Apple is reaping a mind-blowing 93% margin on iPhone 5 memory
0. phoneArena 04 Oct 2012, 06:30 posted on
The Apple iPhone 5 might not have met Wall Street analysts expectations for mind-blowing sales over the first weekend…
This is a discussion for a news. To read the whole news, click here
31. TalkingTechy (Posts: 97; Member since: 05 Dec 2011)
I agree thank heavens for subsidary contracts, but I could say your argument for any smart phone on the market. The MSRP of an AT&T Samsung Galaxy S3 is $550. Are you telling me that those phones wouldn't rot on the shelves without subsidized pricing? Pretty sure they would.
My point is though the iPhone is more expensive, it retains its value. Whereas Samsung, HTC, etc make new products all the time that renders their previous generation obsolete. Therefore, their value is significantly lower.
37. Slammer (Posts: 1515; Member since: 03 Jun 2010)
In the end, all manufacturers benefit through the offering of contractual commitments. Off contract pricing is still effected by contract pricing so comparing Apple prices to others, is irrelevant. Eliminating the contracts all together would prove how manufacturers would price their devices. in this case,out of my experience, Apple would still remain 2-3 times higher. It's Apple's MO and its imbedded in its DNA. It has not changed in 30 years.
My argument is that if carriers would've adjusted their price plans for JUST Apple consumers in order to compensate Apple's high price demand, iPhone sales would not be nearly as vast. Trend and hype would become very expensive to support.
45. TalkingTechy (Posts: 97; Member since: 05 Dec 2011)
"...Apple would still remain 2-3 times higher."
iPhone 5 16GB = MSRP $650
Galaxy S3 16GB = MSRP $550
650/550 = 1.182
Where is the 2-3 times higher pricing? If you don't like Apple...fine. But where do you get these "facts?"
56. TalkingTechy (Posts: 97; Member since: 05 Dec 2011)
"Eliminating the contracts all together would prove how manufacturers would price their devices"
The pricing of Samsung's, HTC's, Apple's, etc devices already have a price disregarding the carriers; It's the retail price (MSRP).
Would this pricing be different if carrier's didn't have subsidized pricing? Maybe. Remember these are essentially computers with many different radios and tiny PC components in the palm of your hand. The amount of engineering involved is astonishing to get all those working parts into one pretty package. Who's to say they would only cost $200-$300 if contract pricing didn't exist?
48. remixfa (Posts: 14255; Member since: 19 Dec 2008)
no.. it wouldnt.
Subsidies are stupid. Your trading a 300-400 discount on a phone for 2 years worth of contract premiums that are 600-1200+ more expensive than a similar plan without a phone subsidy. Your getting ripped off. But you dont mind since your paying for it over 2 years instead of up front.
57. TalkingTechy (Posts: 97; Member since: 05 Dec 2011)
For some people, I agree with your statement.
However, for those of us who are smart enough to get on a family plan with someone who gets a discount, you can pay less than $50/mo for your data/text/minutes.
Not sure where your $600-$1200 more expensive claim comes in.
My buddy has boost mobile and now has a $45/mo bill. That is great for unlimited, but only at 3G speeds on sprint's network and you still have to pay $500 if you want the "latest" Samsung Galaxy S2. I'll gladly pay $5/mo more for a decent subsidized priced device.
63. Slammer (Posts: 1515; Member since: 03 Jun 2010)
All manufacture's handset pricing is greatly exaggerated; not just Apple. The importance of subsidy(contractual) pricing for manufacturers, is that allows them to keep MSRPs(off contract) higher as well. It's simple and here's why:
The goal for any business is to reap as much profit as possible. Subsidies have groomed us to percieve a great deal in paying only an average of 200 dollars for a handset. The carriers absorb the initial cost and pass it on to us over two years. The manufacturers are benefiting a probable 45% profit on each one sold. So if the off contract price is say 565 dollars, that is presumably what carriers are paying. If the carriers were to lower the off contract pricing by a considerable amount, people would most likely migrate to the off contract and lose profit. So, as long as contract subsidies exist, the true price points for attractive off contract purchasing will never come to fruition.
Apple is greatly benefiting from carrier subsidies due to spreading the costs for Apple across the entire mobile device purchasers. If subsidies went away, Apple would be left with trying to appease their shareholders with the same profit margins that they have been commanding. Which is roughly been averaging 75%.
This means Apple would still have to charge roughly twice as much as their competitors. I'm not willing to do that.
70. TalkingTechy (Posts: 97; Member since: 05 Dec 2011)
Great write-up Slammer, and I appreciate your response. Maybe Apple set the pace for contract pricing back in 2007 for smart phones, but Samsung et al have done this for years prior to smart phones.
How do you think you used to get a clam-shell flip phone for free? You think Sony Ericcson charged Sprint $free for the device? No. They made money on their phone the same way Apple is doing it. And when your flip phone was dropped in the toilet, do you get a replacement for free? No you get an original flip Razr for over $200.
Apple wasn't first in performing to this model, and they aren't the last. Every other smart phone mfg is doing the same thing. So quit saying that it's Apple's fault. It's Sony, Samsung et al who started this model years ago.
