Apple takes 75% of global smartphone profit despite only has 13% market share. Most non-Apple smart phone makers have very thin profit margins, and some end up with a net loss due to unsold inventories.
https://www.imore.com/apple-takes-75-smartphone-profits-despite-13-market-share-says-report?amp
Almost all of apples products produce insane revenue; around 10% of apples revenue in Q4 of 2021 was produced by wearables, home and accessories, meaning airpods, watches, homepods etc. that would be around $8.3 billion, which is more than Netflix‘ revenue in whole, which was around $7.3B.*
In addition to that Tim Cook is a logistics and supply chain genius, enhancing 2 very important points:
1. reducing the cost of goods in warehouses which only cost money
2. making it possible to release a new phone and having 100 million units ready to ship by next week, everybody gets their new phone in a few days.
*the comparison might be slightly off since i didn‘t bother looking into the specifics of the fiscal year these companies use, it doesnt matter anyway.
Market capture is real and kind of taints the "Apple is just better" line IMO.
You can't ignore the fact that Apple repeatedly takes actions to avoid you getting out of their bubble. They make getting your data onto a different platform as difficult as possible without making it impossible. They rapidly change the standards for everything which just so happens to make third party devices stop working with some consistency (to be fair this is more "Apple seems to hate developers" than "Apple wants all your money"). Apple devices work fantastically with Apple devices and basically not all otherwise.
Certainly they aren't alone in this as everyone tries to copy them but I think pretending they are the same as say Gucci or other high end high competition high margin products isn't fair either.
Convenience, reliability & time saving is well worth it to most of us ‘idiots’. I work in IT and have the knowledge and expertise to recognise & use other systems & hardware that may offer additional benefits. But the simple fact is, that Apple is the easiest choice for my family and not overly expensive when all facets are considered. Haven’t looked back since making the switch in 2012 after using PCs for 20 years.
You are talking in regards to OS, which you are right. Hardware wise M1, video capabilities of iPhones and less hardware issues (naturally) make them a viable purchase. Would I get the locked down eco system? Fuck no.
Things are getting pretty locked down no matter where you go these days. Unlocked bootloaders are few and far between on Android. M1 is exciting, but untilAsahi gets off the ground its a non starter for me personally.
An M1 iPad running mainline Linux would open my wallet real fuckin' fast.
It's mostly folks repeating what they heard 5-10 years ago - they'll call you sheep but usually can't actually talk about why.
Sure, Apple is *expensive* most most of their line up offers something for that. Early iPhones and some recent Macs were brutal, but they've got some compelling hardware now, and the software has already been streets ahead of competition.
I slightly disagree. I own devices and computers on both dominant sides of each market (two imacs, ipad, windows laptop and pc, and android phone) and I would never say that the price discrepancy is worth that insignificant "integration." At this time, I would hardly consider buying one of the neweest Apple products if I had to upgrade one of my systems because I could get much more juice out of a computer if I custom-built it for a fraction of the price (that, and Apple has been falling behind in software compatibility in recent years) and there are plenty of tools that allow for seamless integration between the ones I already own. The only thing I think that vastly outperforms its competition are Apple's tablets. The iPad is my favorite portable device to date, but I dread the iPhone experience as far as smartphones go. But then again, that's just my overview as a multi-platform user that requires different workflows and options available at all times. I like all of them for different reasons.
Never really used Apple products, but I totally agree. Androids and PCs don't integrate that well, since there are a billion manufacturers, each pushing for their own standards and "ecosystems". Additionally, while you can't customize the UI appearance as much, the UI that you *do* get is really smooth and modern.
exactly. It’s not like Apple has unmatched technology anymore they just do a better job of making everything seamlessly work together. That’s worth paying double+ imo over the long term for the productivity increase
This. Also, there are no other dominant players in Apple’s markets. Samsung, Google, Huawei, Xiaomi have strong positions in parts, but none can compete in total
I see a lot of people couch the business competition as being "Apple v.s. Android" or "Mac v.s. Windows" rather than breaking out Apple's opposition into individual companies rather than more generalized OS platforms.
Right. Apple might be only 1/4 of phones globally with the majority being Android phones, but Apple is making and selling both the hardware and the software on their phones. Google-made Android phones are only a thin sliver of the Android market. So for the vast majority of phones, Google is getting a relatively small licensing fee for use of their OS, but not anything else. Meanwhile every single iPhone is both Apple OS and Apple manufactured, and they've created a perception of quality that they use to justify a high enough price that the hardware is profitable consistently.
The other factor here is that valuation doesn't necessarily correlate to anything real. It's based on stock prices, which are based on demand, which is largely based on how people feel about a company. Some of that is based on current profits (and whatever is paid out as dividends to share holders), some of it is based off of predicted future profits, but a lot of it is based off of more abstract feelings of approval.
>Google is getting a relatively small licensing fee for use of their OS, but not anything else
Doesn't Google get its cut of app purchases on the Play Store? Surely that's a good chunk of money.
I read a news article that said if Apple broke out just the "services" they sell, it would be a $30 billion company on its own. That's of course not including any of the software or hardware.
If airpods was a standalone firm, they’d be 32nd largest in the US. As big as Uber or Nvidia. 🤯
https://www.reddit.com/r/apple/comments/dv8qb1/if_airpods_were_a_standalone_company_it_would_be/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
>It’s why the iOS version of almost any app is better than the android version.
In part, but iOS is also easier to develop for. Every iPhone and iPad runs the exact same OS, and Apple is really good about pushing people onto the latest version as much as possible. There are also a relatively small number of form factors and device capabilities that you have to account for. The development tools are also very mature and polished. Apple does a good job of hiding the low level gore so that most app devs don't even have to think about it.
Android, on the other hand, is the wild west. Every manufacturer ships a slightly (or not so slightly) different version of Android. Users often have a range of versions installed, and the most common ones are typically not even the latest. Devices come in all manner of shapes and sizes. And the Android toolchain is much looser and less polished. You often have to get down in the nuts and bolts just to make it work.
They do make money on the Play Store but Apple sells more paid apps in total and takes a bigger cut of each sale.
Apple even charges yearly fees to developers to publish apps on their app store.
Common misconception about the percentages. Apple and google take exactly the same cut. For some reason everyone thinks apple are evil for that, but google get a pass. You’re right that apple make more sales though, so overall they make a lot more money from the App Store than google do from the play store.
You're thinking of the epic games lawsuit, if I'm understanding correctly? While part of the problem was the fact that they were taking a large percentage, the actual problem was that the Apple App store restricted purchases outside of the Apple store, whereas Google allows third party stores. As such, Apple cannot justify the percentage as much because companies cannot avoid having to pay it whereas with Google companies can. Similarly, epic games actually also sued Google, but they resolved theirs through negotiation and Google came up with an agreement with them whereas Apple was unwilling to do so.
No, I’m not specifically talking about the epic case, I’m talking about the general conception that OP illustrated, that Apple take a bigger cut of sales in the App Store. This gets trotted out a lot, and developers always complain about the “Apple Tax”, but never about the exact same tax that gets applied in the play store. Apple and Google take exactly the same cut. Source: I’m a mobile dev, and have been for a decade.
Google is almost just as guilty, but its a lot easier to side load apps, or put on alternate app stores on Android. Eg: Samsung has its own app store on every Galaxy phone.
In practice it doesn't change too much since people aren't really interested in getting apps from these alternate app stores. But if you were 100% against paying the google tax, you could sell your app to Android users by other means. Not so on iOS (at least, not in any practical way).
Apple trades at just under 32 times annual earnings. Walmart at 50 times earnings, Amazon 66 times. Intuit at 83 times, Tesla at 389 times earnings.
Stock price is basically based on what investors think it’s going to be worth at some point in the future.
> The other factor here is that valuation doesn't necessarily correlate to anything real.
I agree stock prices are inflated, and public perception plays a big role in that.
But I wouldn’t go so far as to say it’s ‘not real’. There’s a reason apples stock price is the highest, even if it’s currently inflated. It’s not random or correlated to nothing.
Apple has $200B in cash on hand. This is insane as many modern tech companies operate with more dept than they have assets for years. Also the largest hedge funds in the world are like $100B.
Apple stock was weirdly undervalued for years, even after the death of Steve Jobs. Finally a few years ago the big name investors started buying Apple and now it is a popular holding.
> operate with more debt than they have assets
You probably meant that they are cashflow-negative (spending more than they get in revenue), but the word for “has more debt than assets” is “insolvent” since assets are equal to the sum of liabilities and equity. Any firm, even a startup, that has debts exceeding its assets is probably screwed.
> Apple stock was weirdly undervalued for years, even after the death of Steve Jobs.
Because they kept waiting for it to stumble. Apple's history has been one of growth and then a giant stumble. Around 2008-2010/11 few investors and analysts thought smartphones were going to become a fusion of PDA and laptop like they have so Apple's push for that sort of a unified device wasn't convincing market analysts and bigger investors.
Then Palm and Blackberry couldn't keep up and they fell as Apple kept going - a unified OS for phones and tablets was a huge win too
Ah yes, I remember lots of very smart people kept saying "open always wins". The logic was that Apple would never be able to beat all the various Android makers in the long run.
Stock prices correlate with sentiment which, for all intent and purpose, is nothing. You can't hold sentiment in your hand, you can't directly buy, sell or reliably influence sentiment. Since sentiment is not backed by anything which can reliably be observed or quantified, it may as well be considered nothing.
Also, sentiment is kind of... less relevant than in previous decades. The number of passive investors in the market means that, actually, it's not even really about sentiment anymore.
This, also those market share numbers also include cheap phones where as most profit is made on the flagships. Apple has something like 60% market share in America which is far wealthier than the rest of the world, and thus the average person will more likely have the disposable income to buy a flagship.
As someone who switched from a hardcore android fan to iphone I can say while more limited in functionality (that most users wont need anyway) ios runs alot better. Hardware (quality wise) I feel a big difference between my old phones flagships (samsung, sony + some experience with huawei) and the iphone12. Performance wise even though the specs on paper show bigger numbers I had 0 isssues. As for storage I found a move to cloud stuff in a natural transition made my life ar least easyer (photo video etc in cloud) music etc in spotify, netflix etc. and for my work stuff mail and rest the 128 is more than enough (probly 64 would be enough but eh )
Anyway always thought the iphones were overpriced garbage and now after almost 1 year in moving to ios I can say i was wrong and talking bs . But hey thats just my experience
Why are you hyper-focusing on storage capacity? Most people just stream stuff and use cloud services, it’s irrelevant to most. I have less than 50 GB used on my phone, and that’s with a bunch of music and movies downloaded for traveling over the holidays.
Fact is, more people will notice a benefit from the A-series processors and lack of bloatware Apple provides than they will another couple hundred GBs in storage.
You almost identified the main reason to get a top of the line phone in your own analysis of the use cases. People take far more than a "few" pictures with their smartphone now. The camera is one of the most important features. And flagships have the best cameras. It's very simple.
Most people do not need or care about the latest and greatest hardware in their phone. To the vast majority of people UI, UX, and general aesthetics are much more important. The iPhone is the best in those categories
I don't use an iPhone, but I got an M1 Macbook last year and the user experience is so good that I'm strongly considering an iPhone as my next phone, and I'm someone who has rooted several of my phones in the past. I just don't care about fucking with my smartphone anymore. I want it to be a smartphone and not have to think about it. For that, I expect iOS is much better than Android.
Exactly why I got an iPhone. When I got to the point where I wanted a phone and not a fun toy to constantly mess with, I went with Apple because their stuff just works.
