Every time Apple introduces a new model he goes into his little speech about Apple’s capitalistic ways. He says, “In a capitalist society, everyone is out to get your money” and nobody does that better than Apple and it’s destroying the company’s waning competitors.
If You Have To Ask How Much…
Apple Store, iTunes Music Store, iPod, iPhone, iPad, Mac– Apple’s product margins are the envy of the technology industry. No one extracts more profit from a dollar than Apple. Why? Here’s a perfect example.
The iPhone 6 comes in three basic storage amounts. 16GB, 64GB, and 128GB. Four times the 16GB is 64GB which sounds like a bargain at a mere $100 more. Even the 128GB iPhone seems reasonable at only $100 more than the 64GB version.
If all that glitters is not gold, then Apple’s pricing migration may not be quite as attractive as it seems. How so? Flash storage actually costs Apple less than $8 per 16GB, so $32 for 64GB, and about $64 for 128GB, which Apple then marks up and prices at a $200 premium over the entry level 16GB iPhone 6.
It’s those high margins on components which have helped to make Apple the world’s most profitable company with the highest– for now– stock market valuation. What does Apple’s pricing do to the competition?
In every product category, Apple maintains the high ground, the premium end of the product spectrum. The company’s design aesthetic and materials make each iPhone, iPad, and Mac glitter like gold (in some cases, literally) which increases the perceived value. At that game no competitor can match Apple, so most competitors are forced to sell their wares at a lower price point for similar specifications.
Apple’s buying power means it gains a so-called most-favored-nation status and gets the lowest possible price on components but prices products higher than competitors who often are forced to pay more for components and price their products lower than Apple.
It’s win win for Apple, but lose lose for everyone else in the industry. That’s why Apple owns over 90-percent of the entire industry’s profits.
The smartphone manufacturing landscape has been disrupted and changed dramatically since the iPhone was introduced in 2007. Back then the major players included industry leader Nokia, Motorola, Samsung, BlackBerry, HTC, Microsoft, and others. Today, Samsung is the only other major mobile device maker with profits; Nokia, BlackBerry, HTC, once might Microsoft, and others have hit the financial skids.
Apple’s business methods have remolded the entire mobile device industry, but not in Apple’s image– the exact opposite of Apple’s model is what remains.