You need to look at the business as a whole. Software only business are profitable because the per unit cost approaches zero as your volume increases past the d

You need to look at the business as a whole. Software only business are profitable because the per unit cost approaches zero as your volume increases past the development amortization cost. Say profits in the order of 80%+ Embedded systems are part of tangible products. They have an order of magnitude greater non-recurring engineering costs, then cost of components, manufacture, packaging, inventory, distribution and after-sales service and support. Due to the huge up front costs, volumes are generally limited by capital funds. So the net profits are likely to be 15% - 20% range. When you look at the differences, it becomes clear why tangible product companies are unable / unwilling to pay like software-only companies.