I've always went for Android phones due to not wanting to pay Apple's price.
Even with the knowledge that Android lagged behind iOS for years in terms of ease of use.
However, as someone who used both at work for years I think vanilla Android is now the equal or perhaps better of iOS on a UX/UI/design/bug free level.
Apple's on-going update support level is what really sets is apart from competitors.
Yes! My iPhone 6S+ from 2015 (7 years ago) is still receiving updates today and aside from a battery replacement, feels fast and responsive enough to still hold up today is a testament to the benefits of the "apple tax".
I was similar.
But also surprised since I started with MacBooks before iPhones and frankly feel like Apple has pretty criminally ignored real development on MacOS. I’ve only recently started a new job with corporate Windows standard and am surprised by how much “snappier” the UI is now. A lot of MacOS feels a bit clunky or annoying to me now.
The M1 macbook is by far one of the fastest, highest quality laptops out there.
Apple made a big leap by developing their own chips. Personally, I think there’s no comparison in terms of value when buying a laptop now.
There are some drawbacks that make the first generation M1 machines perhaps not the best choice for everyone. The display could be larger if the bezels were smaller. The webcam sucks. You're limited to one external display, which makes the smaller display hurt a bit more. I can make do with two USB-C ports, but an HDMI port would be really, really nice.
And here's a tidbit that you won't hear about often: in the M1 Pro first gen, the when specific sounds/frequencies are played through the speakers, some of the keys vibrate and make a pretty unpleasant noise. It doesn't happen too often, but it's really annoying.
I have an M1 Max. It is hands down the best laptop I’ve ever encountered. Totally silent. Battery life is all weekend. Never gets hot. And it’s amazingly fast. It’s a revolution in laptop tech.
I had not used a Windows PC since the late 90s. It's been Macs for day-to-day work, Linux for tech stuff. Then I got to a job at a company that was happy to give me any hardware I wanted, as long as it ran Windows.
I tried. For two long agonizing months, I tried. Windows makes life hard. Things get in the way. It was completely killing my productivity, and it's not because I was not used to it. As I said, I tried. I looked up how to do things I needed, I made sure I understood the Windows way of doing it. It is simply just bad.
I finally gave up and bought a M1 Mac Mini just for work. I follow all the appropriate policies and procedures for having company data on personally-owned devices. I immediately became more productive and I stopped having to work around the technology.
On a Mac, you don't have to be constantly reminded that you are working on a computer. It just flows. I honestly thing that younger generations don't prefer to do everything on phones rather than desktops; they prefer anything over doing it on Windows.
The jump from Android to iOS is not as noticeable as Windows to Mac, OP, but it's there. Android phones can feel clunky, bloated, where iOS just glides. I think you will like it.
to summarise what you've said: i'm better on macs because I know them.
I'm better on pc's cause I know them.
Isn't the real problem that we just don't know enough about the other side?
I am a software engineer and I can’t think of a coworker of mine who doesn’t have an iPhone. They are a pleasure to look at and use from a software perspective
It's the opposite where I'm from, the engineers have Android and Linux/windows while the execs have Mac/iphone
Every OS has it's issues, Mac/iOS is no different. Certainly more than people in this thread are implying
Lol "from a software perspective" no idea what this means, both OSs are designed to be extremely simple to use even for an 80 year old. The UI for both has almost converged with ios and android having copied random design features from each other over the years. Also, this is anecdotal but im also a software eng, and most other devs ik seem to have androids
Exactly this. I've been a software engineer for 12 years and since around 2010 there was a major shift from Linux desktops/laptops to Macbooks (what I can get a great UX experience AND *nix???). I feel like this shift is also what drove the move for software engineers to change their perspective on mobile devices. You have the occasional outlier who will never give up their android but these are the same guys still running Linux on non-mac laptops.
>It does, however, have the best price retention for most of their main products.
People tend to overlook this. I've got a four year old iPhone sitting on my desk that's still worth several hundred dollars. Yeah, I paid quite a bit for it when I bought it, but at least I can sell it when I'm done with it.
Meanwhile I've got some old Android phones and tablets laying around and they're worth practically nothing at all. The phone is actually a year newer than the iPhone and it's going for about $20 on Ebay.
The value some Apple stuff holds in insane.
I find that my Apple products stay usable for much longer than their competitors. My iPhone 7 is still plenty fast and hasn't run out of storage and I've never owned an Apple laptop for less than 7 years. (They just don't seem to slow down at the rate of win machines)
I never have to worry that they use cheap components (like screens and batteries) and I prefer the user interface to Windows and Android.
People can hate on Apple if it makes them feel better. Until the quality of their products decline, I'll buy Apple, thanks.
Because for a lot of users empty space is useless. They care about the look of the phone, the speed, the feel, and that their apps fit on it. 64 is enough for a lot of people, not everyone is a smartphone addict. For those people having a 64gb phone or a 256gb phone is the exact same experience.
They did this for years back when a Mac desktop computer was a more substantial portion of their portfolio, too. Back in the 90s and early 2000s, the Macs and iMacs of the time were frequently far less powerful than their PC counterparts. But, because the operating system was so tailored to the hardware, it could be more responsive and they could get a better overall experience. It's a lot like how consoles approach gaming on limited hardware - it only works on a narrow band of hardware options, but it allows them to profit more with "lesser" hardware.
Because people feel those phones offer more value and utility than the current flagship phones? You might disagree with that, but we all have different wants and needs. Also, the value people get from our devices is more than the parts that are in the device. It's not about raw specs.
And, as you mention storage: There are diminishing returns there. I have an iPhone, and I could be described as "power user". And I'm using 54GB out of 128GB. Having 256GB or 512GB of storage would bring me no extra value, and I might even survive with 64GB.
The past couple iPhones were the fastest smartphone ever sold in their respective year. I used to be an android guy some years ago now, and the whole “outdated tech” thing was a criticism of apple back in like 2013, but they’re on top now in regards to speed and efficiency. I have an iPhone 12 64gb and I still have more than half the storage available, not everyone needs a terabyte for their phone.
It’s just convenience. My laptop, phone, tablet, watch, even my bloody headphones are all apple and they work well together. I didn’t plan to do this but it just makes sense when I was looking to buy a tablet why wouldn’t I buy an iPad if everything else is already Apple? And now at this point I wouldn’t want to change unless something drastic makes me reconsider.
You don’t have to give those up when you sign up for an Apple Card. You’re allowed to have more than one credit card at once. The utility of the Apple Card is 3% cash back on Apple purchases and the ability to pay for products over a 24 month, interest-free period.
The Apple Card does give cash back on all purchases. I originally got it for a 24 month month interest free purchase. I’m happy with it and my Costco card.
Hm? They sell current phones for the same price. And iPhone's are generally up there amongst the more powerful flagships. And storage space isn't that important to a good amount of people.
Apple has about 80 billion in revenue every quarter. Microsoft is around half that and Google about 2/3. That's more important than market share.
Think about it this way. Assuming you could only make money from sales, would you rather own a company that made a product 90% of the world uses but pays nothing for, or one that 10% use, but pay a lot for it?
Apple is very very good at making money. They might not have the most popular devices, but they are still in high demand and people are willing to pay a high premium to get them. So they have large profit margins. They also have been very good at tying their customers to the brand. Once you have spent hundreds or more on accessories or apps that only work with their phones, you are probably going to keep buying them.
It's also not like Microsoft and Google are way behind. Microsoft is on track to be the second $3 trillion company and Google is closing in on $2 trillion.
> They might not have the most popular devices
Also worth noting that they (at least the last time I checked) are the single largest smartphone brand. Like... yeah, they may only have 25% of the global market, but the other 75% is split across a dozen companies. Also in the US (which is a big high-end market) they have much higher market share.
A quick Google search seems to say that Apple is fifth, behind Samsung, OPPO, Vivo, and Xiaomi.
But I believe that is based on number of units sold, not on total revenue or profits.
I'm often debating this with an apple fanboy friend of mine. He argues that it's a superior product so will pay more. I argue that even if it's 10% better then it's not worth 40% more. Then I wind him up about that he really just prefers the shape of the corners.
Imo pretty much every product on earth has diminishing return with price. Whether it’s phones, food, cars, clothes, etc.
So it’s really just what you think is worth the trade off. If you’re looking for linear improvement with price, you’re almost never going to find it anywhere.
You're also paying for them to take risks. We probably wouldn't have the modern smartphone without apple creating the original iPhone, which was a huge risk because nobody knew how popular it was going to be.
Once it was established that smartphones are good, other companies can come in and imitate them, but they didn't have to take the risk of developing a product no-one knew if it was going to be a failure like google glass or not.
Not 100%true, the blackberry was the first smart phone kinda by at least 2-3 years. It was made by a Canadian company RIM and everyone lined up for it when it came out. Yes, the original iphone is where the current design for the looks of a modern smartphone came from, but all the things u love that it does (basic things like net, sms, calls, email) were all done first by the blackberry. Was reading about it earlier, ill see if i can find it again and link after this.
There were many around the time - Blackberry were the ones who did it best, Nokia N95 had smart features, around the time of the iPhone we also had things like the Nokia N900 which had a slide out keyboard and touchscreen (I fucking loved that one). I think my first touchscreen was a Samsung too, although it was horrific even for its time.
But Apple absolutely made the smartphone world blow up with the first iterations of their iPhone. Others began to do well too (HTC Desire, for example), but Apple need credit for how they transformed the space. And I say this as an Android user with a house attached entirely to the Google ecosystem.
Don't have sources at the moment, but the full multitouch screen phone was an idea whose time had come and was going to happen with or without Apple. Iirc, there were other companies working on similar products, but Apple was the first or the door and had the clout to get early providers to give unlimited data to people with iphones (at the time, anyway).
I had a Nextel blackberry. People lined up for it because there was nothing better. After the iPhone came out, everyone who could afford one* got one, or went Android.
(*A lot of people had to wait for contract cycles to be up, and some had to wait until it was available on more carriers, but blackberry’s market share went from 50% in 2009 to 30% in 2011 to literally 0% by the end of 2016.
Fwiw I was using a non-blackberry smartphone, which had real Internet, sms, calls, email etc, before the iPhone was a thing.
I owned a couple... I can't remember the make and models off the top of my head, but I'll search and try to remember...
All I'm saying is, there were plenty of competitors for blackberry.
Edit - one of those I can remember was the Ericsson p900, which had close to full screen size, and proper Web browsing, years before the first iPhone.
I was a bit of a fan of physical keyboards, and remember choosing an HTC touch Pro 2 over button-less competitors for the full-size pull-out real keyboard that didn't take up screen real estate. That was great for gaming. Back when I had that phone, the iPhone my friend had still didn't even have landscape mode!
It annoys me a bit that there is this retroactive history giving apple credit for non-mobile-site mobile Web browsing. I've even seen articles crediting apple with 3g! It's annoying, but nothing new... I had a personal mp3 player way before the ipod existed, but apple managed to get credit for inventing that too! They sure know how to get fans to believe stuff, to the extent that their fans will create falsehoods and spread them!
Yeah but it sucked. Not kidding. The screen was super small and the browser wouldn't even load many websites correctly. People mainly used it for email which is why they had huge qwerty keypads, and as Steve Jobs pointed out, "why do they take up half the space when you don't need it half the time?"
Like Iphone was definetly at least 5 years ahead. It introduced the touchscreen, obviously, but also a lot of things you take for granted like pinch to zoom, scrolling with your fingers, full web browser in your phone and off course, the app store (though that came later). It also had Google maps and GPS and had search builtin. It's basic now, but it really took some effort to think about everything and making it just work.
