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For the vast majority of laptops that aren't made by Apple all profit margins are entirely erased (and then some) by these tariffs. So yeah the manufacturers c

For the vast majority of laptops that aren't made by Apple all profit margins are entirely erased (and then some) by these tariffs. So yeah the manufacturers could eat the cost... as long as they don't mind losing money on every sale.

belorn 2y ago
Manufacturer that builds laptops has the following costs: Components, Assembly, Software & Licensing, Research & Development, Marketing & Branding. Out of those, components and assembly is the unit cost. If the cost of components and assembly are greater than sell price then every sale is a loss. Tariffs impact this cost, and they are not close to erase the difference between sticker price and unit price. The estimated per-unit profit margins for a company like Lenovo, Acer, Dell and so on is in the range of 25-30% per laptop, through the exact numbers do not get published. In comparison, Apple is estimated to be around 60% per laptop. It is when you then add Software & Licensing, Research & Development, Marketing & Branding, and static costs, spread out on all sold units, the profit margin goes down to 5-10% (with Apple here having a margin around 40%). Some of that margin get significant increased with added services like extended warranty and payment plans. Tariffs will decrease profits. In order to get the same profit as before tariffs they can increase prices, but it risk decreasing sales. If sales drop then the static costs is spread out over fewer sold units, which mean they would need to increase prices even more to cover the lost sales. If they increase it too much, sales drop below viability and they go bankrupt. Alternative they could decrease price (compared to the competition) in order to increase sales, covering the increased unit cost by increasing sales volume. The best strategy is to have a price that results in the highest combination of price and sales volumes.

belorn 2y ago

Manufacturer that builds laptops has the following costs: Components, Assembly, Software & Licensing, Research & Development, Marketing & Branding. Out of those, components and assembly is the unit cost. If the cost of components and assembly are greater than sell price then every sale is a loss. Tariffs impact this cost, and they are not close to erase the difference between sticker price and unit price. The estimated per-unit profit margins for a company like Lenovo, Acer, Dell and so on is in the range of 25-30% per laptop, through the exact numbers do not get published. In comparison, Apple is estimated to be around 60% per laptop. It is when you then add Software & Licensing, Research & Development, Marketing & Branding, and static costs, spread out on all sold units, the profit margin goes down to 5-10% (with Apple here having a margin around 40%). Some of that margin get significant increased with added services like extended warranty and payment plans. Tariffs will decrease profits. In order to get the same profit as before tariffs they can increase prices, but it risk decreasing sales. If sales drop then the static costs is spread out over fewer sold units, which mean they would need to increase prices even more to cover the lost sales. If they increase it too much, sales drop below viability and they go bankrupt. Alternative they could decrease price (compared to the competition) in order to increase sales, covering the increased unit cost by increasing sales volume. The best strategy is to have a price that results in the highest combination of price and sales volumes.