1) I don't think that Foxconn has "inhuman working conditions". You hear a lot about the number of suicides there, but the fact of the matter is that China, itself, has a very high suicide rate. The suicide rate at Foxconn is actually somewhere around 1/2 to 1/3 of China's rate. Life at Foxconn is actually pretty good compared to the rest of China.
2) How do you raise up the standard of living in third-world countries? You invest money there. You build factories and hire workers. It's a long, slow process. If you think the salaries that Apple is paying are substandard, ask yourself how much those workers would be making if Apple wasn't there. Then ask yourself what the aggregate effect of all American companies withdrawing their investment dollars would be on that economy. It would be an economic disaster for China.
3) Apple is not a government agency; they don't need to do anything about unemployment per se. They are a for-profit business, and the best thing that they can do for the economy is to be successful. A whole industry has sprung up around smartphone and tablet app development, many thanks to Apple. In fact, that industry is expected to hit $100 billion dollars by 2015. Apple is also expected to hire a ton of construction workers here in the near future when work starts on their new campus, and the California construction industry needs that work badly.
4) Apple is very focused, financially. They're sitting on a huge pile of cash because they don't squander it on vanity acquisitions. And they don't have it all sitting in the iVault, either. They have it invested in stocks and bonds and other short term investments that can be converted to cash very quickly when they need it. Investing in the market is investing in other businesses -- again, spurring employment and economic growth.
All that said, I just bought a 64 GB iPhone 4S. Was I aware that Apple was making an obscene profit on it? I've been around long enough to know that, yes. Apple's profit margin didn't factor into my decision, though. I bought the phone because I believe it's worth that much.
Wow, I know Apple tend to make around 30-35% margin usually, but 70%....... Does make me feel that Apple just shafted me on my £499 aquisition for a 16gb iPhone 4S. \
The problem is that the article created a new figure out of thin air. They are defining 'manufacturing margin' as the difference between selling price and component costs. That is a meaningless figure - and is not the same as gross margin.
To calculate gross margin, you subtract total manufacturing costs from selling price - not just component costs. It neglects packaging, shipping, quality costs, plant overhead, assembly cost, warranty costs (which may or may not be included on cost of goods sold) and so on. Gross margin on the iPhone is far less than the 70% "Manufacturing Margin" being reported.
Manufacturing margin is different from operating margin. That's just the cost of the parts, once you add in all the other costs like shipping, marketing, engineering, etc the margin probably falls to around 35%. Still a very healthy profit. In the end something is really only worth what enough people are willing to pay for it.
That is note quite correct, either. That's a typical gross margin figure for Apple products.
Let's break it out:
Start with your revenue.
Subtract component costs. That gives you the 'manufacturing margin' - which is not a term that anyone uses except this analyst. It's also a meaningless term.
Subtract direct manufacturing costs. Shipping. Packaging. Assembly labor. Quality costs. Warranty costs (sometimes included here, sometimes included in indirect costs). Plant overhead (typically only the direct plant overhead is included here, not the indirect plant overhead). And so on. Now you have the gross margin. For Apple products, 35-40% range is common.
Subtract all the indirect costs (that is, costs that are not dependent on how many units are shipped. In theory, indirect costs are the same whether you sell one unit or a million. Obviously, that is an approximation). Things like R&D, Marketing, Corporate administration, legal costs, rent, etc. Some companies do include some direct costs (for example, tech support costs) in this category. That leaves you with operating margin (typically single digits for most companies, but an incredible 30% for Apple).
Now, subtract or add non-operating income. Things like interest expense, investment income, etc. That gives you pre-tax net income (again, around 30% for Apple).
Now, subtract taxes on the income and you get a net income figure. (around 20-25% for Apple)
(And BTW, I don't buy coffee from *$s, because I think it is mediocre.)
You are too kind. Starbucks is horrible not mediocre. No one can stand to drink black coffee there. That is why they always mix it with milk, sugar, whipped cream, chocolate, syrup, and artificial flavors like hazel nut, vanilla, etc. They buy cheap coffee and roast really dark to try to disguise the defects.
