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264 Comments
- moisie, on 10/11/2007, -8/+149As we all know, most other products are sold on a materials cost only basis.
- ateoto, on 10/11/2007, -4/+121Why do we do this everytime Apple releases a new product?
Here's a business tip, you sell a product for as much as you can get for it. - webcure, on 10/11/2007, -46/+157They invested plenty in R&D, that investment needs to paid by product sales. Its Steve's baby, its fair that he charge what he thinks is reasonable.
Digg it! - nshah, on 10/11/2007, -2/+92Breaking News: American companies seek profits.
- xsecretfiles, on 10/11/2007, -0/+81In other news
Music Cd's cost only 1c - shehnshah, on 10/11/2007, -6/+83True or not, I dont think anyone would disagree that they put millions of $ into R/D and they have to get that back too somehow!
- pygar, on 10/11/2007, -8/+65Also nobody is factoring cost of software development which took Apple 2 years!
- Quix, on 10/11/2007, -8/+46BREAKING NEWS: Windows Vista Ultimate ($399) costs Microsoft $1 to print and package. Rabid Apple haters conveniently look the other way...
- Chewie67, on 10/11/2007, -4/+38Exactly. For example, we all know a can of Coca Cola costs $1.25 to make. They don't profit at all.
- Lixie, on 10/11/2007, -0/+30People have bills pay; you have to make profit. If the market says people will pay $600, then people will pay $600.
- ScornForSega, on 10/11/2007, -6/+35Good.
There's room for a price drop then. - stmiller, on 10/11/2007, -3/+30And Apple iPhone software engineers work for free.
- Waterispoison, on 10/11/2007, -12/+36There seems to be a double standard. When it comes to the iPhone, it's ok for Apple to be charging a significant amount of money, but when it comes to Microsoft Surface people outcry at how expensive it will be. Don't you think Microsoft invested in R&D as well?
- Boondoggle, on 10/11/2007, -1/+24This is not how much it costs to make an iPhone. it is how much the components cost. It is like saying a pile of Rolls Royce parts = a Rolls Royce.
- iainwall, on 10/11/2007, -27/+45Its fair that they have to recoup their R&D costs, but your idea that steve has the right to charge what he wants, and that we should all still buy it is a ridiculous case of fan-boy-ism...
If it had a LG or Samsung logo on it, you know you wouldnt like it as much.
The logo is all that matters - Braxo, on 10/11/2007, -9/+25Good. Then the employees at Apple are able to but bread on the table.
- inactive, on 10/11/2007, -1/+16does this include the salaries of the R&D people for the past few years to develop the hardware and the software? and the marketing? i think this type of cost analysis is a little misleading...
- Samji, on 10/11/2007, -2/+17Welcome to capitalism.
- Rkstar, on 10/11/2007, -0/+15Next: A Photoshop CD only costs Adobe 2 cents to make. And they're charging more for it than the iPhone!
- Boondoggle, on 10/11/2007, -0/+12Breaking news. All companies seek profits.
- oracleofmist, on 10/11/2007, -0/+12its called a free market. If people didn't buy it at the 600 price tag then there would be a price drop to what the market will pay for it.
- msaleem, on 10/11/2007, -7/+17Read the article before pulling words out of your butt. They were speculating back in January and they're saying that now that they know the actual numbers, their speculation was pretty much on the mark.
- Rethcir, on 10/11/2007, -3/+13dead horse, meet stick. stick, meet dead horse.
- darksheer, on 10/11/2007, -2/+12Echoing what's already been said (but it wouldn't be digg without a thousand dupes, right?)
This is an analysis of materials cost--not product cost. You can't say that Apple has a $400+ margin over cost--you can say that product cost makes up $220 of the cost to Apple. There's also:
Assembly
Software Development (R&D)
Marketing (TV commercials, website, the literally marketing blitz surrounding the iPhone)
My guess is that once you factor those in, the margin is probably closer to about $100 to $150 / phone--at best.
These "cost analysis" studies are bogus--shame on Business Week for repeatedly posting them. - ferggo, on 10/11/2007, -4/+14Let me break it down for everyone:
Sand: $0.20
Electricity to Run Sand Poking machine: $5.00
Knowing Which Grains of Sand to Poke: $214.80 - nsummy, on 10/11/2007, -6/+14I was actually surprised to see that it only costs Apple $20 more to build the 8 gig model! That makes me think that when I get my iphone I should get the 4 gb to get the better deal.
- eescabar, on 10/11/2007, -1/+9Also factor in the following, my point being there is on going development over the next 24 months
Why does no one ever consider the fact that Apple has already admitted to using a subscription model for all revenue generated fro the iphone and appleTV, in order to provide new features and update over the hardwares subscription life time. So many reviews act as if 'What you see is what you get'. Feature will be added, otherwise it is not beneficial for apple to use a subscription based model for revenue. Link below to proof of upcoming updates:
http://www.macrumors.com/2007/04/25/apples-second-quarter-2007-financial-results-770-million-profit/ - InternetCeleb, on 10/11/2007, -0/+8"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible."
--Henry Ford - Homunculiheaded, on 10/11/2007, -3/+11It doesn't matter if it's reasonable or not, it's fair that he charges what people will pay, that's how the whole thing works. If I can make a sharpened stick for 2 cents, but people really, really love my sharp sticks (the UI is awesome for marshmallow roasting) and will gladly pay $30 for them, then I'll gladly sell them for $30.
