5 ms·

And yet, oddly, similar phones (see: android devices) are not priced significantly less.

by ptomato 16y ago

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.
    - JofArnold 16y ago
      It's an amazing team. Not just Ives but Cook, Mansfield and others too. I've seen teams with similar complementary personalities and skills in industry before, and provided they have project control and/or are in high-level positions they tend to do extremely well.
    - aditya42 16y ago
      Ive, not Ives. Secondly, as an Industrial Design graduate, I believe Ive has more of a functional knowledge of subjects like strength of materials. The rest is just experiential from working with industrial engineers and others at Apple. For example, what you hear him saying in the iPhone commercial about the manufacturing is experiential knowledge. His job is to design the form. It's the people under him who give him the best materials based on his requirements. A good way to understand what the process from top to bottom is, is to hear Jobs explain how they came up with the idea for the iPhone at D8. It starts with an idea that is then handed down to relevant people to think and work on. Both Jobs and Ive are fantastic at what they do, don't get me wrong. But the truth is they're run as much by other people's ideas as they're run by their own.
    - nuriaion 16y ago
      Double sourcing is standard. It helps also when you try to get lower prices.
  - rmah 16y ago
    To back up what JofArnold is saying, I have been told that Hon Hai (aka Foxconn) receives about $15 for the assembly of an iPad. I'd bet they get about the same, give or take $10 for assembling each iPhone. As a point of reference an assembly worker there makes about $3,500 USD per year or $1.50 per hour (note, the company provides housing and some food).
    - JofArnold 16y ago
      That's an interesting figure - thanks. I'd really love to see the breakdown - the manufacturing geek in me is getting all excited thinking about whether or not they deburr, how processed the parts are when they arrive as Foxconn etc etc.
sliverstorm 16y ago
But do android device makers get the same cut from the carrier as Apple? Notice an unlocked iPhone 4 is ~$750, and Apple probably gets a little more out of it when they sell with a contract (otherwise wouldn't they just sell unlocked phones with no particular carrier association?)
- apl 16y ago
  otherwise wouldn't they just sell unlocked phones with no particular carrier association? No, not necessarily. Apple will sell more iPhones on one carrier priced at 200$ (+ subsidy) than iPhones that work on all carriers for 750$. So I suspect that AT&T doesn't even pay close to the actual price difference.
- ceejayoz 16y ago
  > otherwise wouldn't they just sell unlocked phones with no particular carrier association? Not if Apple has contracts preventing it.
cletus 16y ago
Excellent point. The power of Apple's supply chain cannot be underestimated. They are constantly looking at new materials, locking up global supply of key components and constantly reinventing their form factors. The problem with Android is that it isn't a brand. It's an idea. Motorola Android phones work completely differently to HTC Android phones. Google has succeeded in what they wanted to achieve: to commoditize the phone OS. Manufacturers are playing along and their phones too are, basically, commodities. There is no "Android experience" like there is an "iPhone experience" so they're all simply competing on price. The other problem with the Android manufacturers is they make the same two mistakes pretty much everyone but Apple makes: they ask customers what they want and they use "shotgun marketing". Asking customers what they want (eg focus groups) is a terrible idea with an horrendous track record. Shotgun marketing is basically throwing everything at the market and hoping something sticks. That's why there are so many models and they pack in as many features as they can (marketers like bullet point lists). Apple is the only one who seems to have a coherent and consistent user experience.
- forensic 16y ago
  And the disgusting beauty of this is that the more bad companies use shotgun marketing, the more consumers are trained to only trust Apple. Why do people buy Apple? For many, they don't trust ANY other technology brand to provide a coherent experience. Every other tech brand from LG to HP to MS engages in shotgun marketing and thereby traumatizes customers and destroys their own market. The reason "free" became so popular in software is because so much bad software was made where users felt buyer's remorse so they just stopped buying. Free became the only way to get your product in people's hands. Apple has managed to avoid this with their quality control and lack of focus groups. This gives them credibility in a landscape where NO ONE ELSE is credible. And that is worth lots of money. Why only buy Apple? Because only Apple can be trusted not to sell you an aggravating hassle. People will pay twice as much for half the hardware specs just to get the Apple promise.
deleted 16y ago
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JofArnold 16y ago
Additionally, note that in effect Apple decides the price of smartphones. Must hurt being a competitor who's making a quality product and knowing you need to price similar to them in order for your customers to understand what level of quality they are buying. Too high and people will buy an iPhone, too low and people may feel you are lower quality.
deleted 16y ago
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And yet, oddly, similar phones (see: android devices) are not priced significantly less.

by ptomato 16y ago

And yet, oddly, similar phones (see: android devices) are not priced significantly less.

