.D. upon launch much smaller than when the previous model was launched, when you consider that the screen wasn't the only thing that got upgraded.
Having said that, if the screen was $140 more than the previous model, I don't think Apple would be willing to absorb that. It would have made the margins on the 15.4" with L.E.D. upon launch much smaller than when the previous model was launched, when you consider that the screen wasn't the only thing that got upgraded.
"LED backlights are about half as thick as CCFL backlights, according to Luke Yao, an analyst at DisplaySearch.
?The problem with LED backlights is still cost, but prices are coming down,? he said during a conference in Taipei.
The price of an LED backlight is still twice as much as that of CCFL or more."
http://www.macworld.com/article/1330...okair_led.html.
"LED backlights are about half as thick as CCFL backlights, according to Luke Yao, an analyst at DisplaySearch.
?The problem with LED backlights is still cost, but prices are coming down,? he said during a conference in Taipei.
The price of an LED backlight is still twice as much as that of CCFL or more."
http://www.macworld.com/article/1330...okair_led.html.
Thanks for the link. Perhaps my +$5 estimate was slightly wishful thinking, but I still think it's significantly less than +$75-100 as suggested by Melgross. If L.E.D. adds $75 and L.E.D. is double the price of CFL, that makes the cost of CFL $75. And I don't believe that for a second. It also doesn't tally with the +$100 retail price for Apple's high-res L.E.D. screen for the 17" MacBook Pro.
Perhaps my +$5 estimate was slightly wishful thinking, but I still think it's significantly less than +$75-100 as suggested by Melgross.
If you go to Dell website and configure an XPS M1330 to have a LED backlit screen it ups the price by $150 so I think Melgross's estimate is more likely to be correct than yours.
It's usually done to pay the R&D off up front. It's decided that a certain number of machines will bear the brunt of the costs. Once that number has been sold, and most of the R&D paid down, the priced is dropped by that amount. There may be another price drop later as a manufacturing price drop approaches. Then the cycle starts again with the next model.
I agree with Mel and would also like to add that the higher prices are also used to control the supply/demand curve at the initial launch. I think this is especially the case with the iPhone launch. Apple has not been able to keep up with demand for many products including iPods in the past. If you can sell all your stock at $600, it would be foolish for any company to price those same units at $400 and not be able to make enough units to fulfill demand. When they realized that the demand wasn't large enough to meet the supply at that price point once a few months past, they lowered the price. The $100 gift certificates they gave out cost them less than $60 each and probably actually made them money as I am sure many customers used them toward a computer or other purchase much greater than $100. Overall, I believe it was brilliantly executed.