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Author Apple with 70% margins for each iPhone 4S sold
laffen
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Posted: 2011-10-11 03:42
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According to a recent report, the iPhone 4S hardware component costs is $170 for the 16GB version and $220 for the 32GB model giving Apple impressive margins over 70%
Esato News

Apple iPhone 4 puzzle

According the analyst Chris Whitmore at Deutche Bank, Apple are paying $170 for the hardware components used in the iPhone 4S 16GB. The 32GB version is a little more expensive where components are estimated to cost $220. Apple iPhone 4 8GB component costs are approximately $140. Whitmore estimates that Apple has 71-73% manufacturing margins on the iPhone 4S. No wonder why Apple is the most valuable company in the world.

Apple spend approximately 600 million USD on research and development per quarter and since the iPhone 4S basically is just a more powerful iPhone 4 we was expected something more during the iPhone 4S announcemet last week.

However, iPhone 4S pre-orders still reached one million during the first day. The previous 24 hours pre-order record was held by the iPhone 4 with 600,000 devices. It seems like everyone is going for the Apple brand even though the disappointment when it was known that the iPhone 5 not are coming out this fall. If you are at the end of your contract and want something out of the ordinary, you should consider another phone model. It all reminds us of Nokias hegemony a decade ago.

The weekly publication The Economist published a similar break down of the cost of iPhone 4 hardware parts before the iPhone 4S was announced. Their conclusion was that the cost for 16GB iPhone 4 hardware components was estimated to be $178 USD. After manufacture cost and hardware parts was bought, Apple was left with $368 per iPhone.

Apples Q3 financial report reveals that almost half of the revenue comes from the post iPhone and Related Products and Services which does not include iPad, iPod or music products. A not well known source of income is from the accessory business. Every company wanting to make accessories for the iPhone has to pay for the use of certification logos, via the MFi program (Made for iPhone/iPad/iPod). After signing a NDA contract, accessory makers will receive benefits such as Tech info, Product Certification, MFi Logos, iPhone/iPod/iPad compatibility logos. Typically, a 20-25% royalty of the accessory price are collected by Apple. When you buy a $100 speaker for your iPhone, Apple receives $20.

source, source (PDF), source

Bonovox
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Posted: 2011-10-11 07:50
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Ah well so customers are being ripped off with the high price of the iphone then
Phone?? What phone??
admad
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Posted: 2011-10-11 10:50
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Yeah, and what's more they are happy about it That's the phenomenon of Apple
Tsepz_GP
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Posted: 2011-10-11 12:54
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INCREDIBLE! It must be so sweet to be a an Apple shareholder.

Companies around the world can only wish to have such high margins, Apple just keep amazing me, its not their fault people still pay the high price, most CEOs wish their companies could be operating like this, Steve Ballmer must have thrown his WindowsPhone at his Windows computer when he read this, and Stephen Elop still can't decide between throwing the SeaRay, N9 or N8...bet 100bucks he picks the N8
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pt020
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Posted: 2011-10-11 13:13
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Thieves
laffen
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Posted: 2011-10-11 13:27
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Apple can charge whatever they want for their products. No one is forced to buy any devices from them. Like every other public company, Apple is rising the prices as far as they can.
Bonovox
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Posted: 2011-10-11 13:28
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True. They know the people want it & will pay anything to get it within their means. And paying for high priced contracts too. Whoever said were expensive??
[ This Message was edited by: Bonovox on 2011-10-11 12:28 ]
Phone?? What phone??
jplacson
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Posted: 2011-10-11 14:31
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Ok, I was not gonna comment, hoping people would notice the obvious slant of the article.

I love how "analysts" only state component costs and not R&D, Marketing, Distribution, Logistics, etc...

If all employee salaries were part/component based... then it would just be the cost of the paper reports and ink they submit.

Since when has a company ever charged AT COST?

How much does an Intel chip cost, at cost? How much is a sliver of silicon?

Restaurants should only charge the cost of ingredients. Waiters have no product output and shouldn't be paid at all.

Consultants shouldn't be paid either, except for the cost of the paper reports they give in.

Businessmen should only be paid for the ink used to sign contracts.

A business is free to charge however much they want for their products. People are free to buy them or not. Regardless of how much people complain about Apple's prices, they still buy it... at the end of the day... actions are what matter.

