7 ms·

IPhone: 4% of market, 50% of profit

52 points by kirpekar 16y ago

brudgers 16y ago
I see the graphics. I see the app store affiliate links. I do not see the source for the data upon which the graphics are based listed.
- mattparcher 16y ago
  I agree that there should be more explicit citation for this article. The original source is IDC [1], who says the mobile phone market is: 1. Nokia, 32.4% 2. Samsung, 21.0% 3. LG Electronics, 8.3% 4. Apple, 4.1% 5. R.I.M., 3.6% 6. Others, 30.5% The IDC press release is referenced by Horace Dediu in his first post on the matter [2]. A later post of his [3], is the one referenced by CNN, only linked from the chart images. [1] http://www.idc.com/about/viewpressrelease.jsp?containerId=prUS22550010&sectionId=null&elementId=null&pageType=SYNOPSIS http://www.idc.com/about/viewpressrelease.jsp?containerId=pr... [2] http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/ http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4... [3] http://www.asymco.com/2010/10/29/iphone-share-of-all-phones-sold-is-now-above-4-and-continuing-to-rise/ http://www.asymco.com/2010/10/29/iphone-share-of-all-phones-...
- charlief 16y ago
  It is underneath the charts: "Source: Asymco" http://www.asymco.com/2010/09/21/can-android-change-the-profit-share-of-phone-vendors/ http://www.asymco.com/2010/09/21/can-android-change-the-prof...
  - brudgers 16y ago
    Asymco prepared the graphic, they did not collect the original data upon which it is based.
- lotusleaf1987 16y ago
  It might be Goldman Sachs. This chart from Business Insider from July, says the same thing but attributes the information to Goldman Sachs: http://www.businessinsider.com/you-cant-appreciate-how-completely-apple-has-humiliated-rim-nokia-and-the-rest-of-the-gadget-industry-until-you-see-these-charts-2010-7 http://www.businessinsider.com/you-cant-appreciate-how-compl...
deleted 16y ago
[deleted]
sliverstorm 16y ago
All this tells me is what I already knew- Apple products are priced with a very large profit margin included. They are the only ones who've been able to get away with it. (I think it's safe to surmise that when one company is making 25x the profit as other manufacturers per device, it's not because they have figured out how to manufacture product more efficiently)
- ptomato 16y ago
  And yet, oddly, similar phones (see: android devices) are not priced significantly less.
  - baddox 16y ago
    Exactly. Unless the hardware of an iPhone costs significantly less than, say, an Evo 4g or Touch Pro 2, there's no reason their profit margin would be any better. Of course, the whole pricing model is very obfuscated at least with US carriers due to contracts, required internet plans, etc.
    - JofArnold 16y ago
      As a former manufacturing engineer, I can tell you Apple's devices are extremely optimised to reduce the cost of manufacture yet maintain quality and this helps their margins considerable I'd imagine. Their attention to the cost of assembly is - to me - as beautiful as the aesthetic design; they clearly have some amazing mechanical/design/process engineers.
      - maximilian 16y ago
        From things I've read on Steve Jobs, he seems equally interested in the industrial of building the products he designs[1]. I've also heard their lead designer Jonathon Ives talk a lot about materials and how to use them, which I think underscores the fact that he is an industrial designer, meaning he doesn't just design an end product, but also designs the process, or at least designs the product with process holding equal weight with the actual aesthetic. I've also read that they require all parts to be doubly sourced, so that if one source fails, they have a backup. I don't know how common this is, but seems like an interesting point in their process. [1] He doesn't design them himself, but I couldn't think of a better word.
Herring 16y ago
I am shocked the copy-everything-apple-does-a-year-late-and-compete-on-price business model isn't very profitable.
- tjogin 16y ago
  I think it's because those who try to do that don't realize the full spectrum of things that Apple does right, seeing only the most superficial fraction of it.
mjfern 16y ago