Yet people who know nothing about coffee think it must be good because there is a Starbucks on every corner. Quantity != quality.
Apple, in electronics, is like Hacienda la Esmeralda in coffee, which is what I am drinking right now. Cost a little more but worth it.
You are too kind. Starbucks is horrible not mediocre.
Naw. Not horrible.
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
Coffee should brewed 3 days after roasting.
I'll take a middle quality coffee roasted perfectly over a top quality roasted poorly. Starbucks like any major food chain values consistency over quality, which is why they over roast everything. Charcoal tastes the same regardless of which bean you start out with. Panamas need to be roasted light.
No one is saying this. All I said was, that my guess is that it is covered by the first million or so phones. Apple sell about 10-20 million phones every quarter.
1. no the iCloud - that one will need cash flow continously
2. do you have figures to support your claim of "the first million or so" or is it a guess?
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
Given that these profits are achieved at the cost of insanely inhuman working conditions for the Chinese who actually fabricate the phones, and that Apple has obscene amounts of cash on hand with which they could actually do something about unemployment in the US tech industry, this is just the reason I'm reluctant to buy new Apple products. It's true that everyone else does the same thing, but Apple could be using their leverage in positive ways, not just to make more money (and as an Apple stockholder, I have an interest in the money they make...). Remember when Jobs said he hoped Apple would never lose its soul? They have.
And maybe you've lost your reason. How do you know what they are planning to do with their "obscene" capital? What if they are developing EVEN MORE products that will save real journalism, reform education, expand art and music making and 'consuming,' and so on, including stuff even you might have thought of, such as preserving heritage languages?
The global tectonic shifts in macroeconomics that make one society postindustrial and another ascendantly industrial are beyond the control of any single company. Working conditions are relative, and they are always evolving.
That is definitely conventional wisdom, and certainly true for Sumatra, but I've found the optimum wait does vary considerably depending on the bean. Some are best almost immediately after roasting, at least to my taste. Another unwelcome variable.
I also feel they charge to much for the device. Average selling price of the iPhone is north of 600$ if I'm not mistaken.
Say it costs Apple 200$ to get it from nothing, to a customer. Thats 400$ profit on a 600$ device. They are making gold. Simple as that.
But the price is set for what people pay. If they feel that the price is keeping people away, they have ALOT of margin to bite from.
It's not Starbucks fault a cup of coffee is 5 dollars. It's yours.
How much it cost to make has no barring on the demand it creates. If we look at the iPhone 4's history we have a product that was wildly successful for 5 quarters, increasing in sales and barely being able to keep its head above production.
From a business PoV it sounds like they priced it right, if not a little too inexpensive. From a consumer's PoV, sure I want less expensive but not at the cost of too great a wait in trying to purchase to demand far outstripping supply well beyond the initial release. You have to take into account the intangible aspects of buying an iPhone. For instance, their customer service is great because they can afford to replace your phone no questions asked which is a value in an of itself.
PS: Notice the iPod Touch didn't get updated with an A5 chip this year. I hypothesis that between their top selling devices, the iPad and iPhone, Apple wasn't able to get enough chips to satisfy all three business models so they focused on the ones the were most popular and most profitable.
I don't understand something. Many people say that Android phones are only popular because of price. But with a greater carrier subsidy, does the customer really see a much higher price for the iPhone? It doesn't appear to be so based on this article.
I don't understand something. Many people say that Android phones are only popular because of price. But with a greater carrier subsidy, does the customer really see a much higher price for the iPhone? It doesn't appear to be so based on this article.
No, as their are some excellent Android phones. The only Android I want is Galaxy S series. SUPER AMOLED PLUS is one of the best displays on any phone.
Android phones are popular because of choice. I guess you can say they're this generation's feature phone. Remeber when the RAZR was selling, but the LG Chocolate and other phones were selling well (but not as much)? That's the difference I see. In fact, some people absolutely can't get an iPhone because of the job they have (some jobs don't permit cameras).