77. Slammer (Posts: 1515; Member since: 03 Jun 2010)
I didn't say it was ALL Apple's fault. We were comparing the price strategy of Apple as opposed to the competition. All the manufacturers are benefiting from subsidies.
If I could have one wish for the wireless industry, it would to make subsidies illegal. Carriers don't care how much manufacturers charge because they only pass it down to us. If we consumers were in direct charge of purchasing power, prices would be significantly lower.
22. Slammer (Posts: 1515; Member since: 03 Jun 2010)
Apple has 30 years experience in overpricing their products. Even while facing bankruptsy, they didn't change their pricing. Massive profit or die mentality.
27. Nathan_ingx (Posts: 3662; Member since: 07 Mar 2012)
Dude! Those two sedans i would love to own!! Of course, BMW and Mercedes are different...
30. remixfa (Posts: 14255; Member since: 19 Dec 2008)
raise your hand if your surprised that apple price gouges its customers
yea.. didnt think so. You pay a HUGE premium for that little apple logo on there and the ability to hang out at overly expensive coffee shops.
38. moofoodooloo (Posts: 137; Member since: 04 Jan 2011)
It's complete idiocy to tell yourself that the only reason people purchase an iPhone is for the logo. Maybe it helps you sleep at night? I don't know.
The bottom line is that it's a stable, quality product. You pay for quality in all facets of life, justifiably or not. Apple knows it makes a quality product and knows people are willing to pay more for a dependable product.
Tell yourself you wouldn't do the same thing if you were in Apples shoes had the ability to do so. Do you really think all of the extra income is profit? All the extra money is going into pockets and isn't being used for R&D, marketing, the ability to capture market share?
Like it or not, there is an AMAZING amount of information you armchair-analysts don't know and are oblivious to. Sorry. This ends Economics 101. Unfollowing thread.
41. Slammer (Posts: 1515; Member since: 03 Jun 2010)
---" Apple knows it makes a quality product and knows people are willing to pay more for a dependable product."---
This theory didn't work when they only held less than 8% marketshare. In fact, even facing bankruptsy, people weren't purchasing them and still remained higher priced than competition. This was pre wireless era.
As I posted earlier, the only reason Apple exists at its current level, is because the cost of owning an iPhone is imbedded in carrier's price plans. This makes the initial cost easy to obtain. However, the plans are price plans that EVERYONE pays regardless of owning one or not. Take a look at how carriers have instituted their plans in conjunction to the demand of the iPhone. It isnt just for Apple consumers. We are all paying.
It doesn't take economics 101 to notice this. It just takes experience with Apple products as I have over the course of 30 years.
47. moofoodooloo (Posts: 137; Member since: 04 Jan 2011)
I don't see how Apple pre-wireless, from how many years ago, translates to the Apple we know today.. Are we still talking about cellphones? Are you saying Apple's market strategies from how many years ago still hold water today?
67. Slammer (Posts: 1515; Member since: 03 Jun 2010)
I gave you a thumbs up for your question. The answer is mostly a yes and yes answer. Apple is in the business to sell hardware regardless if it is a phone or computer. So, prior to Apple's entrance into mobility(Pre-wireless), they have always remained higher priced for comparable offerings. They love profit. Not saying other corporations don't, but Apple is the master of vertical integration. Everything is controlled via close monitorization. They operate by lowest possible manufacturing costs verses highest price sold. Hence why they have been able to go from the verge of bankruptcy to the most valuble tech company in the world. Not to put Apple down, but this is their reasoning for holding back features others have implemented. They don't need to include features. This keeps the manufacturing cost price very low yet they can charge more than what everyone charges. They were on a positive upswing with this due to the ipod touch but Apple could not have done this in the short time they have by not getting help from carrier subsidies for the iPhone. The carriers made it easy to purchase an Apple product. Due to the iPhone, the brand name became synonymous with popularity and status. This helped in sales for the ipad.
89. flamencoguy (Posts: 107; Member since: 04 Aug 2012)
"stable quality product"? Where have you been hiding.
Have you read about Maps, purple halo on pics, light leak from case, scratches on case, iOS6 eats batteries....
And what R&D is evident? They just buy companies and patents. Bought Siri, bought chip company from Israel, bought hundreds of LTE patents from Nortel..
33. VJo003 (Posts: 356; Member since: 11 Mar 2012)
Apple resembles the traits of the parasite - Leech
It sticks to the flesh of its host & keeps sucking the blood ... much as it can.. as long as it can
49. kotoulas100 (Posts: 2; Member since: 24 Feb 2009)
well i just want to say this : Don't you think that Apple should be rewarded for a job well done ? I think we are missing the point. The point is not how much Apple earns from it's products but if we are pleased with them . I sure am pleased and that's why i don't care about Apple's profit . Actually i would prefer it best if the iphone cost was lowest possible so that the firm will be healty to give us the next iphone :)
65. Jobes (Posts: 364; Member since: 27 Oct 2011)
So you are willing to overpay so that way they will be a healthy company.... so they can give you incremental upgrades? Its like saying you go to Starbucks not because the coffee is good but because you support them. Apply that to all aspects of your life.. next time you go to buy a car let them know you love (insert company) so much.. that you are willing to pay a few thousand more just to support them... or hey you enjoy Arco as a company soooo much you want to pay 7 dollars a gallon for their gas.. can you see the stupidity in that? Btw not to burst your bubble but all that money extra "given" to them to support them pays their execs and legal fees and whats left over is used for R&D.