Apple's profitability with its iPhone business is partly a function of its vertical integration and its industry power. Consider that Apple controls the key inputs for the iPhone (e.g., the A4 system on a chip and iOS), owns important distribution channels (e.g., the Apple Stores), and exercises substantial power over complements (e.g., AT&T and apps via the App Store). In short, Apple creates substantial customer value with the iPhone, and due to its vertical integration and industry power is able to appropriate much of the value that is created (in the form of profits). A second key reason for its profitability is Apple's low cost structure. With economies of scale and scope (consider that many components are shared across the iPod, iPhone, iPad, etc), learning curve advantages, relationships with key suppliers (Samsung) and contractors (Foxconn), and so on, Apple is able to drive down the unit costs of the iPhone and thus drive up its margins.
- sbaqai 16y ago
  I think this is a great example of Apple's "design strategy" being completely end-to-end. They don't just focus on the tiniest details of industrial design; the aluminum chassis, the battery layout, the screws, friction coefficients on the trackpad, etc.. they have also designed their entire supply chain with the same attention to detail. There was a post on HN a while ago about Apple's patent on a new headphone jack design - they redesigned what is pretty much a commoditized component (and never seen by the customer), to unlock more value in the form of greater maneuverability and internal space. I imagine the supply chain is also very commoditized, and Apple is the kind of company to take that process apart and refine it in the same way, to unlock value in the form of greater margins. EDIT: Another area where their attention to detail is apparent is their manufacturing tolerances. They've pretty much perfected the art of physically manufacturing precision components. I've not been able to find another product, luxury or otherwise, that comes close to the fit and finish of Apple's devices - and thats including things like rolexes, ferraris, etc.
  - lotusleaf1987 16y ago
    To add another example of Apple's details of industrial design, Apple makes two keyboards from the space they stamp out for the iMac's screen. Apple is very efficient.
flgb 16y ago
People focus on Steve Jobs and Apple's design and marketing prowess. However, Tim Cook and Apple's supply chain management and operating excellence is just as important a part of their success.
guynamedloren 16y ago
This dead-simple analysis just goes to show you that market share is not nearly as important as so many make it out to be.
wouterinho 16y ago
Does this include Apple's revenue share deals with the operators or is it just phone sales?
JofArnold 16y ago
This is my biggest question (and I'd love thoughts from HN people on it); if Android is mostly seen on handsets with very small margins that compete on price with almost identical features... who's paying for the R&D to keep up with Apple's innovations? That question assumes that innovation is important in the smartphone sector. That may not be the case I guess. I'm just trying to understand the end situation as best I can as like a number of startups our future heavily depends on smartphones.
- aditya42 16y ago
  Innovation is always important. The iPhone was innovative. iOS was innovative. Without those two, we wouldn't be having this discussion. We would still be using Nokias and Blackberries, or Android phones which would be like Blackberries -- not the iPhone. As far as paying for R&D goes, how much does it take to replicate something? I'd say a fraction of the cost since you already have the product in front of you. All you need to do is duplicate it.
  - DrJokepu 16y ago
    And that's exactly where the much hated patents (software or otherwise) would have a role, in my opinion; protecting hard-earned innovation. That's what they're supposed achieve, but due to the completely broken patent system, they're only good for "patent trolling".
- ergo98 16y ago
  Apple is responsible for shockingly little of the innovation in the smartphone field. They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU. They didn't create the "Retina display" or their memory or their touchscreen sensor. They are a software company that other companies -- like LG and Samsung -- supply with hardware. The electronics market has traditionally been a very low margin industry (which is good for consumers). Apple has managed a pretty remarkable game of finding a very profitable niche and exploiting it as it exploded, with them in a leadership position, however it is not sustainable, which Apple realizes. And it is simply perverse seeing people actually bragging on behalf of Apple about the fact that they are rolling in cash.