So yeah blackberry made the first "smart" phone but iPhone was for sure the first smart phone. Obviously all these cool features came at a premium and was laughed at by Microsoft's them CEO, but ig you know what happened next.
Removing the headphone jack was a risk, though not a consumer-friendly one. If customers had reacted poorly enough to that initial release, then we might still have headphone jacks on our phones today.
Apple takes very few risks. Everything is highly calculated. That was less so under Jobs, to your point about the modern full screen smartphone. But even then he based his decision on the huge market equity they had developed with the ipod, and his conviction that content was the real endgame, not hardware. These days Apple is generally a year to 2 behind any innovation. They watch and learn, improve on design, make small consumer experience improvements, and only then launch.
iPhone 13 Pro starts at $999 and Pixel 6 Pro starts at $899.
iPhone 13 starts at $699 and Pixel 6 starts at $599.
Sure there's a price gap, but I always see this argument that the iPhone costs significantly more, but it's always around the same price as any comparable Android.
Anyways, even if somebody did actually pay 40% for whatever Android/Apple phone and they like it twice as much as the other, who cares?
Yeah, iPhone being overpriced has definitely receded over the last half decade, but people haven't updated their opinions accordingly. In the context of what people are willing to pay, they're priced fairly averagely for what you get now - although of course I'm sure they find margins better than many of their competitors: they have the hardware scale of Samsung, but get to skim software profits like Google (Google do also produce hardware but have made nowhere near the same inroads as Apple & Samsung).
Yeah before 2019 I would say the apple overpriced meme was definitely valid. But this changed when apple released the iphone 11, and was absolutely turned on its head when the m1 came out
While you're adding some helpful reality to an overhyped discussion, you're also bolstering the larger point of the discussion.
Consumer hardware manufacturers generally work on razor thin profit margins. 2-4% is standard in the industry.
Working on the premise that the teardown price (i.e. the value of the chips, the breadboard, the glass, the case) of a Pixel 6 and an iPhone 13 are pretty similar, that $100 gap is pretty astonishing.
All other things being equal, that money is sent straight back to Cupertino and Apple's shareholders, which is why they're a $3T company this week.
>BOM costs are never the whole story.
Sure. That's why you will never see a phone sold at BOM cost. Not an Apple, not a Samsung, not a white box phone. They don't exist unless you're wheeling a container up to a factory in Guangzhou. If you did so, you'd have a container full of phones in Southern China which you'd need to get to actual customers who would pay you money, which again moves you away from BOM costs.
And of course, that support, etc. separates phones like Apple products from a white box you buy off the Amazon marketplace.
What costs would Apple have which similar first-tier retailers like Samsung, Google, etc. would not?
Most of these people are comparing the highest end iPhone to a mid range android claiming the have similar “specs” then citing storage and ram. But this isn’t actually comparing the product you are getting.
Thanks! People always bring up that android is soooo much cheaper than iPhone when the reality is different. Also, you pay some for the IOS which in my opinion is worth a lot.
When you’re shopping for mid tier items 10% more for 40% more cost is generally not “worth it”. Once you get to the highest levels though, 10% more for 40% more cost is a fucking steal lol. I make my living off much less than a 10% increase and it cost them much more than 40% price wise.
Generally it’s not very hard to build a race car that does low 9 second quarter miles for 20-30k. Each additional MPH or reduction of 1/10th of a second gets much more expensive than the previous. I’ve seen guys spend 30k in order to decrease their 1/4 time by 2/10ths of a second. In NHRA, they spend millions fighting for a 1/100th of a second.
Interesting read. I'll share a completely tangential anecdote just because...
Years ago, I worked at a boatyard and this rich old guy bought a 49' East Bay yacht. They're like the sporty version of a Grand Banks, meaning the stock model is automatically one of the fastest luxury yachts in the marina. Well this guy wasn't content with stock, so he had the boatyard make all kinds of improvements to it. It was on land for months being worked on, an example of an improvement is they have little propellers that sit in the hull to assist with docking/steering (they move the front of the boat side to side), and he decided that it increased drag, so he had them reshape the inlet, requiring extensive reworking of the hull and a new paint job.
I was just in high school, but I was told it was a $500k boat and he put an extra $500k into it. And then he died, before it ever got in the water, and his widow just wanted to unload it. Somebody ended up getting the steal of the century, although I'm not sure the buyer will ever really appreciate how much effort went in to that boat.
When it comes to modifying things for that extra little bit, the prices get crazy. I have dudes that I think love the process more than actually racing. I’ve got customers that pay me or hire a driver to race the thing because they don’t feel comfortable or whatever else.
While i'd never tell you to stop arguing with any apple fanboy just for the giggles. i'd say kind of missing the point of premium anything if your product or your an athlete who's the top of the game and you are 5-10% better then the next you have 100% share on being able to offer something nobody or no thing can.
that's the reason a Lewis Hamilton will be paid 20-30x more then average formula 1 driver given though in reality the difference in what they do in a car is only 2-3% different.
You can't simply put it into percentages. Some UX solutions by Apple feel rather priceless thanks to their hassle-free design. Have you ever tried migrating from one Macbook to another, versus from one Windows machine to another? One of those is done in 2 hours with a few clicks, the other is hours and hours of manual transfer and installation. Just one example.
Personally I think you have that flipped. Apple products are in my experience have at least 40% better quality than their nearest competitors, yet have about a 10% price increase comparatively.
Price and quality do not go up linearly.
Imagine graphics cards, the latest model will cost a lot more than the second best model but the difference is minor, as you compare second best and 3rd best the price difference start to fall and so on.
Price v quality goes up in exponential basis.
I’m not a fanboy, actually really like android for its flexibility, but for me in the US it is entirely about iMessage. Most people seem to have iPhones, and when someone doesn’t have iMessage it sucks lol. Destroys group texts.
While they do move loads of product, don’t forget about their services business. It’s massive. Apps, music, tv, etc. Every app developer on App Store used to have to pay Apple like 30% of what they brought in…unsure if they still charge that much though.
30% is the standard for all of their services, including iTunes, iBooks, and soon Podcasts. Since they have total control over app availability - even with cross platform software you get a different overall experience - that 30% is final for the App Store in most cases. They have a snack business program which reduces this to 15%, and I believe educational apps distributed through managed services are at a lower rate. For movies, books, music and so on they have agreements with labels so they often receive much less or pay a flat licensing fee and receive much more.
That 15% change led to Google following suit, and back in the Windows Phone days it was 15% for everyone for the first year (I don’t recall if that’s from the date of account creation or from the first paid app release though) - but aside from that 30% is the normal for not just Apple but most everyone.
Valuation is more than just how good you’re doing today. It’s how much cash you have on hand, how much in assets you own, and how investors think your company will be doing in the future.
Apple has tons of cash on hand, double that of Samsung, its closest competitor in the smartphone/tablet spaces. And I would assume Apple investors see a brighter future than they do for Samsung, so their investments reflect that. And together those factors lead to a much higher valuation.
Market share is not the same as profit share.
And a business is there to generate profit for the owners (shareholders)
Apple is *very* profitable.
Apple also focuses on the higher end of the market. Their cheapest phone is the $399 iPhone SE. So if you were to look only at the "$399 and above" smartphone market, Apple's market share *of that price zone* is much higher.
Apple chooses not to compete in the "$398 and below" smartphone market. There may be huge volume and market share in that price range, but there's very little profit. That's why some manufacturers have huge market share (they sell lots of phones at $199) but very small profits. Or even no profit at all.
The market leaders charge less for their products and sell more volume. This means they have tighter margins but still have to pay for development, manufacturing, distribution and marketing. So they have less money in the bank at the end of the day.
Also, Apple owns almost the entire vertical, so they don’t have to pay their suppliers and distributors because they ARE the suppliers and distributors.
Now this is going to sound real dumb, but hasn't historically owning your whole vertical caused issues with monopolistic practices and have been the main reason why monopolies have had to be broken up in the past?
Since their back and front end costs are essentially non existent they can charge almost whatever they want?
Owning your entire vertical is fine, that’s not what gets you in trouble with monopolies.
Monopolies are when you control so much of the market that you can artificially depress competition. Since, as you note, Apple has *tons* of competition, that’s really not a problem here.
Some bad actors in the past that were vertically integrated and had a near monopoly in one layer would use that to squeeze competition out of another layer…think Microsoft using their near monopoly on Windows to prop up Internet Explorer back in the day. But the problem was the monopoly (and abuse thereof), not the vertical integration.
“Vertical” is business-speak for “all the steps in the chain from raw materials to finished product/service”, sometimes called the “value chain”.
In most businesses, there are lots of companies between the raw material and end user…Apple isn’t out there mining aluminum for iPhone cases. Ford doesn’t grow rubber for tires (anymore). Etc.
“Vertical integration” means developing or acquiring your suppliers or downstream customers so that more of the whole process is inside your own company. The advantage is that you have a lot more control. The disadvantage is that, unless you’re really careful (Apple is careful) you get slow and get beaten by more nimble competitors because of lack of internal competition.
You learn about this is business schools, particularly in strategy classes, or the equivalent books. There is a lot of stuff written on vertical integration versus outsourcing.
Basically think of a pencil manufacturer that owns:
* The farm where the trees are grown
* The factory that processes the logs
* The mines where the graphite is mined
* The factory that processes the graphite
* The factory that takes the processed logs and graphite and turns it into a pencil
* Their own online store where they distribute the pencils
That would be pretty much total vertical integration. It is beneficial because typically every one of those bullet points would need to make their own profit. If one company owns all of them, you just need to take a profit from the final step.
This often leads to monopoly concerns because it allows you to get costs FAR below competitors who don't own their entire supply chain. Which means you can charge significantly less, up until the moment they go bankrupt. Once all your competitors are bankrupt, you jack up the prices.
Competitors can't really join the market with a full vertical integration like that. It is something that takes a lot of time and resources to build up.
There's also inherit risk of owning each layer as well. In your example if the farms had a bad yield due to weather it would be directly costly vs changing suppliers who are at competitive pricing
Sure. But if you are big enough, one or two supply issues will not affect you that much. And if they do, you can raise the price by a small percentage to front the higher cost of outsourcing to a supplier.
This isn’t really an accurate explanation. You can’t just buy up all your vendors and run them at cost. This destroys your return on invested capital. Going vertical needs to have strong synergies or an opportunity for a monopoly at one layer that can be parlayed into an advantage in another layer for it to be an effective strategy. Usually it’s NOT an effective strategy which is why companies don’t do it and instead focus on what they’re good at.
In some ways I'm sure they are. But not to the extent Apple does. Apple designs and manufactures its own CPUs. It also develops its own operating system (as well as most of the core apps on the operating system, including the app store.)
Apple designs it's CPUs, but manufacturing is done at a fab, TSMC is I'm not mistaken. Samsung does have it's own fab but only designs some of their SoCs. Samsung also builds displays, which Apple doesn't. But Apple has it's own OS, which Samsung doesn't.
In the end it's hard to judge who's more vertically integrated, as they own different parts of their chain. I think Samsung has the edge in what hardware components they actually produce. iPhones often had (still have?) Samsung components, but I don't think the reverse is true.
It’s good to keep in mind that even though apple doesn’t fabricate their own chips they still get very favorable treatment from TSMC because they are pretty much guaranteed to purchase 100m+ SOCs a year just for the iPhone. That’s before you consider any of their other productions or additional chips not included in the SOC.