Look at the PS3, they loose money on that, but unfortunately people are still unwilling to pay that amount, it doesn't mater how much it costs to produce an item only how much people are willing to pay for it. Sell a cheaper product similar to the iphone and the price will drop. - mfratt, on 10/11/2007, -3/+10Its as much Apple's right to charge whatever they want for it as it is my right to not buy it. Capitalism much? Personally, I wouldn't get one if it were free with a contract renewal. I'm happy with my Blackberry.
- FlamingWombat, on 10/11/2007, -2/+9Speaking of double standards, what about the PS3? They're selling that puppy at a loss (for the same price as an iPhone), and people still complain. I'd expect that the R&D costs involved with that were a heck of a lot more than with the iPhone. Yet apparently a huge profit margin on the iPhone is OK. Fanboys are funny (and oftentimes moronic).
For the record, I do think that $600 is still overpriced for a game console, but would still buy a PS3 before an iPhone. Not that I'm going to buy either. - IceJelly, on 10/11/2007, -11/+17Wow I am surprised it doesn't cost less too make.
I am serious. - tetsura, on 10/11/2007, -2/+8yeh, im sure apple employees have it real hard..
- mscman, on 10/11/2007, -1/+6You've obviously never done electronics design, have you? Prototyping costs alone could reach millions of dollars, let alone the money invested in machines for mass production of these phones. Go find someone in your area that's an electrical engineer and ask to take a tour of some design facilities, then come back with your new opinion.
- tuartboy, on 10/11/2007, -3/+8"...your idea that steve has the right to charge what he wants, and that we should all still buy it..."
Yeah, but he never said we should all buy it. - inactive, on 10/11/2007, -0/+5you know the chips they used in there are only made of sand right, the chip companies are ripping off apple!
- CraigJ, on 10/11/2007, -0/+5Working for a UK company, I can confirm that.
- ciram, on 10/11/2007, -10/+15You big moron.
The logo is attractive because it represents Apple. If Apple makes good products, the "value" of it's logo will rise. Basic psychology dude - people's subjective impression of a brand will always lag behind actual user experience. That is to say that if Samsung started making better phones, after a while, the samsung logo would also rise in value. People don't pay the insane markup because of the retarded logo, they do it for what the logo represents --> ease of use, innovative UI,...and whatever else... People are lazy. They don't want to do research on every device they buy.
BTW, I'm not getting an iPhone as of yet - too many birth defects. - specialK16, on 10/11/2007, -1/+6Functionally less robust?
- louiedog, on 10/11/2007, -1/+6I'm neither an iPhone hater or a MS fanboy, but come on.
1. It's a 30" touchscreen. A good LCD for the same size retails for $2,000 + the multitouch tech + the computer + the housing + the R&D and design that went into it.
1. They said $5,000 to $10,000 starting out and is aimed at businesses like restaurants. They estimated it would come down in price to a level for consumers in 3-5 years which means they're not expecting this in people's living rooms at that price. - gann, on 10/11/2007, -1/+5Exactly. Let the market, not the cost, determines the price. This is Econ 101.
- neonfunk, on 10/11/2007, -2/+6? think you're confused about what I'm saying. when I say the aesthetics of the UI are inseparable from it's technical value, I'm saying that a large degree of the technical investment is itself in what may appear to be "aesthetic". digg me down, but you can't you can't separate HOW you use a device from WHAT it does-- to advance either requires a huge -technical- investment. to say that you're paying just for it to "look pretty" is vastly oversimplifying a pretty stunning technical achievement (if I do say so myself).
- darkyoshi, on 10/11/2007, -1/+5You're comparing the markups on computers to the markups on cables, notorious for being the most marked-up products sold? You've gotta be kidding me! Apple makes WAY more profit than a company like Dell or HP.
- inactive, on 10/11/2007, -0/+4I agree with K16. I bought one
- iName, on 10/11/2007, -1/+5I'm sick of these stories. It happens with just about every new hardware release. The total cost of the product is not simply totaling up the cost of the component parts. It's just not the case that $600 - $220 = Apple's profit per iPhone.
- jedicurt, on 10/11/2007, -0/+4Too Bad that isn't on the crest of the Ford Family.... they could learn a thing or two from him
- stealthboy, on 10/11/2007, -1/+5Buried as inaccurate. All prices also have to pay for R&D, shipping, manufacturing, marketing, support, software development, etc. These "articles" seem to come out every time Apple releases something - and they're always wrong and very misleading. There is more to the total price of a device than simply the cost of the component parts. But then again, people are stupid and will Digg this story anyways...
- shiftt, on 10/11/2007, -3/+7They're also putting millions into advertising. Advertising costs are factored into the product costs, so part of that $600 pays for the billboards you see on your way to work.
It's absolutely logical for Apple to recoup its R&D costs, but charging extra in order to recoup advertising expenses is something different. Take a walk down any metropolitan city and you'll be greeted with thousands of ads - whether you like it or not - and Apple is no different. Plenty of people don't like the iPhone, don't need an iPhone, or can't afford the iPhone - but that's not going to stop Apple from spending millions on ads - and that cost will be passed on to those who spend $600+ to get one. - catalysis, on 10/11/2007, -2/+6Supply and demand. You charge as much as people are willing to pay. Do you really think they sit around and say "well our R&D cost $x, so we just have to recover that and sell it as cheap as possible"? Hell no, they make a price/demand curve and choose the point that will make the most money.
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