52 points by kirpekar 16y ago

I see the graphics. I see the app store affiliate links. I do not see the source for the data upon which the graphics are based listed.

mattparcher 16y ago
I agree that there should be more explicit citation for this article. The original source is IDC [1], who says the mobile phone market is: 1. Nokia, 32.4% 2. Samsung, 21.0% 3. LG Electronics, 8.3% 4. Apple, 4.1% 5. R.I.M., 3.6% 6. Others, 30.5% The IDC press release is referenced by Horace Dediu in his first post on the matter [2]. A later post of his [3], is the one referenced by CNN, only linked from the chart images. [1] http://www.idc.com/about/viewpressrelease.jsp?containerId=prUS22550010&sectionId=null&elementId=null&pageType=SYNOPSIS http://www.idc.com/about/viewpressrelease.jsp?containerId=pr... [2] http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4-unit-share-22-sales-value-share-and-48-of-profit-share/ http://www.asymco.com/2010/10/30/last-quarter-apple-gained-4... [3] http://www.asymco.com/2010/10/29/iphone-share-of-all-phones-sold-is-now-above-4-and-continuing-to-rise/ http://www.asymco.com/2010/10/29/iphone-share-of-all-phones-...
charlief 16y ago
It is underneath the charts: "Source: Asymco" http://www.asymco.com/2010/09/21/can-android-change-the-profit-share-of-phone-vendors/ http://www.asymco.com/2010/09/21/can-android-change-the-prof...
- brudgers 16y ago
  Asymco prepared the graphic, they did not collect the original data upon which it is based.
lotusleaf1987 16y ago
It might be Goldman Sachs. This chart from Business Insider from July, says the same thing but attributes the information to Goldman Sachs: http://www.businessinsider.com/you-cant-appreciate-how-completely-apple-has-humiliated-rim-nokia-and-the-rest-of-the-gadget-industry-until-you-see-these-charts-2010-7 http://www.businessinsider.com/you-cant-appreciate-how-compl...

deleted 16y ago

[deleted]

sliverstorm 16y ago

All this tells me is what I already knew- Apple products are priced with a very large profit margin included. They are the only ones who've been able to get away with it. (I think it's safe to surmise that when one company is making 25x the profit as other manufacturers per device, it's not because they have figured out how to manufacture product more efficiently)

ptomato 16y ago
And yet, oddly, similar phones (see: android devices) are not priced significantly less.
- baddox 16y ago
  Exactly. Unless the hardware of an iPhone costs significantly less than, say, an Evo 4g or Touch Pro 2, there's no reason their profit margin would be any better. Of course, the whole pricing model is very obfuscated at least with US carriers due to contracts, required internet plans, etc.
  - JofArnold 16y ago
    As a former manufacturing engineer, I can tell you Apple's devices are extremely optimised to reduce the cost of manufacture yet maintain quality and this helps their margins considerable I'd imagine. Their attention to the cost of assembly is - to me - as beautiful as the aesthetic design; they clearly have some amazing mechanical/design/process engineers.
    - maximilian 16y ago
      From things I've read on Steve Jobs, he seems equally interested in the industrial of building the products he designs[1]. I've also heard their lead designer Jonathon Ives talk a lot about materials and how to use them, which I think underscores the fact that he is an industrial designer, meaning he doesn't just design an end product, but also designs the process, or at least designs the product with process holding equal weight with the actual aesthetic. I've also read that they require all parts to be doubly sourced, so that if one source fails, they have a backup. I don't know how common this is, but seems like an interesting point in their process. [1] He doesn't design them himself, but I couldn't think of a better word.