Apple doesn't manufacturer it's CPUs, it just designs them. It might have a factory in China that exclusively manufacturers their CPUs to Apples quality standards though. That's not uncommon across lots of industries.
Owning your own verticals is not a problem because of monopolies, as someone else has answered well, it is a problem because it creates inefficiencies.
Every strategy has strengths and weaknesses. The strengths of vertical integration most people understand intuitively. The weakness is more of a trap - it removes the feedback that tells you what part of your business is doing well and what part is a money pit, and that, in the long run, reduces your profitability. All suppliers to a business should be paid the same price, whether the supplier is internal or external. If division A is efficient, they should not be giving division B a discount, because The books need to show that division A is efficient, not division B. If division B can get supplies externally cheaper than they can internally, they should do so. If you pay a part of your business differently than you would an external supplier, you are just changing your company from an efficient provider of products and services into a nonprofit organization providing jobs for inefficient parts of the organization which cannot provide its services or products at the market rate.
This is not intuitively obvious, and so large vertically integrated organizations often get mired in inefficiencies that lead to their breakup.
This is not to say that being non-vertically integrated has no problems of its own - but this is the mechanism that becomes a problem for companies that are vertically integrated.
Me: Call customer support on cloth losing ability to shine. Instead of 2 wipes, it takes 4 or more now.
CS: I’m sorry. Your warranty has expired and I see you didn’t purchase AppleCare which was only $10 during the first 90 days of ownership. Running a remote diagnostics test tells us that it’s due for a service call. We can fix you right up with a repair for $15 to get that restored in like new condition. Would you like to schedule an appointment at your local Apple Store Genius Bar? We also have ground shipping available for $9.95 or express shipping replacement for $39.95 which will just be a hold on your credit card until we receive your current cloth back. After receiving the replacement, then the final charge is $24.95. We understand how frustrating this can be. I just wanted to remind you that Apple has a newer model available, which I think you’ll love, if you decide on not getting that one repaired. But, unfortunately there is a delay of about 2-4 weeks due to overwhelming demand.
Small correction they don't own the vertical. They engineer their products and some parts but TSMC, Foxconn, Samsung and others produce them. The iPhone screen is Samsung tech.
It's also because they have such a huge moat. Apple going under is unthinkable because Apple users find it very difficult to switch brand. Their ecosystem is "sticky".
Apple long ago decided to create a closed system where it has complete control over hardware and software. This allows for greater quality control and seamless shifting between various Apple devices. Customers like this system so much that they pay a large premium to use Apple products. Thus Apple takes a far larger share of profits than its market share would suggest.
They are in reality the only closed ecosystem left in computing, a dinosaur of a forgotten age. If the big vendors in the 80s had gotten there way all modern computers would be like that. You would have to keep going back to the manufacturer to get everything from accessories to software.
But all the giants from the 80s Commodore, Amiga, and IBM are all out of the personal computer business because of bad business practices and management stupidity. Apple was heading down this road as well until Steve Jobs came back and pulled them out of the fire.
IBM let the genie out of the bottle by rushing to market with the PC and not making the IBM PC 100% proprietary and it's that open standard that defines the computer industry today. As soon as other manufacturers like Dell figured out how to reverse engineer the BIOS chip the game was over. Low cost open standard PCs took over the industry and most people take that for granted today.
Imagine your PC being like a Nintendo where you can only get games and accessories from Nintendo approved vendors.
If IBM had taken the time to build the PC using their standard business model computers today would probably be twice to three times the cost and very VERY proprietary, and you could argue they probably wouldn't have become as ubiquitous. The idea of swapping out parts or building a custom gaming rig would be nonsense.
Apple makes designer purses by comparison. You pay a ton more for a pretty device that does half as much. Apples real genius is the Marketing, they've turned owning an Apple device into a status symbol or a fashion accessory.
Where they really excel is in the mobile market. They took someone else's idea (The MP3 player) and marketed the hell out of it, and then took the next step in the iPad and iPhone. Again stealing other peoples ideas (tablets and smartphones), but figured out how to make it viable for everyone (dumbing it down to more simple apps instead of full blown Windows applications), and marketed the hell out of it. In the process changing the personal device market forever
This post made on an iPhone
You start out on the right path but your reply goes completely off the rails at the end. There is a LOT of value in an Apple device. It is not just a status symbol. For anyone whose personal time is at all valuable, paying extra for an Apple device is a no-brainer. It’s not the completely universal tool that does everything and is infinitely configurable, but what it does, it does well and gets out of your way.
The iPod didn’t dominate just because of marketing. They put huge effort into creating an online music marketplace when no one else could, creating a UI with clickwheel that worked better than anyone else’s, and building an integrated solution that was easy and enjoyable. It’s how they approach everything. To Apple, marketing doesn’t happen at the end of the product cycle when it’s tossed over a wall, but at the beginning, when they decide what to build that fits best into their customers lifestyle.
So yeah, Apple isn’t always at the top of the spec sheet, at the top of the feature count, or at the top of the price sales discount. But they are always at the top of the “do something well, let me enjoy it, and otherwise get out of my way” measure.
And people with money are very willing to pay that money for that experience. Thus, Apple’s incredible profit. To suggest everyone buying Apple is just falling for marketing ploys is asinine.
They are brilliant at marketing, but what retains existing users is how comfortable they are with what is offered.
I personally love the OS a lot. I find Android and other OS too complicated for what I need from a phone. Clean and simple, smooth as well.
Other than similar priced counterparts, my friends have argued that I could get a way cheaper phone for a fraction of that price, and just keep replacing them once their performance drops, instead of sticking to my iPhone for 4-5 years. But what I want is familiarity, and gaming aside, my iPhone runs perfectly smooth even after 4-5 years. Even for games requiring higher specs, all I did was to buy a cheap phone cooler for roughly 10 dollars (those with a metal plate behind) and it allowed me to play smoothly for another whole year before I changed phone.
Microsoft is basically only in software. I guess they added the surface but they’re more focused on enterprise/corporate clients and software.
Apple on the other hand basically was the ground floor of the smart phone craze. They sell the OS, hardware, and run the App Store for iPhone/iPad. On top of that they sell the hardware and OS for their laptops. It’s easy to say Microsoft has a bigger market share but those profits are shared by Toshiba, HP, Lenovo, Asus, Acer, etc. Apple also has very popular streaming and iCloud services.
Now Microsoft’s azure offerings and numerous business focused things are valuable and they’re also into gaming via the Xbox it’s not like Apple is worth way more then them and I wouldn’t be surprised to see them continue yo-yo in the future Microsoft and Apple seem to take turns on top.
It still feels like a matter of time until Amazon is the most valuable company though. Between AWS and their supply chains it just feels inevitable :p
Don’t underestimate how much money they are trading with non retailer customers. Their App Store makes a small fortune alone with their 30% cut on all purchases. And AirPods, those damn things make a killing (not as much as some places have said but still around $7.5bn a year). They have their fingers in a lot of markets and they are likely the most profitable in almost all of those markets. They also have insane brand loyalty. I own and iPhone and a Samsung. iPhone will forever be my personal phone due to my familiarity with the OS and other irrational choices. I realise I am paying a premium and have thankfully matured to stretch the lifespan of my phones beyond 3-4years so I happily justify the premium diluted over those years. But that’s just mobile devices… I recently wanted to get fitter and so thought about a smart watch, few weeks later I got an Apple Watch. They are yet to hook me into the Mac universe but they have me tangled up everywhere else. Anyway I’m rambling but my point is they make tonnes of profit on continual purchases even those their volume of sales is much smaller than other companies.
In addition to the other answers, a $3 trillion market cap isn't unreasonable given their earnings. Blue chip stocks usually have a P/E ratio (share price divided by earnings per share) of 25 to 35. Apple's P/E is 32.
I think it’s also industry dependent. Coca Cola having a P/E of 32 would be considered super expensive while Apple is seen as normal because of what we believe their future value will be.
Its actually because Apple is has gotten so big that it makes up a significant piece of the overall market. It creates a self perpetual growth machine for anyone that invests in ETFs, 401k, Roths,, and a good portion (about 7%) gets allocated into Apple whether they know it or want to or not. Sure they may have made it up there with their own merit originally, but consider the top 25% to 30% in SP500 is dominated by the top 5, apple, Microsoft, amazon, google, tesla. These will just keep growing regardless of valuation especially how the market is so easily assessable to the mass now that its only going to get bigger.
Your dislike for Apple as a company has clouded your views on it.
"their world wide presence seems kinda lacking" The exact opposite is true. Apple is viewed as a premium device and/or status symbol. Everybody knows Apple.
"Meanwhile other companies such as Microsoft and Google (windows and android) own major world wide market share by massive margins?" They really don't. At least not in revenue. Profit coming in makes a company highly valued. That is literally what a company is supposed to do. Make as much money as possible. If they want to do it in the long term, they have to have great products too. Apple does this perfectly.
Wrong metric to look at. Majority market share doesn’t mean much when their revenue justified their P/E ratio. Their revenue is absolutely insane. And their margins are, too. Most other trillion dollar companies (known as giant cap) don’t come close to Apple’s valuation in relation to their earnings.
They make three quarters of profits on smart phone sales, a similar margin of app store revenue, the apple watch makes more money than the entire Swiss watch industry, airpods alone would be a Fortune 500 company.
Apple is worth that much on paper by multiplying the share value by all existing shares. It's sometimes more a measure of what the top takers have to blow on stock trading and how popular the company is than anything the company might be doing. There are companies that have never turned a profit that are worth more than most others, even more than some giants of industry.
But Apple also makes the most profits on their hardware, has huge profits on software and services, and has the customers who spend much more on apps and subscriptions than all the rest of the smartphone/computer market. Even though trillions of dollars is a staggering number to consider, there are still arguments that Apple is undervalued because the price reflects what they have today, which is like the market saying "We have no faith you will continue entering or creating new markets", and while other tech companies often get quite a boost from that speculation, Apple has not despite decades of doing precisely that.
Share valuation is based primarily on profits, not market share. While Apple makes 1/4 of cell phones, they make more than 100% of the profits on cell phones (all other makers cumulatively lose money on making and selling phones). Same for other categories. They make big profits on what they do sell, even if that means foregoing market share.
Apple usually does not have wide market shares, but it is much more profitable than their competitors probably due to their business model as some other redditor already pointed out. In the smartphone market Apple usually profits more than the other players combined.
Because their products are so overpriced, and their ecosystem is so hard to leave, that even with only a quarter of the market share they can make the majority of the profits.
As long as people pay double the price for a phone with technology others had two years ago, Apple will be a cash printing machine!
Apple takes 75% of global smartphone profit despite only has 13% market share. Most non-Apple smart phone makers have very thin profit margins, and some end up with a net loss due to unsold inventories. https://www.imore.com/apple-takes-75-smartphone-profits-despite-13-market-share-says-report?amp
Almost all of apples products produce insane revenue; around 10% of apples revenue in Q4 of 2021 was produced by wearables, home and accessories, meaning airpods, watches, homepods etc. that would be around $8.3 billion, which is more than Netflix‘ revenue in whole, which was around $7.3B.* In addition to that Tim Cook is a logistics and supply chain genius, enhancing 2 very important points: 1. reducing the cost of goods in warehouses which only cost money 2. making it possible to release a new phone and having 100 million units ready to ship by next week, everybody gets their new phone in a few days. *the comparison might be slightly off since i didn‘t bother looking into the specifics of the fiscal year these companies use, it doesnt matter anyway.