There's definately a market and it's outpacing iOS. But that's as an OS. Phone wise, the closest is the Galaxy series from Samsung....even then....
And maybe you've lost your reason. How do you know what they are planning to do with their "obscene" capital? What if they are developing EVEN MORE products that will save real journalism, reform education, expand art and music making and 'consuming,' and so on, including stuff even you might have thought of, such as preserving heritage languages?
The global tectonic shifts in macroeconomics that make one society postindustrial and another ascendantly industrial are beyond the control of any single company. Working conditions are relative, and they are always evolving.
Given that these profits are achieved at the cost of insanely inhuman working conditions for the Chinese who actually fabricate the phones, and that Apple has obscene amounts of cash on hand with which they could actually do something about unemployment in the US tech industry, this is just the reason I'm reluctant to buy new Apple products. It's true that everyone else does the same thing, but Apple could be using their leverage in positive ways, not just to make more money (and as an Apple stockholder, I have an interest in the money they make...). Remember when Jobs said he hoped Apple would never lose its soul? They have.
Sorry, I have to laugh whenever people bringing up Apple's dollars and equating it with the notion that it can be use to ease up unemployments, paying off your grannies' debt and reducing their selling price etc. C'mon, you are talking about capitalism here. It won't happen unless the whole country is ditching the system altogether. There all there for the profits.
Comments
A few things:
1) I don't think that Foxconn has "inhuman working conditions". You hear a lot about the number of suicides there, but the fact of the matter is that China, itself, has a very high suicide rate. The suicide rate at Foxconn is actually somewhere around 1/2 to 1/3 of China's rate. Life at Foxconn is actually pretty good compared to the rest of China.
2) How do you raise up the standard of living in third-world countries? You invest money there. You build factories and hire workers. It's a long, slow process. If you think the salaries that Apple is paying are substandard, ask yourself how much those workers would be making if Apple wasn't there. Then ask yourself what the aggregate effect of all American companies withdrawing their investment dollars would be on that economy. It would be an economic disaster for China.
3) Apple is not a government agency; they don't need to do anything about unemployment per se. They are a for-profit business, and the best thing that they can do for the economy is to be successful. A whole industry has sprung up around smartphone and tablet app development, many thanks to Apple. In fact, that industry is expected to hit $100 billion dollars by 2015. Apple is also expected to hire a ton of construction workers here in the near future when work starts on their new campus, and the California construction industry needs that work badly.
4) Apple is very focused, financially. They're sitting on a huge pile of cash because they don't squander it on vanity acquisitions. And they don't have it all sitting in the iVault, either. They have it invested in stocks and bonds and other short term investments that can be converted to cash very quickly when they need it. Investing in the market is investing in other businesses -- again, spurring employment and economic growth.
All that said, I just bought a 64 GB iPhone 4S. Was I aware that Apple was making an obscene profit on it? I've been around long enough to know that, yes. Apple's profit margin didn't factor into my decision, though. I bought the phone because I believe it's worth that much.
Kudos for that terrific piece of sanity!
Wow, I know Apple tend to make around 30-35% margin usually, but 70%....... Does make me feel that Apple just shafted me on my £499 aquisition for a 16gb iPhone 4S.
The problem is that the article created a new figure out of thin air. They are defining 'manufacturing margin' as the difference between selling price and component costs. That is a meaningless figure - and is not the same as gross margin.
To calculate gross margin, you subtract total manufacturing costs from selling price - not just component costs. It neglects packaging, shipping, quality costs, plant overhead, assembly cost, warranty costs (which may or may not be included on cost of goods sold) and so on. Gross margin on the iPhone is far less than the 70% "Manufacturing Margin" being reported.
Manufacturing margin is different from operating margin. That's just the cost of the parts, once you add in all the other costs like shipping, marketing, engineering, etc the margin probably falls to around 35%. Still a very healthy profit. In the end something is really only worth what enough people are willing to pay for it.
