Goes to show how overpriced the iPhone X is compared to bill of materials.
Apple know how to cream in the money from the public, but these profit margins can't last, just a short term ploy to increase revenue to counteract sliding sales volumes.
How much of that apple profit goes to suppliers though, which would include a large chunk to Samsung?
How is the iPhone X overpriced when Apple’s gross margins haven’t really changed much?
Goes to show how overpriced the iPhone X is compared to bill of materials.
Apple know how to cream in the money from the public, but these profit margins can't last, just a short term ploy to increase revenue to counteract sliding sales volumes.
How much of that apple profit goes to suppliers though, which would include a large chunk to Samsung?
Profit is profit...what you mean "goes to suppliers". Suppliers' cost is a part of fixed cost (expense) which was already factored in...Econ 101, man.
I have the same thoughts on both counts. Assuming the numbers are accurate, they are quite impressive. Part of me says "that's a great profit margin for Apple, so good for them" and part of me says "wait - that also tells me they are way over-priced." Like you say, though, Apple is free to price their phones how they like and we are free to buy them how we like. If the IPX isn't worth it to you then you can get an 8 or a 7 or a 6s. Or a Samsung, or a used windows phone. Ultimately, you should buy the phone that fits your needs both in terms of functionality and price.
The other postive aspect of this for Apple is that if sales are off, they have room to drop the price while still making a profit.
The decade-long success of the iPhone not only tells me the iPhone isn't overpriced, but it's arguably underpriced considering how long it can take before supply and demand balance out for new devices with presages in the millions. While this concept isn't new, the rising ASP supports my hypothesis.
When IDC or Gartner are publishing market share figures, people on this forum justly question these figures. However if Counterpoint publishes profit figures, there are much less people looking critically at these figures. And yet the figures of Counterpoint should be taken with a big bag of salt.
There is a reason why official profit figures are always published on a
company level and never on business line or product level. Acquisitions
and mergers, financials gains, ... are all impacting the profit
figures. By definition a profit figure for a single smartphone model is just plain BS.
Apple does not disclose its figures per model nor do Samsung, Huawei, Oppo, Lenovo, Alcatel, ... So Counterpoint is just guessing the cost and the sales figures per model. Any error in cost or sales figures generates a much bigger error on the profit figures, so the margin of error in the Counterpoint figures must be huge.
Samsung and Huawei are designing and producing their own chips and components. So how
on earth can an external company have a correct assessment of the
internal transfer prices between the chip / component division and the smartphone
division (and taking into account that both sell to other companies, they are not inclined to give these details). For a privately owned company like Huawei, it is even more difficult to make a good guess; I would not be surprised that in this case the cost
estimation of Counterpoint is at least 30% wrong, leading to a profit estimation that has no longer a correlation with the truth.
Does this mean that Apple is not the biggest profit maker in the smartphone business. Of course not. Apple is clearly making the most profits in the smartphone business Only the mentioned percentage of 86% might be wrong. And yet in the coming months a lot of posters here will use this figure to make a point
Goes to show how overpriced the iPhone X is compared to bill of materials.
Apple know how to cream in the money from the public, but these profit margins can't last, just a short term ploy to increase revenue to counteract sliding sales volumes.
How much of that apple profit goes to suppliers though, which would include a large chunk to Samsung?
A short term ploy by whom? Counterpoint Research ?
Where are they getting this data from considering Apple doesn’t provide sales, revenue or profits by iPhone model? Also how do they know what the profits are for the smartphone industry? What companies provide profit data just for their smartphones?
But Apple does give values like ASP (Average Selling Price) and total units sold. People then combine this data to form various equations like (%iPhoneX * medianPrice) + (%iPhone8 * medianPrice) + (%iPhone7 * medianPrice) + (%iPhoneSE * medianPrice) = ASP; %iPhoneX+%iPhone8+%iPhone7+%iPhoneSE=100%. They make some educated guesses based on web analytics and come up with a range of potential values.
So it’s basically all a guess. Which is what I assumed. What is the point of analysis like this that depends so much guessing and estimating?
It's more than a guess though it might seem like it at times. There are real patterns of behavior and statistics dealing with this, and while there is always a bit of error, the numbers are more than just "guesses".
You end up with a series of mostly linear relationships including various inequalities with some of the variables known for 100%. The others have a range of acceptable values. For example, if the %iPhoneX == 100, then the ASP would be far too high. Likewise, if %iPhoneSE == 100, you could never get the ASP high enough. You can put upper and lower limits on each value (this is not guessing but hard math). Web analytics allows you to track screen dimensions and the iPhoneXScreen+iOS/iOS can give a rough estimate of market penetration. This makes some assumptions but this does not mean simply "guessing" values.
NOTE: I find most analysts make bad assumptions (like Gartner and IDC assuming the average lifespan of an iOS device is 16 months and an Android handset is 18 months given that makes their numbers work out).
I‘m quite sure, we tomorrow will see a massive downgrade of Apples stock from Goldman Sachs - they definitely see 35% as a clear fail, as from their estimates and analysis they expected 36% iPhone X profit, and 87% smartphone profit globally.