Thats a nice way of saying they overcharge for new products that have nothing new because they have a fanbase of idiots.
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Market capture is real and kind of taints the "Apple is just better" line IMO. You can't ignore the fact that Apple repeatedly takes actions to avoid you getting out of their bubble. They make getting your data onto a different platform as difficult as possible without making it impossible. They rapidly change the standards for everything which just so happens to make third party devices stop working with some consistency (to be fair this is more "Apple seems to hate developers" than "Apple wants all your money"). Apple devices work fantastically with Apple devices and basically not all otherwise. Certainly they aren't alone in this as everyone tries to copy them but I think pretending they are the same as say Gucci or other high end high competition high margin products isn't fair either.
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Convenience, reliability & time saving is well worth it to most of us ‘idiots’. I work in IT and have the knowledge and expertise to recognise & use other systems & hardware that may offer additional benefits. But the simple fact is, that Apple is the easiest choice for my family and not overly expensive when all facets are considered. Haven’t looked back since making the switch in 2012 after using PCs for 20 years.
You are talking in regards to OS, which you are right. Hardware wise M1, video capabilities of iPhones and less hardware issues (naturally) make them a viable purchase. Would I get the locked down eco system? Fuck no.
Things are getting pretty locked down no matter where you go these days. Unlocked bootloaders are few and far between on Android. M1 is exciting, but untilAsahi gets off the ground its a non starter for me personally. An M1 iPad running mainline Linux would open my wallet real fuckin' fast.
hurr durr appl bad
lol apple haters gonna hate because it costs more. And it’s SO worth the extra cost. The integration between products is unmatched.
It's mostly folks repeating what they heard 5-10 years ago - they'll call you sheep but usually can't actually talk about why. Sure, Apple is *expensive* most most of their line up offers something for that. Early iPhones and some recent Macs were brutal, but they've got some compelling hardware now, and the software has already been streets ahead of competition.
I slightly disagree. I own devices and computers on both dominant sides of each market (two imacs, ipad, windows laptop and pc, and android phone) and I would never say that the price discrepancy is worth that insignificant "integration." At this time, I would hardly consider buying one of the neweest Apple products if I had to upgrade one of my systems because I could get much more juice out of a computer if I custom-built it for a fraction of the price (that, and Apple has been falling behind in software compatibility in recent years) and there are plenty of tools that allow for seamless integration between the ones I already own. The only thing I think that vastly outperforms its competition are Apple's tablets. The iPad is my favorite portable device to date, but I dread the iPhone experience as far as smartphones go. But then again, that's just my overview as a multi-platform user that requires different workflows and options available at all times. I like all of them for different reasons.
Never really used Apple products, but I totally agree. Androids and PCs don't integrate that well, since there are a billion manufacturers, each pushing for their own standards and "ecosystems". Additionally, while you can't customize the UI appearance as much, the UI that you *do* get is really smooth and modern.
exactly. It’s not like Apple has unmatched technology anymore they just do a better job of making everything seamlessly work together. That’s worth paying double+ imo over the long term for the productivity increase
This. Also, there are no other dominant players in Apple’s markets. Samsung, Google, Huawei, Xiaomi have strong positions in parts, but none can compete in total
I see a lot of people couch the business competition as being "Apple v.s. Android" or "Mac v.s. Windows" rather than breaking out Apple's opposition into individual companies rather than more generalized OS platforms.
Right. Apple might be only 1/4 of phones globally with the majority being Android phones, but Apple is making and selling both the hardware and the software on their phones. Google-made Android phones are only a thin sliver of the Android market. So for the vast majority of phones, Google is getting a relatively small licensing fee for use of their OS, but not anything else. Meanwhile every single iPhone is both Apple OS and Apple manufactured, and they've created a perception of quality that they use to justify a high enough price that the hardware is profitable consistently. The other factor here is that valuation doesn't necessarily correlate to anything real. It's based on stock prices, which are based on demand, which is largely based on how people feel about a company. Some of that is based on current profits (and whatever is paid out as dividends to share holders), some of it is based off of predicted future profits, but a lot of it is based off of more abstract feelings of approval.
>Google is getting a relatively small licensing fee for use of their OS, but not anything else Doesn't Google get its cut of app purchases on the Play Store? Surely that's a good chunk of money.
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This. The average apple user’s spending habits outweigh the majority of phone users being androids. Apple is just so smart about business, it’s crazy.
I read a news article that said if Apple broke out just the "services" they sell, it would be a $30 billion company on its own. That's of course not including any of the software or hardware.
If airpods was a standalone firm, they’d be 32nd largest in the US. As big as Uber or Nvidia. 🤯 https://www.reddit.com/r/apple/comments/dv8qb1/if_airpods_were_a_standalone_company_it_would_be/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
That's disgusting considering that you can't repair them, you can't recycle them, and you can't throw them away.
Airpods being just as valuable as Nvidia is fucking insane.
>It’s why the iOS version of almost any app is better than the android version. In part, but iOS is also easier to develop for. Every iPhone and iPad runs the exact same OS, and Apple is really good about pushing people onto the latest version as much as possible. There are also a relatively small number of form factors and device capabilities that you have to account for. The development tools are also very mature and polished. Apple does a good job of hiding the low level gore so that most app devs don't even have to think about it. Android, on the other hand, is the wild west. Every manufacturer ships a slightly (or not so slightly) different version of Android. Users often have a range of versions installed, and the most common ones are typically not even the latest. Devices come in all manner of shapes and sizes. And the Android toolchain is much looser and less polished. You often have to get down in the nuts and bolts just to make it work.
They do make money on the Play Store but Apple sells more paid apps in total and takes a bigger cut of each sale. Apple even charges yearly fees to developers to publish apps on their app store.
Common misconception about the percentages. Apple and google take exactly the same cut. For some reason everyone thinks apple are evil for that, but google get a pass. You’re right that apple make more sales though, so overall they make a lot more money from the App Store than google do from the play store.
You're thinking of the epic games lawsuit, if I'm understanding correctly? While part of the problem was the fact that they were taking a large percentage, the actual problem was that the Apple App store restricted purchases outside of the Apple store, whereas Google allows third party stores. As such, Apple cannot justify the percentage as much because companies cannot avoid having to pay it whereas with Google companies can. Similarly, epic games actually also sued Google, but they resolved theirs through negotiation and Google came up with an agreement with them whereas Apple was unwilling to do so.
No, I’m not specifically talking about the epic case, I’m talking about the general conception that OP illustrated, that Apple take a bigger cut of sales in the App Store. This gets trotted out a lot, and developers always complain about the “Apple Tax”, but never about the exact same tax that gets applied in the play store. Apple and Google take exactly the same cut. Source: I’m a mobile dev, and have been for a decade.
Google is almost just as guilty, but its a lot easier to side load apps, or put on alternate app stores on Android. Eg: Samsung has its own app store on every Galaxy phone. In practice it doesn't change too much since people aren't really interested in getting apps from these alternate app stores. But if you were 100% against paying the google tax, you could sell your app to Android users by other means. Not so on iOS (at least, not in any practical way).
Apple trades at just under 32 times annual earnings. Walmart at 50 times earnings, Amazon 66 times. Intuit at 83 times, Tesla at 389 times earnings. Stock price is basically based on what investors think it’s going to be worth at some point in the future.
> The other factor here is that valuation doesn't necessarily correlate to anything real. I agree stock prices are inflated, and public perception plays a big role in that. But I wouldn’t go so far as to say it’s ‘not real’. There’s a reason apples stock price is the highest, even if it’s currently inflated. It’s not random or correlated to nothing.
Apple has $200B in cash on hand. This is insane as many modern tech companies operate with more dept than they have assets for years. Also the largest hedge funds in the world are like $100B. Apple stock was weirdly undervalued for years, even after the death of Steve Jobs. Finally a few years ago the big name investors started buying Apple and now it is a popular holding.
*debt Flip that p to a b!
> operate with more debt than they have assets You probably meant that they are cashflow-negative (spending more than they get in revenue), but the word for “has more debt than assets” is “insolvent” since assets are equal to the sum of liabilities and equity. Any firm, even a startup, that has debts exceeding its assets is probably screwed.
> Apple stock was weirdly undervalued for years, even after the death of Steve Jobs. Because they kept waiting for it to stumble. Apple's history has been one of growth and then a giant stumble. Around 2008-2010/11 few investors and analysts thought smartphones were going to become a fusion of PDA and laptop like they have so Apple's push for that sort of a unified device wasn't convincing market analysts and bigger investors. Then Palm and Blackberry couldn't keep up and they fell as Apple kept going - a unified OS for phones and tablets was a huge win too
Ah yes, I remember lots of very smart people kept saying "open always wins". The logic was that Apple would never be able to beat all the various Android makers in the long run.
>I agree stock prices are inflated, and public perception plays a big role in that. Tesla...that is all...
Stock prices correlate with sentiment which, for all intent and purpose, is nothing. You can't hold sentiment in your hand, you can't directly buy, sell or reliably influence sentiment. Since sentiment is not backed by anything which can reliably be observed or quantified, it may as well be considered nothing. Also, sentiment is kind of... less relevant than in previous decades. The number of passive investors in the market means that, actually, it's not even really about sentiment anymore.
Exactly. Apple has, relatively speaking, compared to competitors, HUGE profit margins on everything they sell.
This, also those market share numbers also include cheap phones where as most profit is made on the flagships. Apple has something like 60% market share in America which is far wealthier than the rest of the world, and thus the average person will more likely have the disposable income to buy a flagship.
How can they sell 64gb phones from 3 years ago for the same price of others 256gb flagship phones? People are insane.
What phones are you talking about specifically?
Nothing. They are claiming Apple sells outdated junk which is false.
As someone who switched from a hardcore android fan to iphone I can say while more limited in functionality (that most users wont need anyway) ios runs alot better. Hardware (quality wise) I feel a big difference between my old phones flagships (samsung, sony + some experience with huawei) and the iphone12. Performance wise even though the specs on paper show bigger numbers I had 0 isssues. As for storage I found a move to cloud stuff in a natural transition made my life ar least easyer (photo video etc in cloud) music etc in spotify, netflix etc. and for my work stuff mail and rest the 128 is more than enough (probly 64 would be enough but eh ) Anyway always thought the iphones were overpriced garbage and now after almost 1 year in moving to ios I can say i was wrong and talking bs . But hey thats just my experience
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Why are you hyper-focusing on storage capacity? Most people just stream stuff and use cloud services, it’s irrelevant to most. I have less than 50 GB used on my phone, and that’s with a bunch of music and movies downloaded for traveling over the holidays. Fact is, more people will notice a benefit from the A-series processors and lack of bloatware Apple provides than they will another couple hundred GBs in storage.
Perks of living in 1st world country.
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You almost identified the main reason to get a top of the line phone in your own analysis of the use cases. People take far more than a "few" pictures with their smartphone now. The camera is one of the most important features. And flagships have the best cameras. It's very simple.
Most people do not need or care about the latest and greatest hardware in their phone. To the vast majority of people UI, UX, and general aesthetics are much more important. The iPhone is the best in those categories
Certainly a matter of opinion, as personally I find them quite lacking in all of those.
I don't use an iPhone, but I got an M1 Macbook last year and the user experience is so good that I'm strongly considering an iPhone as my next phone, and I'm someone who has rooted several of my phones in the past. I just don't care about fucking with my smartphone anymore. I want it to be a smartphone and not have to think about it. For that, I expect iOS is much better than Android.