52. casperspirits (Posts: 15; Member since: 20 Sep 2012)
Try to ask any of your friends who own iPhone, they will say it worth every penny they spent... no matter how hard I tried to sway them from Apple product, they WOULDN'T EVEN THINK of changing their mind. It's like a curse...
53. stuonio (Posts: 1; Member since: 16 Sep 2012)
When Apple gets you, they have you. Proprietary devices, proprietary consumers, proprietary users, proprietary software, proprietary property. Apple is trying to get everyone to turn into a MacBot.
54. ryq24 (Posts: 708; Member since: 17 Oct 2011)
first, i don't own an iphone. second, its not as if apple is forcing you to buy their products. you still have a choice. their suit against samsung is not about monopoly but samsung really copied iphone but their lawyers and supporters are muddling the issue. .
58. bigstrudel (Posts: 518; Member since: 20 Aug 2012)
One X+ will be coming to AT&T with 64 gigs and you can bet your butt the contract price will be just $199. Suckers.
61. timtimity (Posts: 196; Member since: 13 Aug 2012)
What annoys me is people saying "you're only criticising the iPhone because you can't afford it".
1. I find that an unbelievably rude and arrogant thing to say.
2. Lots of people can afford one but choose not to. I've currently got an iPhone but I'll be getting an S3 or Xperia T next. Personally I think they're better phones but the cost is an issue. Yes, if I want an iPhone, I can afford one, but there's better things to spend my money on.
83. ILikeBubbles (Posts: 525; Member since: 17 Jan 2011)
i've heard that a couple times... i know exactly what you mean xD
66. wolstenbeast (Posts: 25; Member since: 21 Sep 2012)
Reading some of the comments here made my brain hurt. Yes demand and supply are the free market forces that allows Apple to make amazing profits, I have no issue with them doing so, every business seeks to maximize profits. I do however find it startling obscene when it comes to the issue of internal storage, Apple deny the consumer the right to use readily available and cheaper external memory.
Yes other companies offer ,16gb or 32gb models of some phones but allow external memory (shame on you HTC One X also), or they provide 32gb at a more reasonable price is Samsung Nexus.
The denial of the ability to choose to use cheaper substitute memory is immoral in my view.
Btw I am thinking I-Zombie might be a better term than the fleece covered mammals
68. Slammer (Posts: 1515; Member since: 03 Jun 2010)
Are you saying Apple can't operate on less than a 75%profit margin? I am quite sure they can. This is almost the equivelant of oil companies. Oil companies are price gouging and no one but investors like it. But, because Apple is liked, price gouging is acceptable?
84. jmoita2 (Posts: 930; Member since: 23 Dec 2011)
If you want an iPhone...
Grab your ankles...lol!!!
79. sena7 (Posts: 29; Member since: 12 Jul 2012)
Apple's not being greedy, Apple's being conservative. Looking at it from the eyes of a business owner, you don't want to lower prices if you don't have to (and Apple certainly doesn't have to) and this is a great way to generate profit.
90. flamencoguy (Posts: 107; Member since: 04 Aug 2012)
A great way to generate profit? Like they need more money in the bank? They already have $130B in the bank. So much that they don't know what to do with it all.And you are saying consumers don't deserve fair pricing but they deserve anti-competetive practices? Cost of memory is coming down so why not pass down the savings?
100. Hemlocke (unregistered)
Apple is consistent. The price to manufacture a new iPhone goes up, the price is the same. The price goes down, it is the same. The NAND memory may have come down in price, but the screen, processor, and radio chipsets all cost more to produce.
80. XPERIA-KNIGHT (unregistered)
now lets just think about how much it cost apple to make the iphone itself! and how much they are selling it to their ifans for......I get the feeling those number would do serious damage to the minds of their customers with them knowing that kind of information...
82. ILikeBubbles (Posts: 525; Member since: 17 Jan 2011)
is anyone surprised? it's not like Apple has ever really made any effort to do ANYTHING simply for the customer... they are NOT customer driven, they are DOLLAR driven... and if you love the iPhone that's totally fine. ios i think is a pretty good operating system (except for the obvious misstep that is ios6).
97. Nathan_ingx (Posts: 3662; Member since: 07 Mar 2012)
I guess you didn't read the article...you came here and only went through the comments. The intelligent insight you seek is up there, on the math problem which when fairly subtracted amounts to Apple taking more than they need and more than the device actually costs. Is that intelligent enough?
111. Nathan_ingx (Posts: 3662; Member since: 07 Mar 2012)
Yes, it could be said for any company and right now, Apple is in the limelight.
No other company will charge that much with the customers so happy about it like Apple does.