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With that unbelievable 40% margin it seems like they could wipe out all competition by lowering their prices. I wonder if they worry that that would get them in

by guelo 11y ago

With that unbelievable 40% margin it seems like they could wipe out all competition by lowering their prices. I wonder if they worry that that would get them into monopoly territory and bring heavier regulation.

samstave 11y ago
Greed is a hell of a drug
- aroman 11y ago
  would greed be wiping out their competitors or keeping their large margins...?
- seivan 11y ago
  That greed made a vastly superior phone (back then) to anything on the market as it was mocked and ridiculed. Companies like (Sony) Ericsson were ridiculing it. First phone with a decent development environment, SDK and App Store.
  - samstave 11y ago
    The two can be mutually exclusive. Good phone... still greedy.
wiremine 11y ago
Yeah, but how would they fund the development of their self-driving electric car that will only turn left? (because, you know, it's going to be opinionated. I can just see the the Jony Ive ad now: "We rethought everything, took everything away that absolutely didn't need to be there. What we were left with was just that: left")
- deleted 11y ago
  [deleted]
- s73v3r 11y ago
  On top of how silly your statement is, if they were to do something like that, the car would only turn right, due to fuel concerns and not having to wait for lights. Hell, a lot of fleet management software for companies like UPS already tries to minimize the amount of left turns for this very reason.
abtinf 11y ago
Apple earns 92% of all smartphone profits. There is no competition to wipe out. http://www.wsj.com/articles/apples-share-of-smartphone-industrys-profits-soars-to-92-1436727458 http://www.wsj.com/articles/apples-share-of-smartphone-indus...
- aetherson 11y ago
  Profit-share is STILL a stupid, vanity metric. This is the metric that says, "If a well-funded competitor steals your market-share at the cost of running a loss, that is actually good for you." Edit to add: This is the metric that says that life is awesome for taxi companies because Uber runs enormous losses. Profit is a useful metric (and Apple has awesome profits). Market share is a useful metric (and Apple has a small minority of the smartphone market share). Profit-share is something that somebody made up to make Apple's market share not seem as small.
  - oldmanjay 11y ago
    You assert that iPhone market share is the important metric, but never actually demonstrate why. Care to put some reasoning behind it? Your taxi analogy is unsatisfying for a number of reasons, not the least of which is the utterly unrelated market conditions between that and the mature consumer electronics industry, but feel free to expand if you think it will go somewhere. edit: clarity
    - aetherson 11y ago
      The only reasonable answer to you is: No, of course I won't try to justify why market share is a meaningful metric, and I particularly won't try to justify why this utterly standard metric is meaningful in the context of someone coming up with a ridiculous vanity metric and asserting that it has some value utterly divorced from any argumentation. But what the hell, I'm feeling unreasonable today: Market share is meaningful because it demonstrates the size of the market that Apple could potentially reach. Market share is meaningful because if Apple's market share falls below a critical percentage, people will not target the iPhone for app development (as happened with the Mac and is currently happening with, say, Windows Phone).
supercoder 11y ago
Except that's exactly how their competitors think, yet their competitors haven't wiped out the market by lowering their prices. A large part of the success of the iPhone is the 40% margin for many reasons.
- kuschku 11y ago
  Well, the market has been wiped out. The iPhone in Europe is down to 14% market share, from 17% 2 years ago.
  - oldmanjay 11y ago
    Market share is not really the number that matters to Apple, although it definitely seems to matter to people who want Apple to fail.
  - culturestate 11y ago
    I don't think market share is the best metric for measuring iPhone success, or even necessarily one that Apple cares about (save for when it breaks in their favor). As with the Mac, they seem content to let their competitors fight over the high volume strata while staying in the upper tiers and banking the lion's share of the profits.
  - onedev 11y ago
    As abtinf pointed out, market share != profit share. What percentage of smartphone profits does the iPhone garner in Europe?
    - kuschku 11y ago
      That data, sadly, is not available anywhere – they don’t seem to disclose this. I only get results about SAMSUNG falling back in profits internationally, because in the US the premium market is focusing more on Apple. But no information about what the profits look like in Germany.
jonpaine 11y ago
Apple is a premium* brand. They don't make commodity products. I think there are better articles out there than this one [0], but it was the first search result. Thinking about their behaviors through that lens is interesting and, to me, clarifies a lot of the strategy behind some of their actions. Fun stuff. [0]:http://www.cnbc.com/2013/10/15/apple-is-a-luxury-brand-not-a-tech-company.html http://www.cnbc.com/2013/10/15/apple-is-a-luxury-brand-not-a... AUTO PLAY NON-MUTED VIDEO WARNING
- runako 11y ago
  Hell of a non-commodity product that takes the size of share the iPhone takes. In the car market, marketshare numbers comparable to the iPhone's numbers do not accrue to luxury automobiles (which have far lower shares).
- czr80 11y ago
  Apple is in general a premium brand, not a luxury brand. The Apple Watch Edition is their first foray into luxury brand territory, See: http://sethgodin.typepad.com/seths_blog/2009/05/luxury-vs-premium.html http://sethgodin.typepad.com/seths_blog/2009/05/luxury-vs-pr...
  - jonpaine 11y ago
    I agree. That's a great little writeup - thanks for posting it.
matwood 11y ago
What competition to wipe out? In the flagship phone category Apple beats all. It is why they take all the profits since flagship phones is where profits are made.
mdasen 11y ago
Consumers don't always choose based on price. There would be many consumers that would choose Android equipment even if Apple lowered their pricing. Then Apple would be competing, but without the war chest that allows them to, say, buy some chip companies and start designing their own chips or being able to pay in advance for parts and get a steep discount. Plus, as you note, if they achieved 92% marketshare, they'd fall under heavy regulation. This way, they're able to get 92% of the profit, but there's still significant competition to the point where Apple isn't even the largest by number of devices. It means that Apple doesn't have the market power to dictate terms - most people don't buy Apple equipment. It must continue innovating and producing great things. But it also means a lack of anti-trust attention since consumers have highly viable alternatives - alternatives that the majority of consumers worldwide use. Similarly, there are certain industries that seem to be "cool" and people will try and compete in them regardless of profit. Smartphones seems like such a market. In a market where Apple and Samsung are the only two profitable makers and there's little innovative new features coming out, people still want in. I mean, Apple joined the smartphone market with a completely different design in the iPhone - no keyboard, capacitive multi-touch screen that dominated the phone, etc. Today, it's mostly polishing that formula introduced in 2007. Why would you want to enter an industry where you'd just be taking a display, a chip from Qualcomm or MediaTek, and a pretty standard body and camera, pair that with Android, and ship what everyone else is shipping? Are you doing anything better? Unlikely. And yet people want in even in the face of zero profits. So, even if Apple wiped out the current competition, it's likely that people would want in. And companies like OnePlus have shown that it's not terribly hard to join in the party. Lowering margins probably wouldn't help Apple over the long run. Companies have shown a willingness to enter unprofitably and anti-trust attention on Apple could break their ability to continue profiting.
skywhopper 11y ago
That's gross margin over production costs for their current products. Much of that margin goes towards massive R&D investments towards their future products. One of the keys to Apple's continued success is the huge investments they make in new materials and processes with a very long term view.
pbreit 11y ago
I'd like to see Apple drop its margin requirements a bit and really work to get its product in more hands. I think ultimately getting your product in more hands is a more worthy objective than "just" making the best products.