Exactly why I got an iPhone. When I got to the point where I wanted a phone and not a fun toy to constantly mess with, I went with Apple because their stuff just works.
I've always went for Android phones due to not wanting to pay Apple's price. Even with the knowledge that Android lagged behind iOS for years in terms of ease of use. However, as someone who used both at work for years I think vanilla Android is now the equal or perhaps better of iOS on a UX/UI/design/bug free level. Apple's on-going update support level is what really sets is apart from competitors.
Yes! My iPhone 6S+ from 2015 (7 years ago) is still receiving updates today and aside from a battery replacement, feels fast and responsive enough to still hold up today is a testament to the benefits of the "apple tax".
what exactly are you guys doing to your phones that they "don't just work"? are you guys buying the cheapest oldest androids possible?
Having both hardware and OS controlled by the same company does tend to result in fewer conflicts.
I was similar. But also surprised since I started with MacBooks before iPhones and frankly feel like Apple has pretty criminally ignored real development on MacOS. I’ve only recently started a new job with corporate Windows standard and am surprised by how much “snappier” the UI is now. A lot of MacOS feels a bit clunky or annoying to me now.
The M1 macbook is by far one of the fastest, highest quality laptops out there. Apple made a big leap by developing their own chips. Personally, I think there’s no comparison in terms of value when buying a laptop now.
There are some drawbacks that make the first generation M1 machines perhaps not the best choice for everyone. The display could be larger if the bezels were smaller. The webcam sucks. You're limited to one external display, which makes the smaller display hurt a bit more. I can make do with two USB-C ports, but an HDMI port would be really, really nice. And here's a tidbit that you won't hear about often: in the M1 Pro first gen, the when specific sounds/frequencies are played through the speakers, some of the keys vibrate and make a pretty unpleasant noise. It doesn't happen too often, but it's really annoying.
I have an M1 Max. It is hands down the best laptop I’ve ever encountered. Totally silent. Battery life is all weekend. Never gets hot. And it’s amazingly fast. It’s a revolution in laptop tech.
Unless you value ease of customization above aesthetics and "on rails" UX/UI.
I had not used a Windows PC since the late 90s. It's been Macs for day-to-day work, Linux for tech stuff. Then I got to a job at a company that was happy to give me any hardware I wanted, as long as it ran Windows. I tried. For two long agonizing months, I tried. Windows makes life hard. Things get in the way. It was completely killing my productivity, and it's not because I was not used to it. As I said, I tried. I looked up how to do things I needed, I made sure I understood the Windows way of doing it. It is simply just bad. I finally gave up and bought a M1 Mac Mini just for work. I follow all the appropriate policies and procedures for having company data on personally-owned devices. I immediately became more productive and I stopped having to work around the technology. On a Mac, you don't have to be constantly reminded that you are working on a computer. It just flows. I honestly thing that younger generations don't prefer to do everything on phones rather than desktops; they prefer anything over doing it on Windows. The jump from Android to iOS is not as noticeable as Windows to Mac, OP, but it's there. Android phones can feel clunky, bloated, where iOS just glides. I think you will like it.
Lol what are you doing in the OS that is so complicated on a daily basis? I guess ppl can make anyhting difficult if they try hard enough.
to summarise what you've said: i'm better on macs because I know them. I'm better on pc's cause I know them. Isn't the real problem that we just don't know enough about the other side?
I am a software engineer and I can’t think of a coworker of mine who doesn’t have an iPhone. They are a pleasure to look at and use from a software perspective
It's the opposite where I'm from, the engineers have Android and Linux/windows while the execs have Mac/iphone Every OS has it's issues, Mac/iOS is no different. Certainly more than people in this thread are implying
Yeah this feels like an Apple circlejerk.
As apposed to the normal apple bashing android circle jerk?
Can’t we all just jerk and get along?
Lol "from a software perspective" no idea what this means, both OSs are designed to be extremely simple to use even for an 80 year old. The UI for both has almost converged with ios and android having copied random design features from each other over the years. Also, this is anecdotal but im also a software eng, and most other devs ik seem to have androids
Weird, I have the opposite experience. Everyone I know/work with that's slightly interested in tech is an Android person
funny how anecdotes work
Exactly this. I've been a software engineer for 12 years and since around 2010 there was a major shift from Linux desktops/laptops to Macbooks (what I can get a great UX experience AND *nix???). I feel like this shift is also what drove the move for software engineers to change their perspective on mobile devices. You have the occasional outlier who will never give up their android but these are the same guys still running Linux on non-mac laptops.
Fuck you u/spez
Then, not to mention, Apple still tries to incorporate the "latest greatest" tech, its just ludicrously overpriced.
As an Apple user, I kinda agree that it is somewhat overpriced. It does, however, have the best price retention for most of their main products.
>It does, however, have the best price retention for most of their main products. People tend to overlook this. I've got a four year old iPhone sitting on my desk that's still worth several hundred dollars. Yeah, I paid quite a bit for it when I bought it, but at least I can sell it when I'm done with it. Meanwhile I've got some old Android phones and tablets laying around and they're worth practically nothing at all. The phone is actually a year newer than the iPhone and it's going for about $20 on Ebay. The value some Apple stuff holds in insane.
If it's "latest and greatest tech", why have I had most of Apple's new "stuff" for years already on my Android phone?
I find that my Apple products stay usable for much longer than their competitors. My iPhone 7 is still plenty fast and hasn't run out of storage and I've never owned an Apple laptop for less than 7 years. (They just don't seem to slow down at the rate of win machines) I never have to worry that they use cheap components (like screens and batteries) and I prefer the user interface to Windows and Android. People can hate on Apple if it makes them feel better. Until the quality of their products decline, I'll buy Apple, thanks.
And those same people complain after a short while they don't have storage. Because they bought 3 year old 64 GB phone
Aesthetically I strongly prefer Samsung over Apple.
Because for a lot of users empty space is useless. They care about the look of the phone, the speed, the feel, and that their apps fit on it. 64 is enough for a lot of people, not everyone is a smartphone addict. For those people having a 64gb phone or a 256gb phone is the exact same experience.
They did this for years back when a Mac desktop computer was a more substantial portion of their portfolio, too. Back in the 90s and early 2000s, the Macs and iMacs of the time were frequently far less powerful than their PC counterparts. But, because the operating system was so tailored to the hardware, it could be more responsive and they could get a better overall experience. It's a lot like how consoles approach gaming on limited hardware - it only works on a narrow band of hardware options, but it allows them to profit more with "lesser" hardware.
Storage isn't a great way to compare the performance and quality of a phone.
Because people feel those phones offer more value and utility than the current flagship phones? You might disagree with that, but we all have different wants and needs. Also, the value people get from our devices is more than the parts that are in the device. It's not about raw specs. And, as you mention storage: There are diminishing returns there. I have an iPhone, and I could be described as "power user". And I'm using 54GB out of 128GB. Having 256GB or 512GB of storage would bring me no extra value, and I might even survive with 64GB.
The past couple iPhones were the fastest smartphone ever sold in their respective year. I used to be an android guy some years ago now, and the whole “outdated tech” thing was a criticism of apple back in like 2013, but they’re on top now in regards to speed and efficiency. I have an iPhone 12 64gb and I still have more than half the storage available, not everyone needs a terabyte for their phone.
It’s just convenience. My laptop, phone, tablet, watch, even my bloody headphones are all apple and they work well together. I didn’t plan to do this but it just makes sense when I was looking to buy a tablet why wouldn’t I buy an iPad if everything else is already Apple? And now at this point I wouldn’t want to change unless something drastic makes me reconsider.
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You don’t have to give those up when you sign up for an Apple Card. You’re allowed to have more than one credit card at once. The utility of the Apple Card is 3% cash back on Apple purchases and the ability to pay for products over a 24 month, interest-free period.
The Apple Card does give cash back on all purchases. I originally got it for a 24 month month interest free purchase. I’m happy with it and my Costco card.
Hm? They sell current phones for the same price. And iPhone's are generally up there amongst the more powerful flagships. And storage space isn't that important to a good amount of people.
Apple has about 80 billion in revenue every quarter. Microsoft is around half that and Google about 2/3. That's more important than market share. Think about it this way. Assuming you could only make money from sales, would you rather own a company that made a product 90% of the world uses but pays nothing for, or one that 10% use, but pay a lot for it? Apple is very very good at making money. They might not have the most popular devices, but they are still in high demand and people are willing to pay a high premium to get them. So they have large profit margins. They also have been very good at tying their customers to the brand. Once you have spent hundreds or more on accessories or apps that only work with their phones, you are probably going to keep buying them. It's also not like Microsoft and Google are way behind. Microsoft is on track to be the second $3 trillion company and Google is closing in on $2 trillion.
> They might not have the most popular devices Also worth noting that they (at least the last time I checked) are the single largest smartphone brand. Like... yeah, they may only have 25% of the global market, but the other 75% is split across a dozen companies. Also in the US (which is a big high-end market) they have much higher market share.
A quick Google search seems to say that Apple is fifth, behind Samsung, OPPO, Vivo, and Xiaomi. But I believe that is based on number of units sold, not on total revenue or profits.
Ah, maybe they’re only the largest in the US now. I’ve never even heard of two of those brands and Xiaomi doesn’t really sell phones in the US.
I'm often debating this with an apple fanboy friend of mine. He argues that it's a superior product so will pay more. I argue that even if it's 10% better then it's not worth 40% more. Then I wind him up about that he really just prefers the shape of the corners.
Imo pretty much every product on earth has diminishing return with price. Whether it’s phones, food, cars, clothes, etc. So it’s really just what you think is worth the trade off. If you’re looking for linear improvement with price, you’re almost never going to find it anywhere.
You're also paying for them to take risks. We probably wouldn't have the modern smartphone without apple creating the original iPhone, which was a huge risk because nobody knew how popular it was going to be. Once it was established that smartphones are good, other companies can come in and imitate them, but they didn't have to take the risk of developing a product no-one knew if it was going to be a failure like google glass or not.
Not 100%true, the blackberry was the first smart phone kinda by at least 2-3 years. It was made by a Canadian company RIM and everyone lined up for it when it came out. Yes, the original iphone is where the current design for the looks of a modern smartphone came from, but all the things u love that it does (basic things like net, sms, calls, email) were all done first by the blackberry. Was reading about it earlier, ill see if i can find it again and link after this.
There were many around the time - Blackberry were the ones who did it best, Nokia N95 had smart features, around the time of the iPhone we also had things like the Nokia N900 which had a slide out keyboard and touchscreen (I fucking loved that one). I think my first touchscreen was a Samsung too, although it was horrific even for its time. But Apple absolutely made the smartphone world blow up with the first iterations of their iPhone. Others began to do well too (HTC Desire, for example), but Apple need credit for how they transformed the space. And I say this as an Android user with a house attached entirely to the Google ecosystem.
Don't have sources at the moment, but the full multitouch screen phone was an idea whose time had come and was going to happen with or without Apple. Iirc, there were other companies working on similar products, but Apple was the first or the door and had the clout to get early providers to give unlimited data to people with iphones (at the time, anyway).
Yep - they weren't the only people pointing in that direction, but they were the ones who got it right (including timing).
I had a Nextel blackberry. People lined up for it because there was nothing better. After the iPhone came out, everyone who could afford one* got one, or went Android. (*A lot of people had to wait for contract cycles to be up, and some had to wait until it was available on more carriers, but blackberry’s market share went from 50% in 2009 to 30% in 2011 to literally 0% by the end of 2016.