That is note quite correct, either. That's a typical gross margin figure for Apple products.
Let's break it out:
Start with your revenue.
Subtract component costs. That gives you the 'manufacturing margin' - which is not a term that anyone uses except this analyst. It's also a meaningless term.
Subtract direct manufacturing costs. Shipping. Packaging. Assembly labor. Quality costs. Warranty costs (sometimes included here, sometimes included in indirect costs). Plant overhead (typically only the direct plant overhead is included here, not the indirect plant overhead). And so on. Now you have the gross margin. For Apple products, 35-40% range is common.
Subtract all the indirect costs (that is, costs that are not dependent on how many units are shipped. In theory, indirect costs are the same whether you sell one unit or a million. Obviously, that is an approximation). Things like R&D, Marketing, Corporate administration, legal costs, rent, etc. Some companies do include some direct costs (for example, tech support costs) in this category. That leaves you with operating margin (typically single digits for most companies, but an incredible 30% for Apple).
Now, subtract or add non-operating income. Things like interest expense, investment income, etc. That gives you pre-tax net income (again, around 30% for Apple).
Now, subtract taxes on the income and you get a net income figure. (around 20-25% for Apple)
(And BTW, I don't buy coffee from *$s, because I think it is mediocre.)
You are too kind. Starbucks is horrible not mediocre. No one can stand to drink black coffee there. That is why they always mix it with milk, sugar, whipped cream, chocolate, syrup, and artificial flavors like hazel nut, vanilla, etc. They buy cheap coffee and roast really dark to try to disguise the defects.
Yet people who know nothing about coffee think it must be good because there is a Starbucks on every corner. Quantity != quality.
Apple, in electronics, is like Hacienda la Esmeralda in coffee, which is what I am drinking right now. Cost a little more but worth it.
Lolz, $32 droid!
I'll take two!
Apple, in electronics, is like Hacienda la Esmeralda in coffee, which is what I am drinking right now. Cost a little more but worth it.
Where do you get it?
You are too kind. Starbucks is horrible not mediocre.
Naw. Not horrible.
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
Naw. Not horrible.
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
Coffee should brewed 3 days after roasting.
I'll take a middle quality coffee roasted perfectly over a top quality roasted poorly. Starbucks like any major food chain values consistency over quality, which is why they over roast everything. Charcoal tastes the same regardless of which bean you start out with. Panamas need to be roasted light.
@Robin - I PMed you.
No one is saying this. All I said was, that my guess is that it is covered by the first million or so phones. Apple sell about 10-20 million phones every quarter.
1. no the iCloud - that one will need cash flow continously
2. do you have figures to support your claim of "the first million or so" or is it a guess?
Naw. Not horrible.
Its all arabica beans, for starters. The drip equipment is competent, and the Clover machines are top notch.
But the beans are, at best, middling quality arabicas, over roasted, and not-so-fresh by the time they are served. Fresh is as important to coffee as it is to baked goods.
I roast my own coffee, from (nearly) top quality beans. Its easy and fun, and its as rewarding as eating fresh baked chocolate chip cookies.
Panama's been producing top notch coffees consistently lately. Are you able to buy it within a few days after it was roasted?
OT - but where are you getting the Panama from?
Given that these profits are achieved at the cost of insanely inhuman working conditions for the Chinese who actually fabricate the phones, and that Apple has obscene amounts of cash on hand with which they could actually do something about unemployment in the US tech industry, this is just the reason I'm reluctant to buy new Apple products. It's true that everyone else does the same thing, but Apple could be using their leverage in positive ways, not just to make more money (and as an Apple stockholder, I have an interest in the money they make...). Remember when Jobs said he hoped Apple would never lose its soul? They have.
And maybe you've lost your reason. How do you know what they are planning to do with their "obscene" capital? What if they are developing EVEN MORE products that will save real journalism, reform education, expand art and music making and 'consuming,' and so on, including stuff even you might have thought of, such as preserving heritage languages?