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.
  - JofArnold 16y ago
    It's an amazing team. Not just Ives but Cook, Mansfield and others too. I've seen teams with similar complementary personalities and skills in industry before, and provided they have project control and/or are in high-level positions they tend to do extremely well.
  - aditya42 16y ago
    Ive, not Ives. Secondly, as an Industrial Design graduate, I believe Ive has more of a functional knowledge of subjects like strength of materials. The rest is just experiential from working with industrial engineers and others at Apple. For example, what you hear him saying in the iPhone commercial about the manufacturing is experiential knowledge. His job is to design the form. It's the people under him who give him the best materials based on his requirements. A good way to understand what the process from top to bottom is, is to hear Jobs explain how they came up with the idea for the iPhone at D8. It starts with an idea that is then handed down to relevant people to think and work on. Both Jobs and Ive are fantastic at what they do, don't get me wrong. But the truth is they're run as much by other people's ideas as they're run by their own.
  - nuriaion 16y ago
    Double sourcing is standard. It helps also when you try to get lower prices.
- rmah 16y ago
  To back up what JofArnold is saying, I have been told that Hon Hai (aka Foxconn) receives about $15 for the assembly of an iPad. I'd bet they get about the same, give or take $10 for assembling each iPhone. As a point of reference an assembly worker there makes about $3,500 USD per year or $1.50 per hour (note, the company provides housing and some food).
  - JofArnold 16y ago
    That's an interesting figure - thanks. I'd really love to see the breakdown - the manufacturing geek in me is getting all excited thinking about whether or not they deburr, how processed the parts are when they arrive as Foxconn etc etc.

sliverstorm 16y ago

But do android device makers get the same cut from the carrier as Apple? Notice an unlocked iPhone 4 is ~$750, and Apple probably gets a little more out of it when they sell with a contract (otherwise wouldn't they just sell unlocked phones with no particular carrier association?)

apl 16y ago
otherwise wouldn't they just sell unlocked phones with no particular carrier association? No, not necessarily. Apple will sell more iPhones on one carrier priced at 200$ (+ subsidy) than iPhones that work on all carriers for 750$. So I suspect that AT&T doesn't even pay close to the actual price difference.
ceejayoz 16y ago
> otherwise wouldn't they just sell unlocked phones with no particular carrier association? Not if Apple has contracts preventing it.

cletus 16y ago

Excellent point. The power of Apple's supply chain cannot be underestimated. They are constantly looking at new materials, locking up global supply of key components and constantly reinventing their form factors. The problem with Android is that it isn't a brand. It's an idea. Motorola Android phones work completely differently to HTC Android phones. Google has succeeded in what they wanted to achieve: to commoditize the phone OS. Manufacturers are playing along and their phones too are, basically, commodities. There is no "Android experience" like there is an "iPhone experience" so they're all simply competing on price. The other problem with the Android manufacturers is they make the same two mistakes pretty much everyone but Apple makes: they ask customers what they want and they use "shotgun marketing". Asking customers what they want (eg focus groups) is a terrible idea with an horrendous track record. Shotgun marketing is basically throwing everything at the market and hoping something sticks. That's why there are so many models and they pack in as many features as they can (marketers like bullet point lists). Apple is the only one who seems to have a coherent and consistent user experience.

forensic 16y ago
And the disgusting beauty of this is that the more bad companies use shotgun marketing, the more consumers are trained to only trust Apple. Why do people buy Apple? For many, they don't trust ANY other technology brand to provide a coherent experience. Every other tech brand from LG to HP to MS engages in shotgun marketing and thereby traumatizes customers and destroys their own market. The reason "free" became so popular in software is because so much bad software was made where users felt buyer's remorse so they just stopped buying. Free became the only way to get your product in people's hands. Apple has managed to avoid this with their quality control and lack of focus groups. This gives them credibility in a landscape where NO ONE ELSE is credible. And that is worth lots of money. Why only buy Apple? Because only Apple can be trusted not to sell you an aggravating hassle. People will pay twice as much for half the hardware specs just to get the Apple promise.

deleted 16y ago

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deleted 16y ago

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JofArnold 16y ago

Additionally, note that in effect Apple decides the price of smartphones. Must hurt being a competitor who's making a quality product and knowing you need to price similar to them in order for your customers to understand what level of quality they are buying. Too high and people will buy an iPhone, too low and people may feel you are lower quality.

deleted 16y ago

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