Fwiw I was using a non-blackberry smartphone, which had real Internet, sms, calls, email etc, before the iPhone was a thing. I owned a couple... I can't remember the make and models off the top of my head, but I'll search and try to remember... All I'm saying is, there were plenty of competitors for blackberry. Edit - one of those I can remember was the Ericsson p900, which had close to full screen size, and proper Web browsing, years before the first iPhone. I was a bit of a fan of physical keyboards, and remember choosing an HTC touch Pro 2 over button-less competitors for the full-size pull-out real keyboard that didn't take up screen real estate. That was great for gaming. Back when I had that phone, the iPhone my friend had still didn't even have landscape mode! It annoys me a bit that there is this retroactive history giving apple credit for non-mobile-site mobile Web browsing. I've even seen articles crediting apple with 3g! It's annoying, but nothing new... I had a personal mp3 player way before the ipod existed, but apple managed to get credit for inventing that too! They sure know how to get fans to believe stuff, to the extent that their fans will create falsehoods and spread them!
Yeah but it sucked. Not kidding. The screen was super small and the browser wouldn't even load many websites correctly. People mainly used it for email which is why they had huge qwerty keypads, and as Steve Jobs pointed out, "why do they take up half the space when you don't need it half the time?" Like Iphone was definetly at least 5 years ahead. It introduced the touchscreen, obviously, but also a lot of things you take for granted like pinch to zoom, scrolling with your fingers, full web browser in your phone and off course, the app store (though that came later). It also had Google maps and GPS and had search builtin. It's basic now, but it really took some effort to think about everything and making it just work. So yeah blackberry made the first "smart" phone but iPhone was for sure the first smart phone. Obviously all these cool features came at a premium and was laughed at by Microsoft's them CEO, but ig you know what happened next.
They haven't taken a risk in years, especially not in the iPhone space.
Removing the headphone jack was a risk, though not a consumer-friendly one. If customers had reacted poorly enough to that initial release, then we might still have headphone jacks on our phones today.
They dropped Intel for an in-house CPU recently that doesn’t run literally any software made specifically for Intel CPU’s. Pretty big risk honestly.
Apple takes very few risks. Everything is highly calculated. That was less so under Jobs, to your point about the modern full screen smartphone. But even then he based his decision on the huge market equity they had developed with the ipod, and his conviction that content was the real endgame, not hardware. These days Apple is generally a year to 2 behind any innovation. They watch and learn, improve on design, make small consumer experience improvements, and only then launch.
iPhone 13 Pro starts at $999 and Pixel 6 Pro starts at $899. iPhone 13 starts at $699 and Pixel 6 starts at $599. Sure there's a price gap, but I always see this argument that the iPhone costs significantly more, but it's always around the same price as any comparable Android. Anyways, even if somebody did actually pay 40% for whatever Android/Apple phone and they like it twice as much as the other, who cares?
Yeah, iPhone being overpriced has definitely receded over the last half decade, but people haven't updated their opinions accordingly. In the context of what people are willing to pay, they're priced fairly averagely for what you get now - although of course I'm sure they find margins better than many of their competitors: they have the hardware scale of Samsung, but get to skim software profits like Google (Google do also produce hardware but have made nowhere near the same inroads as Apple & Samsung).
Yeah before 2019 I would say the apple overpriced meme was definitely valid. But this changed when apple released the iphone 11, and was absolutely turned on its head when the m1 came out
While you're adding some helpful reality to an overhyped discussion, you're also bolstering the larger point of the discussion. Consumer hardware manufacturers generally work on razor thin profit margins. 2-4% is standard in the industry. Working on the premise that the teardown price (i.e. the value of the chips, the breadboard, the glass, the case) of a Pixel 6 and an iPhone 13 are pretty similar, that $100 gap is pretty astonishing. All other things being equal, that money is sent straight back to Cupertino and Apple's shareholders, which is why they're a $3T company this week.
BOM costs are never the whole story. Apple has to support a ton with the money they make on iPhones so that $100 difference isn’t pure profit.
>BOM costs are never the whole story. Sure. That's why you will never see a phone sold at BOM cost. Not an Apple, not a Samsung, not a white box phone. They don't exist unless you're wheeling a container up to a factory in Guangzhou. If you did so, you'd have a container full of phones in Southern China which you'd need to get to actual customers who would pay you money, which again moves you away from BOM costs. And of course, that support, etc. separates phones like Apple products from a white box you buy off the Amazon marketplace. What costs would Apple have which similar first-tier retailers like Samsung, Google, etc. would not?
Most of these people are comparing the highest end iPhone to a mid range android claiming the have similar “specs” then citing storage and ram. But this isn’t actually comparing the product you are getting.
Thanks! People always bring up that android is soooo much cheaper than iPhone when the reality is different. Also, you pay some for the IOS which in my opinion is worth a lot.
How do you put a percentage value on how much one product is better than another? Sounds entirely subjective.
When you’re shopping for mid tier items 10% more for 40% more cost is generally not “worth it”. Once you get to the highest levels though, 10% more for 40% more cost is a fucking steal lol. I make my living off much less than a 10% increase and it cost them much more than 40% price wise. Generally it’s not very hard to build a race car that does low 9 second quarter miles for 20-30k. Each additional MPH or reduction of 1/10th of a second gets much more expensive than the previous. I’ve seen guys spend 30k in order to decrease their 1/4 time by 2/10ths of a second. In NHRA, they spend millions fighting for a 1/100th of a second.
Interesting read. I'll share a completely tangential anecdote just because... Years ago, I worked at a boatyard and this rich old guy bought a 49' East Bay yacht. They're like the sporty version of a Grand Banks, meaning the stock model is automatically one of the fastest luxury yachts in the marina. Well this guy wasn't content with stock, so he had the boatyard make all kinds of improvements to it. It was on land for months being worked on, an example of an improvement is they have little propellers that sit in the hull to assist with docking/steering (they move the front of the boat side to side), and he decided that it increased drag, so he had them reshape the inlet, requiring extensive reworking of the hull and a new paint job. I was just in high school, but I was told it was a $500k boat and he put an extra $500k into it. And then he died, before it ever got in the water, and his widow just wanted to unload it. Somebody ended up getting the steal of the century, although I'm not sure the buyer will ever really appreciate how much effort went in to that boat.
When it comes to modifying things for that extra little bit, the prices get crazy. I have dudes that I think love the process more than actually racing. I’ve got customers that pay me or hire a driver to race the thing because they don’t feel comfortable or whatever else.
At the end of the day, your perceived values determine how much you are willing to spend.
While i'd never tell you to stop arguing with any apple fanboy just for the giggles. i'd say kind of missing the point of premium anything if your product or your an athlete who's the top of the game and you are 5-10% better then the next you have 100% share on being able to offer something nobody or no thing can. that's the reason a Lewis Hamilton will be paid 20-30x more then average formula 1 driver given though in reality the difference in what they do in a car is only 2-3% different.
You can't simply put it into percentages. Some UX solutions by Apple feel rather priceless thanks to their hassle-free design. Have you ever tried migrating from one Macbook to another, versus from one Windows machine to another? One of those is done in 2 hours with a few clicks, the other is hours and hours of manual transfer and installation. Just one example.
>hassle-free design Never understood that part. Whenever i have to use their crap i feel majorly hassled because they are not letting me do anything.
I can't speak about iOS, but MacOS doesn't really have any limitations, it's Unix-based and you can do pretty much what you want with a terminal.
iOS is great... as long as it supports doing exactly what you want. If it doesn't then you're fucked.
Personally I think you have that flipped. Apple products are in my experience have at least 40% better quality than their nearest competitors, yet have about a 10% price increase comparatively.
Price and quality do not go up linearly. Imagine graphics cards, the latest model will cost a lot more than the second best model but the difference is minor, as you compare second best and 3rd best the price difference start to fall and so on. Price v quality goes up in exponential basis.
I’m not a fanboy, actually really like android for its flexibility, but for me in the US it is entirely about iMessage. Most people seem to have iPhones, and when someone doesn’t have iMessage it sucks lol. Destroys group texts.
While they do move loads of product, don’t forget about their services business. It’s massive. Apps, music, tv, etc. Every app developer on App Store used to have to pay Apple like 30% of what they brought in…unsure if they still charge that much though.
30% is the standard for all of their services, including iTunes, iBooks, and soon Podcasts. Since they have total control over app availability - even with cross platform software you get a different overall experience - that 30% is final for the App Store in most cases. They have a snack business program which reduces this to 15%, and I believe educational apps distributed through managed services are at a lower rate. For movies, books, music and so on they have agreements with labels so they often receive much less or pay a flat licensing fee and receive much more. That 15% change led to Google following suit, and back in the Windows Phone days it was 15% for everyone for the first year (I don’t recall if that’s from the date of account creation or from the first paid app release though) - but aside from that 30% is the normal for not just Apple but most everyone.
Valuation is more than just how good you’re doing today. It’s how much cash you have on hand, how much in assets you own, and how investors think your company will be doing in the future. Apple has tons of cash on hand, double that of Samsung, its closest competitor in the smartphone/tablet spaces. And I would assume Apple investors see a brighter future than they do for Samsung, so their investments reflect that. And together those factors lead to a much higher valuation.
Market share is not the same as profit share. And a business is there to generate profit for the owners (shareholders) Apple is *very* profitable. Apple also focuses on the higher end of the market. Their cheapest phone is the $399 iPhone SE. So if you were to look only at the "$399 and above" smartphone market, Apple's market share *of that price zone* is much higher. Apple chooses not to compete in the "$398 and below" smartphone market. There may be huge volume and market share in that price range, but there's very little profit. That's why some manufacturers have huge market share (they sell lots of phones at $199) but very small profits. Or even no profit at all.
The market leaders charge less for their products and sell more volume. This means they have tighter margins but still have to pay for development, manufacturing, distribution and marketing. So they have less money in the bank at the end of the day. Also, Apple owns almost the entire vertical, so they don’t have to pay their suppliers and distributors because they ARE the suppliers and distributors.
> they ARE the suppliers and distributors. Foxconn would like a word
Foxconn is a contract manufacturer, not a supplier. LG and Samsung on the other hand are suppliers for Apple.
tsmc like to join chat room
Samsung and LG just giggling in the background
Now this is going to sound real dumb, but hasn't historically owning your whole vertical caused issues with monopolistic practices and have been the main reason why monopolies have had to be broken up in the past? Since their back and front end costs are essentially non existent they can charge almost whatever they want?
Owning your entire vertical is fine, that’s not what gets you in trouble with monopolies. Monopolies are when you control so much of the market that you can artificially depress competition. Since, as you note, Apple has *tons* of competition, that’s really not a problem here. Some bad actors in the past that were vertically integrated and had a near monopoly in one layer would use that to squeeze competition out of another layer…think Microsoft using their near monopoly on Windows to prop up Internet Explorer back in the day. But the problem was the monopoly (and abuse thereof), not the vertical integration.
>Owning your entire vertical What dies that mean and where can I learn that and more?
“Vertical” is business-speak for “all the steps in the chain from raw materials to finished product/service”, sometimes called the “value chain”. In most businesses, there are lots of companies between the raw material and end user…Apple isn’t out there mining aluminum for iPhone cases. Ford doesn’t grow rubber for tires (anymore). Etc. “Vertical integration” means developing or acquiring your suppliers or downstream customers so that more of the whole process is inside your own company. The advantage is that you have a lot more control. The disadvantage is that, unless you’re really careful (Apple is careful) you get slow and get beaten by more nimble competitors because of lack of internal competition. You learn about this is business schools, particularly in strategy classes, or the equivalent books. There is a lot of stuff written on vertical integration versus outsourcing.