by guelo 11y ago

samstave 11y ago

Greed is a hell of a drug

aroman 11y ago
would greed be wiping out their competitors or keeping their large margins...?
seivan 11y ago
That greed made a vastly superior phone (back then) to anything on the market as it was mocked and ridiculed. Companies like (Sony) Ericsson were ridiculing it. First phone with a decent development environment, SDK and App Store.
- samstave 11y ago
  The two can be mutually exclusive. Good phone... still greedy.

wiremine 11y ago

Yeah, but how would they fund the development of their self-driving electric car that will only turn left? (because, you know, it's going to be opinionated. I can just see the the Jony Ive ad now: "We rethought everything, took everything away that absolutely didn't need to be there. What we were left with was just that: left")

deleted 11y ago
[deleted]
s73v3r 11y ago
On top of how silly your statement is, if they were to do something like that, the car would only turn right, due to fuel concerns and not having to wait for lights. Hell, a lot of fleet management software for companies like UPS already tries to minimize the amount of left turns for this very reason.

abtinf 11y ago

Apple earns 92% of all smartphone profits. There is no competition to wipe out. http://www.wsj.com/articles/apples-share-of-smartphone-industrys-profits-soars-to-92-1436727458 http://www.wsj.com/articles/apples-share-of-smartphone-indus...

aetherson 11y ago
Profit-share is STILL a stupid, vanity metric. This is the metric that says, "If a well-funded competitor steals your market-share at the cost of running a loss, that is actually good for you." Edit to add: This is the metric that says that life is awesome for taxi companies because Uber runs enormous losses. Profit is a useful metric (and Apple has awesome profits). Market share is a useful metric (and Apple has a small minority of the smartphone market share). Profit-share is something that somebody made up to make Apple's market share not seem as small.
- oldmanjay 11y ago
  You assert that iPhone market share is the important metric, but never actually demonstrate why. Care to put some reasoning behind it? Your taxi analogy is unsatisfying for a number of reasons, not the least of which is the utterly unrelated market conditions between that and the mature consumer electronics industry, but feel free to expand if you think it will go somewhere. edit: clarity
  - aetherson 11y ago
    The only reasonable answer to you is: No, of course I won't try to justify why market share is a meaningful metric, and I particularly won't try to justify why this utterly standard metric is meaningful in the context of someone coming up with a ridiculous vanity metric and asserting that it has some value utterly divorced from any argumentation. But what the hell, I'm feeling unreasonable today: Market share is meaningful because it demonstrates the size of the market that Apple could potentially reach. Market share is meaningful because if Apple's market share falls below a critical percentage, people will not target the iPhone for app development (as happened with the Mac and is currently happening with, say, Windows Phone).