Herring 16y ago

I am shocked the copy-everything-apple-does-a-year-late-and-compete-on-price business model isn't very profitable.

tjogin 16y ago
I think it's because those who try to do that don't realize the full spectrum of things that Apple does right, seeing only the most superficial fraction of it.

mjfern 16y ago

Apple's profitability with its iPhone business is partly a function of its vertical integration and its industry power. Consider that Apple controls the key inputs for the iPhone (e.g., the A4 system on a chip and iOS), owns important distribution channels (e.g., the Apple Stores), and exercises substantial power over complements (e.g., AT&T and apps via the App Store). In short, Apple creates substantial customer value with the iPhone, and due to its vertical integration and industry power is able to appropriate much of the value that is created (in the form of profits). A second key reason for its profitability is Apple's low cost structure. With economies of scale and scope (consider that many components are shared across the iPod, iPhone, iPad, etc), learning curve advantages, relationships with key suppliers (Samsung) and contractors (Foxconn), and so on, Apple is able to drive down the unit costs of the iPhone and thus drive up its margins.

sbaqai 16y ago
I think this is a great example of Apple's "design strategy" being completely end-to-end. They don't just focus on the tiniest details of industrial design; the aluminum chassis, the battery layout, the screws, friction coefficients on the trackpad, etc.. they have also designed their entire supply chain with the same attention to detail. There was a post on HN a while ago about Apple's patent on a new headphone jack design - they redesigned what is pretty much a commoditized component (and never seen by the customer), to unlock more value in the form of greater maneuverability and internal space. I imagine the supply chain is also very commoditized, and Apple is the kind of company to take that process apart and refine it in the same way, to unlock value in the form of greater margins. EDIT: Another area where their attention to detail is apparent is their manufacturing tolerances. They've pretty much perfected the art of physically manufacturing precision components. I've not been able to find another product, luxury or otherwise, that comes close to the fit and finish of Apple's devices - and thats including things like rolexes, ferraris, etc.
- lotusleaf1987 16y ago
  To add another example of Apple's details of industrial design, Apple makes two keyboards from the space they stamp out for the iMac's screen. Apple is very efficient.

flgb 16y ago

People focus on Steve Jobs and Apple's design and marketing prowess. However, Tim Cook and Apple's supply chain management and operating excellence is just as important a part of their success.

guynamedloren 16y ago

This dead-simple analysis just goes to show you that market share is not nearly as important as so many make it out to be.

wouterinho 16y ago

Does this include Apple's revenue share deals with the operators or is it just phone sales?

JofArnold 16y ago

This is my biggest question (and I'd love thoughts from HN people on it); if Android is mostly seen on handsets with very small margins that compete on price with almost identical features... who's paying for the R&D to keep up with Apple's innovations? That question assumes that innovation is important in the smartphone sector. That may not be the case I guess. I'm just trying to understand the end situation as best I can as like a number of startups our future heavily depends on smartphones.

aditya42 16y ago
Innovation is always important. The iPhone was innovative. iOS was innovative. Without those two, we wouldn't be having this discussion. We would still be using Nokias and Blackberries, or Android phones which would be like Blackberries -- not the iPhone. As far as paying for R&D goes, how much does it take to replicate something? I'd say a fraction of the cost since you already have the product in front of you. All you need to do is duplicate it.
- DrJokepu 16y ago
  And that's exactly where the much hated patents (software or otherwise) would have a role, in my opinion; protecting hard-earned innovation. That's what they're supposed achieve, but due to the completely broken patent system, they're only good for "patent trolling".
ergo98 16y ago
Apple is responsible for shockingly little of the innovation in the smartphone field. They didn't create their processor (though they managed to brand it and fool a lot of people for a while). They didn't create the GPU. They didn't create the "Retina display" or their memory or their touchscreen sensor. They are a software company that other companies -- like LG and Samsung -- supply with hardware. The electronics market has traditionally been a very low margin industry (which is good for consumers). Apple has managed a pretty remarkable game of finding a very profitable niche and exploiting it as it exploded, with them in a leadership position, however it is not sustainable, which Apple realizes. And it is simply perverse seeing people actually bragging on behalf of Apple about the fact that they are rolling in cash.