6 ms·

IPhone share of phone market: 5% volumes, 20% revenues, 55% profit

74 points by lotusleaf1987 15y ago

ljlolel 15y ago
This is a very interesting data point. Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market. Moreover, you create real value by innovating and pushing the future forward, reaping the reward from that. Nintendo has similar strategies.
- raganwald 15y ago
  Agreed, although I suggest that Apple has already proven that "you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market." Macintosh systems account for 7% of the PC market and 35% of the profit. More insanely, Apple has a 90% share of the revenue for PCs costing more than $1,000. Although smaller than the market for PCs costing less than $1,000, that's still a huge market and Apple has cornered nearly all of the money in it.
  - joebadmo 15y ago
    I think an important part that is perhaps underemphasized is that Apple has proven that Apple can do this. It's Apple's singular focus on quality that enables it, and it's surely the hard way to do it. And Apple can do it precisely because it's hard. If it was simply a matter of targeting the high end, everyone would be doing it. Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration.
    - bane 15y ago
      If it was simply a matter of targeting the high end, everyone would be doing it. Everybody is doing it, but their execution is abysmal. They're trying to go toe-to-toe with the leader in those segments without the business and development processes to support it. Apple has singularly focused their entire company on this problem and have the execution nailed. Motorola, Dell, etc. are distracted by the low-margin high volume part of their business and can't focus enough to get it right.
      - kenjackson 15y ago
        You can't create a high end when there's a thriving low-end and its all commodity. Apple does this by prohibiting clones. There's no competition to pull down prices. In the PC market Dell would love to go high-end, but they can't because Acer will ship the same machine, with plastic rather than carbon fibre, and sell it at 1/3 the price. Apple doesn't have that worry.
        spitfire 15y ago
        Yes you can. Lexus, J Crew, AMC tv and many others have proven you can. THe poor and tasteless go for the Crap while the wealthy/farsighted go for the quality/design. Technology is an echo-chamber. Step outside it and look at what other people have done, then learn from their success.
        kenjackson 15y ago
        Only JCrew is in a commodity market. Lexus is really more like Apple. While made by Toyota it generally have very different designs, for example the LS460. AMC TV is clearly not a commodity at all, even less so than Apple. JCrew is clearly in a commodity market, but they're not exactly upscale. I'd consider them the $800 laptop. Not Walmart/Netbook, but certainly not expensive. And there are expensive clothing manufacturers, but there's a reason why Gap sells hundreds of millions in jeans, while $500 designer jean brands come and go like the wind.
        archangel_one 15y ago
        I'm not convinced that to the average buyer there is enough separation there any more to call them separate markets. I know several people who have bought Apple machines recently because they pretty much wanted "a computer" and as far as they were concerned the Apple machines were better enough than the alternatives to justify their higher price. It running OSX was a point of difference but only in the way that people buy eg. a Dyson rather than some other no-brand vacuum cleaner, not like a decision to buy a car instead of a motorbike. Dell probably would love to have Apple's revenue share, but they don't have Apple's requirements for style so would make a hash of it. Theirs would also end up being plastic instead of carbon fibre.
    - raganwald 15y ago
      Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration. You would think so, but while WalMart has proven that WalMart can do it in retailing, many other businesses have proven that they can't. So in the end I agree that simply proving such-and-such is possible is not a recipe for any old company doing it.
  - ignifero 15y ago
    I thought sports car makers, fashion designers, wine makers, jewellers etc have already proven that centuries ago.
- bane 15y ago
  Nintendo has similar strategies. Another interesting point about the Nintendo model, their approach is not only more innovative, but it's not cutting edge, and it's cheaper than the competition.
  - cube13 15y ago
    Nintendo also makes a profit on every single console sold from the moment that they are released.
    - masklinn 15y ago
      I believe that was not true of the Gamecube very early on (it became true later on as hardware production prices fell).
  - Steko 15y ago
    It's also interesting that Nintendo and Apple often innovate with similar technologies. The central innovations of the DS and wii -- touchscreen and motion controls respectively -- would up being tentpoles of the iPhone. Four years later and Nintendo's been first to mass market with a 3D device and the central innovation for the wii 2/HD appears to be advanced haptics, something we've seen a number of Apple patent applications for. It will be interesting to see if Apple again catches the rest of the phone industry napping with their implementations of these technologies.