Thus: Apple must be doomed. Trust them! Be ready for a -10% AAPL dip tomorrow. You better sell all your apple stocks NOW.
All the Amerika First biz news outlets may now resume their daily blather about market share. They understand how market economies work about as well as they understand global interdependency. Throw in consideration of factories staffing 1500 process engineers for assemblyline changeovers [Foxconn] and folks might even rediscover how useful it is to have an educated workingclass.
"Apple grabs 86% of smartphone profits globally"
I think that would depend of how you define "smartphone profits". Samsung makes billions of dollars off of their component sales to produce/build millions of phones. Even those that they don't personally sell.
Every time Apple sells a phone... Samsung makes profit.
Maybe you should change the headline to read "...retail profits on smartphone sales globally."?? Just a suggestion.
I believe that when Samsung sells a phone, it books part of the profit in the handset division and part in the component division. That means a huge chunk of profit is being missed by these research firms that are essentially penalising Samsung for being vertically integrated. But these details don't make for snappy headlines so they're usually ignored.
If lying to investors was a crime, there would be a lot of AAPL analysts in jail right now. This is exactly what Tim was talking about — supplier reports do not give you the whole picture.
When IDC or Gartner are publishing market share figures, people on this forum justly question these figures. However if Counterpoint publishes profit figures, there are much less people looking critically at these figures. And yet the figures of Counterpoint should be taken with a big bag of salt.
There is a reason why official profit figures are always published on a
company level and never on business line or product level. Acquisitions
and mergers, financials gains, ... are all impacting the profit
figures. By definition a profit figure for a single smartphone model is just plain BS.
Apple does not disclose its figures per model nor do Samsung, Huawei, Oppo, Lenovo, Alcatel, ... So Counterpoint is just guessing the cost and the sales figures per model. Any error in cost or sales figures generates a much bigger error on the profit figures, so the margin of error in the Counterpoint figures must be huge.
Samsung and Huawei are designing and producing their own chips and components. So how
on earth can an external company have a correct assessment of the
internal transfer prices between the chip / component division and the smartphone
division (and taking into account that both sell to other companies, they are not inclined to give these details). For a privately owned company like Huawei, it is even more difficult to make a good guess; I would not be surprised that in this case the cost
estimation of Counterpoint is at least 30% wrong, leading to a profit estimation that has no longer a correlation with the truth.
Does this mean that Apple is not the biggest profit maker in the smartphone business. Of course not. Apple is clearly making the most profits in the smartphone business Only the mentioned percentage of 86% might be wrong. And yet in the coming months a lot of posters here will use this figure to make a point
It still amazes me how much reports like this get attention on rumor sites and Apple bloggers/pundits on social media. No one ever questions where this data comes from. At least with market share data you could argue these firms get some sales data from 3rd party retailers (and of course Apple discloses sales figures). But when it comes to profits no company is disclosing that information. And that makes sense for competitive reasons. There’s no way any outside firm can accurately put a figure on smartphone profits and what share each company has.
Goes to show how overpriced the iPhone X is compared to bill of materials.
Apple know how to cream in the money from the public, but these profit margins can't last, just a short term ploy to increase revenue to counteract sliding sales volumes.
How much of that apple profit goes to suppliers though, which would include a large chunk to Samsung?
Profit is profit...what you mean "goes to suppliers". Suppliers' cost is a part of fixed cost (expense) which was already factored in...Econ 101, man.
I have the same thoughts on both counts. Assuming the numbers are accurate, they are quite impressive. Part of me says "that's a great profit margin for Apple, so good for them" and part of me says "wait - that also tells me they are way over-priced." Like you say, though, Apple is free to price their phones how they like and we are free to buy them how we like. If the IPX isn't worth it to you then you can get an 8 or a 7 or a 6s. Or a Samsung, or a used windows phone. Ultimately, you should buy the phone that fits your needs both in terms of functionality and price.
The other postive aspect of this for Apple is that if sales are off, they have room to drop the price while still making a profit.
The decade-long success of the iPhone not only tells me the iPhone isn't overpriced, but it's arguably underpriced considering how long it can take before supply and demand balance out for new devices with presages in the millions. While this concept isn't new, the rising ASP supports my hypothesis.
It's amazing how profitable you can be when you don't pay patent royalties to Qualcomm! But these profit levels will drop by 10% once they lose their lawsuit to Qualcomm !!
Comments
You end up with a series of mostly linear relationships including various inequalities with some of the variables known for 100%. The others have a range of acceptable values. For example, if the %iPhoneX == 100, then the ASP would be far too high. Likewise, if %iPhoneSE == 100, you could never get the ASP high enough. You can put upper and lower limits on each value (this is not guessing but hard math). Web analytics allows you to track screen dimensions and the iPhoneXScreen+iOS/iOS can give a rough estimate of market penetration. This makes some assumptions but this does not mean simply "guessing" values.
NOTE: I find most analysts make bad assumptions (like Gartner and IDC assuming the average lifespan of an iOS device is 16 months and an Android handset is 18 months given that makes their numbers work out).
Thus: Apple must be doomed. Trust them! Be ready for a -10% AAPL dip tomorrow. You better sell all your apple stocks NOW.
/Sarcasm off