supercoder 11y ago

Except that's exactly how their competitors think, yet their competitors haven't wiped out the market by lowering their prices. A large part of the success of the iPhone is the 40% margin for many reasons.

kuschku 11y ago
Well, the market has been wiped out. The iPhone in Europe is down to 14% market share, from 17% 2 years ago.
- oldmanjay 11y ago
  Market share is not really the number that matters to Apple, although it definitely seems to matter to people who want Apple to fail.
- culturestate 11y ago
  I don't think market share is the best metric for measuring iPhone success, or even necessarily one that Apple cares about (save for when it breaks in their favor). As with the Mac, they seem content to let their competitors fight over the high volume strata while staying in the upper tiers and banking the lion's share of the profits.
- onedev 11y ago
  As abtinf pointed out, market share != profit share. What percentage of smartphone profits does the iPhone garner in Europe?
  - kuschku 11y ago
    That data, sadly, is not available anywhere – they don’t seem to disclose this. I only get results about SAMSUNG falling back in profits internationally, because in the US the premium market is focusing more on Apple. But no information about what the profits look like in Germany.

jonpaine 11y ago

Apple is a premium* brand. They don't make commodity products. I think there are better articles out there than this one [0], but it was the first search result. Thinking about their behaviors through that lens is interesting and, to me, clarifies a lot of the strategy behind some of their actions. Fun stuff. [0]:http://www.cnbc.com/2013/10/15/apple-is-a-luxury-brand-not-a-tech-company.html http://www.cnbc.com/2013/10/15/apple-is-a-luxury-brand-not-a... AUTO PLAY NON-MUTED VIDEO WARNING

runako 11y ago
Hell of a non-commodity product that takes the size of share the iPhone takes. In the car market, marketshare numbers comparable to the iPhone's numbers do not accrue to luxury automobiles (which have far lower shares).
czr80 11y ago
Apple is in general a premium brand, not a luxury brand. The Apple Watch Edition is their first foray into luxury brand territory, See: http://sethgodin.typepad.com/seths_blog/2009/05/luxury-vs-premium.html http://sethgodin.typepad.com/seths_blog/2009/05/luxury-vs-pr...
- jonpaine 11y ago
  I agree. That's a great little writeup - thanks for posting it.

matwood 11y ago

What competition to wipe out? In the flagship phone category Apple beats all. It is why they take all the profits since flagship phones is where profits are made.

mdasen 11y ago

Consumers don't always choose based on price. There would be many consumers that would choose Android equipment even if Apple lowered their pricing. Then Apple would be competing, but without the war chest that allows them to, say, buy some chip companies and start designing their own chips or being able to pay in advance for parts and get a steep discount. Plus, as you note, if they achieved 92% marketshare, they'd fall under heavy regulation. This way, they're able to get 92% of the profit, but there's still significant competition to the point where Apple isn't even the largest by number of devices. It means that Apple doesn't have the market power to dictate terms - most people don't buy Apple equipment. It must continue innovating and producing great things. But it also means a lack of anti-trust attention since consumers have highly viable alternatives - alternatives that the majority of consumers worldwide use. Similarly, there are certain industries that seem to be "cool" and people will try and compete in them regardless of profit. Smartphones seems like such a market. In a market where Apple and Samsung are the only two profitable makers and there's little innovative new features coming out, people still want in. I mean, Apple joined the smartphone market with a completely different design in the iPhone - no keyboard, capacitive multi-touch screen that dominated the phone, etc. Today, it's mostly polishing that formula introduced in 2007. Why would you want to enter an industry where you'd just be taking a display, a chip from Qualcomm or MediaTek, and a pretty standard body and camera, pair that with Android, and ship what everyone else is shipping? Are you doing anything better? Unlikely. And yet people want in even in the face of zero profits. So, even if Apple wiped out the current competition, it's likely that people would want in. And companies like OnePlus have shown that it's not terribly hard to join in the party. Lowering margins probably wouldn't help Apple over the long run. Companies have shown a willingness to enter unprofitably and anti-trust attention on Apple could break their ability to continue profiting.

skywhopper 11y ago

That's gross margin over production costs for their current products. Much of that margin goes towards massive R&D investments towards their future products. One of the keys to Apple's continued success is the huge investments they make in new materials and processes with a very long term view.

pbreit 11y ago

I'd like to see Apple drop its margin requirements a bit and really work to get its product in more hands. I think ultimately getting your product in more hands is a more worthy objective than "just" making the best products.