- ben1040 15y ago
  Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market. Apple even pointed this strategy out in the original 2007 MWSF keynote where the iPhone was announced. They showed their math, pointed out the global annual sales volume of phones was almost 1 billion devices. They then said 1% of that would be a great starting point because that's still ten million phones out the door and it's a good place to carve out a high value niche.
- c2 15y ago
  Personally I think the claims of Apple's innovation are way overblown. They aren't innovators, they are generally executors. They execute very well, and market very well. The only innovation I can really find where they were truly leaders is the concept of the app store - which admittedly has been huge - but outside of that they sell an extremely well executed smart phone and tablet. Aside from that, Nintendo's strategy is miles away from Apple's.
  - c2 15y ago
    I expected disagreement, but didn't expect it would be so strong as to lead to down votes without discussion. I am not trying to 'troll' anyone here, but I think if you look at the truly innovative business processes, technologies, and sheer inventions, Nokia as a company has Apple beat hands down over the last few years. Yes, in some sense, building a better mouse trap is innovation, and no one can deny Apple's success as a company especially over Nokia's, but I would still strongly contend it has more to do with sheer execution and market positioning over sheer innovation.
    - ignifero 15y ago
      downvoting is endemic lately, dont worry. Apple does innovate too, it's just in sectors that are usually overlooked by rivals: industrial design, form-over-function
    - glhaynes 15y ago
      It's just hard for most people [including me] to look at any smartphone today (essentially all of which are clearly directly descended from the iPhone) and agree with the idea that "Apple is not innovative". I'm not sure what one would have to be looking at to not see the products they ship as innovative.
      - qu4z-2 15y ago
        I'm curious now. What part of the iPhone is innovative? To me it seems like a Palm Pilot with a phone app. Well, and a few hardware updates, but it was released ten years later, so you expect the hardware to be better. What parts does one have to look at to see the innovation? I feel like I'm missing something obvious...
c2 15y ago
Reminds me a lot of Porsche's situation a few years ago in the sports car market.
natmaster 15y ago
In other words, you are paying for the brand, not the product.
- lotusleaf1987 15y ago
  In other words, you probably didn't read the article and would have made this conclusion despite whatever facts were presented.
  - natmaster 15y ago
    It's not really an article, just a presentation of data. I was labeling the data.
    - lotusleaf1987 15y ago
      Article: A nonfictional literary composition that forms an independent part of a publication, as of a newspaper or magazine: http://www.thefreedictionary.com/article http://www.thefreedictionary.com/article
      - natmaster 15y ago
        Literary: of, relating to, concerned with, or characteristic of literature or scholarly writing: http://www.thefreedictionary.com/literary http://www.thefreedictionary.com/literary Charts and graphs aren't writing. Writing: Meaningful letters or characters that constitute readable matter: http://www.thefreedictionary.com/writing http://www.thefreedictionary.com/writing
        lotusleaf1987 15y ago
        I count 6-7 paragraphs of 'scholarly writing.' Scholarly: concerned with academic learning and research: http://dictionary.reference.com/browse/scholarly http://dictionary.reference.com/browse/scholarly You sir, in the kindest way possible, are 100% wrong. You're entitled to your opinion, but not your own facts.
seanalltogether 15y ago
How is profit being calculated?
Stormbringer 15y ago
How were they calculating operating margins? Lots of Apple bashers love screaming about how Apple has huge margins because the cult will buy any old iPoo, yada yada reality distortion field. But on the Apple financials call they pretty consistently come in just under 30% on their product margins, and these guys (asymco) have them peaking at almost 50%. Is this based on some backyard analyst's estimated component cost breakdown? In which case it is a worthless guesstimate, or is it based on official numbers?
- batiudrami 15y ago
  It wouldn't surprise me though. In Australia I can get a Nexus S for AU$29 a month, while the absolute cheapest I can get an iPhone 4 is AU$47/mo (same plan/inclusions, both over 24 months), with a total cost difference of AU$432. Internally, they're essentially the same phone. The iPhone is a better built phone to be sure, but I find it hard to believe that it costs that kind of difference. But hey, people still buy them so I can't see the pricing structure changing for the moment.
- ikono 15y ago
  I think the number you're referring to is Apple's gross margin where as this number being quoted by asymco is iPhone gross margin.