I don't own an iPhone. Not because I don't like Apple, but because I don't think it's good enough for me. I see its appeal to others, much like how a Rolex isn't more accurate than a Casio watch... but people will pay a lot for a Rolex, but not more for a Casio.
[ This Message was edited by: jplacson on 2011-10-12 07:38 ]
laffen
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Posted: 2011-10-11 16:58
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I hope it was clear that this was manufacture margins and not total earnings. Of course Apple spend some of these left overs on marketing, R&D, packaging, shipment etc. but nevertheless their quarterly earnings was 3.5 billion USD of the 28 billion revenue. Not bad at all
jplacson
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Posted: 2011-10-11 17:36
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Hey laffen, although it was clearly stated in the article that it was manufacturing costs... you can see the writer's obvious slant towards implying how big a margin Apple is making... by actually NOT stating how much Apple actually makes... he only makes a biased assumption using incomplete data to stir negative emotional responses.
etaab
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Posted: 2011-10-11 23:49
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Possibly because Apples cost price versus recommended retail price is disproportionately large in comparison to any other manufacturer out there, which is even more evident since the new 4S does not even top the table in current specifications of top end flagship devices.

Apple are known for over charging for their products, which i think this article illustrates quite nicely. Thats all.

I would never buy an iPhone outright unless i had money to burn. Its far too well known your money does not fully go into R&D, Q&A, salaries etc, its pure fleecing of peoples hard earned cash which all companies who produce products are capable of, but Apple simply fleece the consumer without any thoughts of guilt clearly.
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titus1
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Posted: 2011-10-12 00:22
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If they're coming up with great products...who cares. It's not like they're releasing an iPhone every 2-3 months.
[ This Message was edited by: titus1 on 2011-10-11 23:23 ]
jplacson
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Posted: 2011-10-12 08:38
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@etaab no offense intended, but define "overcharging"? And who defines the "recommended retail price"? That's the first time I've ever heard of such a thing.

Does Lexus overcharge? What about Sony? Bowers & Wilkins? They cost way more than the "retail average".

What about salaries? I'm sure management always feels employees are overpaid.

Disproportionate? I think Samsung has more ridiculous pricing than Apple... considering their first 7" tablet (which was a sad attempt at a tablet) cost more than the iPad 1.

Remember that all Android manufacturers don't spend anything on OS development, only on custom skins which aren't even coded well. So all Apple iOS R&D is additional expense on Apple's part. And seeing as how the iPhone 4 and Galaxy S2 cost about the same (and the S2 screen isn't as high-res) I would say Apple charges pretty fair prices. Higher than most but not by much. With the exception of the Xperia ray, I haven't seen any flagship phone use metal in their frame, just glossed over plastic. If the case material doesn't matter to you, then don't buy it. It matters to me.

There were no 9-10" Android tablet in the $500 range... not until Apple released the iPad 2... I thought THAT was overpricing on all Android manufacturers... Prior to the Kindle Fire, the only sub $500 Android tablet you could get was some crappy Chinese iPad knockoff running Android and a resistive screen.

The whole point of Android being free was to reduce development costs for manufacturers (and to drive more ad traffic to Google)... so far, only seems to be giving flagship phones $100 less than everyone else, and they do it without copying the rounded corner design of Apple (which ironically is what I'm not fond of with the iPhone)... the rest are in the iPhone price range.

Let me repeat, I like Apple products but I don't own an iPhone. (tried it, didn't like it, went back to ) Much like how I like Rolex but I would never buy one. I don't think Rolex is overpriced, even though Casios tell much more accurate time.

Specifications don't tell the whole story...

A block of coal = 100% carbon
A 1 carat diamond = 100% carbon

Specs and numbers are so easy to fudge. I highly doubt the 100% carbon argument would work with a girl if you gave her a lump of coal and say "But it's a much bigger block of 100% carbon, better specs! It's heavier!"

I don't mean to offend anyone, but this is a free market... people vote with their money, and the ones with money have voted for the iPhone and Apple. I would get annoyed if Apple was the ONLY choice, but they're not. I'm happy with my Xperia, among all my friends w/ iPhones... Steve said "Think Different"... in a sea of iPhone users... I am.
masseur
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Posted: 2011-10-12 09:27
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I agree with you jplacson... companies set the price, consumers decide if thats the product they want and if thats the price they want to pay. no one is holding a gun to their head saying you must buy this at that price.

I rarely buy branded clothes because generally they only offer a name whereas I can buy similar items that do exactly the same at much less cost.

Although I have tried, as yet I have not found another phone that gives me everything I want and in the same way that the iphone does... so I'm prepared to pay that extra. (Mind you I haven't tried the new windows phone 7 - yet).

I honestly don't care what margin Apple make in as much as I don't care what margin any other company take for products that I buy as it has never been a consideration in any purchase.
etaab
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Posted: 2011-10-12 13:03
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Thats all pretty deep and you're very much right.

But the point im making is simple. Apples pricing structure is based mainly around brand identity. Apples products all sport that large Apple logo which has become very desirable to the consumer. That alone makes its stand out against every other phone out there. Apples products are seen as very high tech, cool and sexy. People will pay for a brand as Masseur said.

Apple simply price their phones to generate as much revenue from such people as possible. Which is morally wrong, but makes great business sense.
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