The global tectonic shifts in macroeconomics that make one society postindustrial and another ascendantly industrial are beyond the control of any single company. Working conditions are relative, and they are always evolving.
Coffee should brewed 3 days after roasting.
That is definitely conventional wisdom, and certainly true for Sumatra, but I've found the optimum wait does vary considerably depending on the bean. Some are best almost immediately after roasting, at least to my taste. Another unwelcome variable.
1. no the iCloud - that one will need cash flow continously
2. do you have figures to support your claim of "the first million or so" or is it a guess?
No figures. I just guessed..
I also feel they charge to much for the device. Average selling price of the iPhone is north of 600$ if I'm not mistaken.
Say it costs Apple 200$ to get it from nothing, to a customer. Thats 400$ profit on a 600$ device. They are making gold. Simple as that.
But the price is set for what people pay. If they feel that the price is keeping people away, they have ALOT of margin to bite from.
It's not Starbucks fault a cup of coffee is 5 dollars. It's yours.
How much it cost to make has no barring on the demand it creates. If we look at the iPhone 4's history we have a product that was wildly successful for 5 quarters, increasing in sales and barely being able to keep its head above production.
From a business PoV it sounds like they priced it right, if not a little too inexpensive. From a consumer's PoV, sure I want less expensive but not at the cost of too great a wait in trying to purchase to demand far outstripping supply well beyond the initial release. You have to take into account the intangible aspects of buying an iPhone. For instance, their customer service is great because they can afford to replace your phone no questions asked which is a value in an of itself.
PS: Notice the iPod Touch didn't get updated with an A5 chip this year. I hypothesis that between their top selling devices, the iPad and iPhone, Apple wasn't able to get enough chips to satisfy all three business models so they focused on the ones the were most popular and most profitable.
I don't understand something. Many people say that Android phones are only popular because of price. But with a greater carrier subsidy, does the customer really see a much higher price for the iPhone? It doesn't appear to be so based on this article.
No, as their are some excellent Android phones. The only Android I want is Galaxy S series. SUPER AMOLED PLUS is one of the best displays on any phone.
Android phones are popular because of choice. I guess you can say they're this generation's feature phone. Remeber when the RAZR was selling, but the LG Chocolate and other phones were selling well (but not as much)? That's the difference I see. In fact, some people absolutely can't get an iPhone because of the job they have (some jobs don't permit cameras).
There's definately a market and it's outpacing iOS. But that's as an OS. Phone wise, the closest is the Galaxy series from Samsung....even then....
Because they are not American.
Ever heard of a global economy?
Apple being an American company sounds good on paper, but that arguement is dead.
The address of a company has little to do with it's philanthropic endeavors IMHO.
And maybe you've lost your reason. How do you know what they are planning to do with their "obscene" capital? What if they are developing EVEN MORE products that will save real journalism, reform education, expand art and music making and 'consuming,' and so on, including stuff even you might have thought of, such as preserving heritage languages?
The global tectonic shifts in macroeconomics that make one society postindustrial and another ascendantly industrial are beyond the control of any single company. Working conditions are relative, and they are always evolving.
Word.
Given that these profits are achieved at the cost of insanely inhuman working conditions for the Chinese who actually fabricate the phones, and that Apple has obscene amounts of cash on hand with which they could actually do something about unemployment in the US tech industry, this is just the reason I'm reluctant to buy new Apple products. It's true that everyone else does the same thing, but Apple could be using their leverage in positive ways, not just to make more money (and as an Apple stockholder, I have an interest in the money they make...). Remember when Jobs said he hoped Apple would never lose its soul? They have.
Sorry, I have to laugh whenever people bringing up Apple's dollars and equating it with the notion that it can be use to ease up unemployments, paying off your grannies' debt and reducing their selling price etc. C'mon, you are talking about capitalism here. It won't happen unless the whole country is ditching the system altogether. There all there for the profits.