74 points by lotusleaf1987 15y ago

This is a very interesting data point. Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market. Moreover, you create real value by innovating and pushing the future forward, reaping the reward from that. Nintendo has similar strategies.

raganwald 15y ago
Agreed, although I suggest that Apple has already proven that "you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market." Macintosh systems account for 7% of the PC market and 35% of the profit. More insanely, Apple has a 90% share of the revenue for PCs costing more than $1,000. Although smaller than the market for PCs costing less than $1,000, that's still a huge market and Apple has cornered nearly all of the money in it.
- joebadmo 15y ago
  I think an important part that is perhaps underemphasized is that Apple has proven that Apple can do this. It's Apple's singular focus on quality that enables it, and it's surely the hard way to do it. And Apple can do it precisely because it's hard. If it was simply a matter of targeting the high end, everyone would be doing it. Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration.
  - bane 15y ago
    If it was simply a matter of targeting the high end, everyone would be doing it. Everybody is doing it, but their execution is abysmal. They're trying to go toe-to-toe with the leader in those segments without the business and development processes to support it. Apple has singularly focused their entire company on this problem and have the execution nailed. Motorola, Dell, etc. are distracted by the low-margin high volume part of their business and can't focus enough to get it right.
    - kenjackson 15y ago
      You can't create a high end when there's a thriving low-end and its all commodity. Apple does this by prohibiting clones. There's no competition to pull down prices. In the PC market Dell would love to go high-end, but they can't because Acer will ship the same machine, with plastic rather than carbon fibre, and sell it at 1/3 the price. Apple doesn't have that worry.
      - spitfire 15y ago
        Yes you can. Lexus, J Crew, AMC tv and many others have proven you can. THe poor and tasteless go for the Crap while the wealthy/farsighted go for the quality/design. Technology is an echo-chamber. Step outside it and look at what other people have done, then learn from their success.
        kenjackson 15y ago
        Only JCrew is in a commodity market. Lexus is really more like Apple. While made by Toyota it generally have very different designs, for example the LS460. AMC TV is clearly not a commodity at all, even less so than Apple. JCrew is clearly in a commodity market, but they're not exactly upscale. I'd consider them the $800 laptop. Not Walmart/Netbook, but certainly not expensive. And there are expensive clothing manufacturers, but there's a reason why Gap sells hundreds of millions in jeans, while $500 designer jean brands come and go like the wind.
      - archangel_one 15y ago
        I'm not convinced that to the average buyer there is enough separation there any more to call them separate markets. I know several people who have bought Apple machines recently because they pretty much wanted "a computer" and as far as they were concerned the Apple machines were better enough than the alternatives to justify their higher price. It running OSX was a point of difference but only in the way that people buy eg. a Dyson rather than some other no-brand vacuum cleaner, not like a decision to buy a car instead of a motorbike. Dell probably would love to have Apple's revenue share, but they don't have Apple's requirements for style so would make a hash of it. Theirs would also end up being plastic instead of carbon fibre.
  - raganwald 15y ago
    Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration. You would think so, but while WalMart has proven that WalMart can do it in retailing, many other businesses have proven that they can't. So in the end I agree that simply proving such-and-such is possible is not a recipe for any old company doing it.
- ignifero 15y ago
  I thought sports car makers, fashion designers, wine makers, jewellers etc have already proven that centuries ago.
bane 15y ago
Nintendo has similar strategies. Another interesting point about the Nintendo model, their approach is not only more innovative, but it's not cutting edge, and it's cheaper than the competition.
- cube13 15y ago
  Nintendo also makes a profit on every single console sold from the moment that they are released.
  - masklinn 15y ago
    I believe that was not true of the Gamecube very early on (it became true later on as hardware production prices fell).
- Steko 15y ago
  It's also interesting that Nintendo and Apple often innovate with similar technologies. The central innovations of the DS and wii -- touchscreen and motion controls respectively -- would up being tentpoles of the iPhone. Four years later and Nintendo's been first to mass market with a 3D device and the central innovation for the wii 2/HD appears to be advanced haptics, something we've seen a number of Apple patent applications for. It will be interesting to see if Apple again catches the rest of the phone industry napping with their implementations of these technologies.
ben1040 15y ago
Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market. Apple even pointed this strategy out in the original 2007 MWSF keynote where the iPhone was announced. They showed their math, pointed out the global annual sales volume of phones was almost 1 billion devices. They then said 1% of that would be a great starting point because that's still ten million phones out the door and it's a good place to carve out a high value niche.
c2 15y ago
Personally I think the claims of Apple's innovation are way overblown. They aren't innovators, they are generally executors. They execute very well, and market very well. The only innovation I can really find where they were truly leaders is the concept of the app store - which admittedly has been huge - but outside of that they sell an extremely well executed smart phone and tablet. Aside from that, Nintendo's strategy is miles away from Apple's.
- c2 15y ago
  I expected disagreement, but didn't expect it would be so strong as to lead to down votes without discussion. I am not trying to 'troll' anyone here, but I think if you look at the truly innovative business processes, technologies, and sheer inventions, Nokia as a company has Apple beat hands down over the last few years. Yes, in some sense, building a better mouse trap is innovation, and no one can deny Apple's success as a company especially over Nokia's, but I would still strongly contend it has more to do with sheer execution and market positioning over sheer innovation.
  - ignifero 15y ago
    downvoting is endemic lately, dont worry. Apple does innovate too, it's just in sectors that are usually overlooked by rivals: industrial design, form-over-function
  - glhaynes 15y ago
    It's just hard for most people [including me] to look at any smartphone today (essentially all of which are clearly directly descended from the iPhone) and agree with the idea that "Apple is not innovative". I'm not sure what one would have to be looking at to not see the products they ship as innovative.
    - qu4z-2 15y ago
      I'm curious now. What part of the iPhone is innovative? To me it seems like a Palm Pilot with a phone app. Well, and a few hardware updates, but it was released ten years later, so you expect the hardware to be better. What parts does one have to look at to see the innovation? I feel like I'm missing something obvious...

c2 15y ago

Reminds me a lot of Porsche's situation a few years ago in the sports car market.

natmaster 15y ago

In other words, you are paying for the brand, not the product.

lotusleaf1987 15y ago
In other words, you probably didn't read the article and would have made this conclusion despite whatever facts were presented.
- natmaster 15y ago
  It's not really an article, just a presentation of data. I was labeling the data.
  - lotusleaf1987 15y ago
    Article: A nonfictional literary composition that forms an independent part of a publication, as of a newspaper or magazine: http://www.thefreedictionary.com/article http://www.thefreedictionary.com/article
    - natmaster 15y ago
      Literary: of, relating to, concerned with, or characteristic of literature or scholarly writing: http://www.thefreedictionary.com/literary http://www.thefreedictionary.com/literary Charts and graphs aren't writing. Writing: Meaningful letters or characters that constitute readable matter: http://www.thefreedictionary.com/writing http://www.thefreedictionary.com/writing
      - lotusleaf1987 15y ago
        I count 6-7 paragraphs of 'scholarly writing.' Scholarly: concerned with academic learning and research: http://dictionary.reference.com/browse/scholarly http://dictionary.reference.com/browse/scholarly You sir, in the kindest way possible, are 100% wrong. You're entitled to your opinion, but not your own facts.

seanalltogether 15y ago

How is profit being calculated?

Stormbringer 15y ago

How were they calculating operating margins? Lots of Apple bashers love screaming about how Apple has huge margins because the cult will buy any old iPoo, yada yada reality distortion field. But on the Apple financials call they pretty consistently come in just under 30% on their product margins, and these guys (asymco) have them peaking at almost 50%. Is this based on some backyard analyst's estimated component cost breakdown? In which case it is a worthless guesstimate, or is it based on official numbers?

batiudrami 15y ago
It wouldn't surprise me though. In Australia I can get a Nexus S for AU$29 a month, while the absolute cheapest I can get an iPhone 4 is AU$47/mo (same plan/inclusions, both over 24 months), with a total cost difference of AU$432. Internally, they're essentially the same phone. The iPhone is a better built phone to be sure, but I find it hard to believe that it costs that kind of difference. But hey, people still buy them so I can't see the pricing structure changing for the moment.
ikono 15y ago
I think the number you're referring to is Apple's gross margin where as this number being quoted by asymco is iPhone gross margin.