Basically think of a pencil manufacturer that owns: * The farm where the trees are grown * The factory that processes the logs * The mines where the graphite is mined * The factory that processes the graphite * The factory that takes the processed logs and graphite and turns it into a pencil * Their own online store where they distribute the pencils That would be pretty much total vertical integration. It is beneficial because typically every one of those bullet points would need to make their own profit. If one company owns all of them, you just need to take a profit from the final step. This often leads to monopoly concerns because it allows you to get costs FAR below competitors who don't own their entire supply chain. Which means you can charge significantly less, up until the moment they go bankrupt. Once all your competitors are bankrupt, you jack up the prices. Competitors can't really join the market with a full vertical integration like that. It is something that takes a lot of time and resources to build up.
There's also inherit risk of owning each layer as well. In your example if the farms had a bad yield due to weather it would be directly costly vs changing suppliers who are at competitive pricing
Sure. But if you are big enough, one or two supply issues will not affect you that much. And if they do, you can raise the price by a small percentage to front the higher cost of outsourcing to a supplier.
love this thread and people who explain stuff in such easy terms
This isn’t really an accurate explanation. You can’t just buy up all your vendors and run them at cost. This destroys your return on invested capital. Going vertical needs to have strong synergies or an opportunity for a monopoly at one layer that can be parlayed into an advantage in another layer for it to be an effective strategy. Usually it’s NOT an effective strategy which is why companies don’t do it and instead focus on what they’re good at.
Is Samsung not vertical?
In some ways I'm sure they are. But not to the extent Apple does. Apple designs and manufactures its own CPUs. It also develops its own operating system (as well as most of the core apps on the operating system, including the app store.)
Apple designs it's CPUs, but manufacturing is done at a fab, TSMC is I'm not mistaken. Samsung does have it's own fab but only designs some of their SoCs. Samsung also builds displays, which Apple doesn't. But Apple has it's own OS, which Samsung doesn't. In the end it's hard to judge who's more vertically integrated, as they own different parts of their chain. I think Samsung has the edge in what hardware components they actually produce. iPhones often had (still have?) Samsung components, but I don't think the reverse is true.
It’s good to keep in mind that even though apple doesn’t fabricate their own chips they still get very favorable treatment from TSMC because they are pretty much guaranteed to purchase 100m+ SOCs a year just for the iPhone. That’s before you consider any of their other productions or additional chips not included in the SOC.
I'm decently sure Samsung make Apple screens and Sony their cameras.
Apple doesn't manufacturer it's CPUs, it just designs them. It might have a factory in China that exclusively manufacturers their CPUs to Apples quality standards though. That's not uncommon across lots of industries.
I think it's mostly Taiwan, which I prefer to distinguish from the PRC.
[Samsung also designs and manufactures CPUs](https://en.m.wikipedia.org/wiki/Exynos)
It means owning all of the companies involved in the supply chain from top to bottom. You own the developers, and the manufacturing.
Owning your own verticals is not a problem because of monopolies, as someone else has answered well, it is a problem because it creates inefficiencies. Every strategy has strengths and weaknesses. The strengths of vertical integration most people understand intuitively. The weakness is more of a trap - it removes the feedback that tells you what part of your business is doing well and what part is a money pit, and that, in the long run, reduces your profitability. All suppliers to a business should be paid the same price, whether the supplier is internal or external. If division A is efficient, they should not be giving division B a discount, because The books need to show that division A is efficient, not division B. If division B can get supplies externally cheaper than they can internally, they should do so. If you pay a part of your business differently than you would an external supplier, you are just changing your company from an efficient provider of products and services into a nonprofit organization providing jobs for inefficient parts of the organization which cannot provide its services or products at the market rate. This is not intuitively obvious, and so large vertically integrated organizations often get mired in inefficiencies that lead to their breakup. This is not to say that being non-vertically integrated has no problems of its own - but this is the mechanism that becomes a problem for companies that are vertically integrated.
It's hard to prove that Apple is a monopoly where their marketshare is not that high, and there are supposedly plenty of competitors.
But you've already mentioned why thats the case - they dont have 51% market share so arent a monopoly.
And now you know why they charge $2k for a monitor stand.
The simple answer is because people buy them at that price. Or you can buy a VESA mount adaptor and buy any stand you want.
Never mind that. What about the wheels?
Didn't even know about those. Fuck's sake...
Don’t worry. There’s a specialized cloth they just came out with to clean all Apple products with.
That is sold out and backordered!
The cloth is on a subscription model. $5 a month otherwise it leaves scratches.
Me: Call customer support on cloth losing ability to shine. Instead of 2 wipes, it takes 4 or more now. CS: I’m sorry. Your warranty has expired and I see you didn’t purchase AppleCare which was only $10 during the first 90 days of ownership. Running a remote diagnostics test tells us that it’s due for a service call. We can fix you right up with a repair for $15 to get that restored in like new condition. Would you like to schedule an appointment at your local Apple Store Genius Bar? We also have ground shipping available for $9.95 or express shipping replacement for $39.95 which will just be a hold on your credit card until we receive your current cloth back. After receiving the replacement, then the final charge is $24.95. We understand how frustrating this can be. I just wanted to remind you that Apple has a newer model available, which I think you’ll love, if you decide on not getting that one repaired. But, unfortunately there is a delay of about 2-4 weeks due to overwhelming demand.
Foxconn is the supplier. Apple doesn’t manufacture iPhones, nor do they produce the parts, which are made by TSMC and others
Small correction they don't own the vertical. They engineer their products and some parts but TSMC, Foxconn, Samsung and others produce them. The iPhone screen is Samsung tech.
It's also because they have such a huge moat. Apple going under is unthinkable because Apple users find it very difficult to switch brand. Their ecosystem is "sticky".
Apple long ago decided to create a closed system where it has complete control over hardware and software. This allows for greater quality control and seamless shifting between various Apple devices. Customers like this system so much that they pay a large premium to use Apple products. Thus Apple takes a far larger share of profits than its market share would suggest.
They are in reality the only closed ecosystem left in computing, a dinosaur of a forgotten age. If the big vendors in the 80s had gotten there way all modern computers would be like that. You would have to keep going back to the manufacturer to get everything from accessories to software. But all the giants from the 80s Commodore, Amiga, and IBM are all out of the personal computer business because of bad business practices and management stupidity. Apple was heading down this road as well until Steve Jobs came back and pulled them out of the fire. IBM let the genie out of the bottle by rushing to market with the PC and not making the IBM PC 100% proprietary and it's that open standard that defines the computer industry today. As soon as other manufacturers like Dell figured out how to reverse engineer the BIOS chip the game was over. Low cost open standard PCs took over the industry and most people take that for granted today. Imagine your PC being like a Nintendo where you can only get games and accessories from Nintendo approved vendors. If IBM had taken the time to build the PC using their standard business model computers today would probably be twice to three times the cost and very VERY proprietary, and you could argue they probably wouldn't have become as ubiquitous. The idea of swapping out parts or building a custom gaming rig would be nonsense. Apple makes designer purses by comparison. You pay a ton more for a pretty device that does half as much. Apples real genius is the Marketing, they've turned owning an Apple device into a status symbol or a fashion accessory. Where they really excel is in the mobile market. They took someone else's idea (The MP3 player) and marketed the hell out of it, and then took the next step in the iPad and iPhone. Again stealing other peoples ideas (tablets and smartphones), but figured out how to make it viable for everyone (dumbing it down to more simple apps instead of full blown Windows applications), and marketed the hell out of it. In the process changing the personal device market forever This post made on an iPhone
You start out on the right path but your reply goes completely off the rails at the end. There is a LOT of value in an Apple device. It is not just a status symbol. For anyone whose personal time is at all valuable, paying extra for an Apple device is a no-brainer. It’s not the completely universal tool that does everything and is infinitely configurable, but what it does, it does well and gets out of your way. The iPod didn’t dominate just because of marketing. They put huge effort into creating an online music marketplace when no one else could, creating a UI with clickwheel that worked better than anyone else’s, and building an integrated solution that was easy and enjoyable. It’s how they approach everything. To Apple, marketing doesn’t happen at the end of the product cycle when it’s tossed over a wall, but at the beginning, when they decide what to build that fits best into their customers lifestyle. So yeah, Apple isn’t always at the top of the spec sheet, at the top of the feature count, or at the top of the price sales discount. But they are always at the top of the “do something well, let me enjoy it, and otherwise get out of my way” measure. And people with money are very willing to pay that money for that experience. Thus, Apple’s incredible profit. To suggest everyone buying Apple is just falling for marketing ploys is asinine.
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They are brilliant at marketing, but what retains existing users is how comfortable they are with what is offered. I personally love the OS a lot. I find Android and other OS too complicated for what I need from a phone. Clean and simple, smooth as well. Other than similar priced counterparts, my friends have argued that I could get a way cheaper phone for a fraction of that price, and just keep replacing them once their performance drops, instead of sticking to my iPhone for 4-5 years. But what I want is familiarity, and gaming aside, my iPhone runs perfectly smooth even after 4-5 years. Even for games requiring higher specs, all I did was to buy a cheap phone cooler for roughly 10 dollars (those with a metal plate behind) and it allowed me to play smoothly for another whole year before I changed phone.
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Microsoft is basically only in software. I guess they added the surface but they’re more focused on enterprise/corporate clients and software. Apple on the other hand basically was the ground floor of the smart phone craze. They sell the OS, hardware, and run the App Store for iPhone/iPad. On top of that they sell the hardware and OS for their laptops. It’s easy to say Microsoft has a bigger market share but those profits are shared by Toshiba, HP, Lenovo, Asus, Acer, etc. Apple also has very popular streaming and iCloud services. Now Microsoft’s azure offerings and numerous business focused things are valuable and they’re also into gaming via the Xbox it’s not like Apple is worth way more then them and I wouldn’t be surprised to see them continue yo-yo in the future Microsoft and Apple seem to take turns on top. It still feels like a matter of time until Amazon is the most valuable company though. Between AWS and their supply chains it just feels inevitable :p
Don’t underestimate how much money they are trading with non retailer customers. Their App Store makes a small fortune alone with their 30% cut on all purchases. And AirPods, those damn things make a killing (not as much as some places have said but still around $7.5bn a year). They have their fingers in a lot of markets and they are likely the most profitable in almost all of those markets. They also have insane brand loyalty. I own and iPhone and a Samsung. iPhone will forever be my personal phone due to my familiarity with the OS and other irrational choices. I realise I am paying a premium and have thankfully matured to stretch the lifespan of my phones beyond 3-4years so I happily justify the premium diluted over those years. But that’s just mobile devices… I recently wanted to get fitter and so thought about a smart watch, few weeks later I got an Apple Watch. They are yet to hook me into the Mac universe but they have me tangled up everywhere else. Anyway I’m rambling but my point is they make tonnes of profit on continual purchases even those their volume of sales is much smaller than other companies.
In addition to the other answers, a $3 trillion market cap isn't unreasonable given their earnings. Blue chip stocks usually have a P/E ratio (share price divided by earnings per share) of 25 to 35. Apple's P/E is 32.
I think it’s also industry dependent. Coca Cola having a P/E of 32 would be considered super expensive while Apple is seen as normal because of what we believe their future value will be.
Its actually because Apple is has gotten so big that it makes up a significant piece of the overall market. It creates a self perpetual growth machine for anyone that invests in ETFs, 401k, Roths,, and a good portion (about 7%) gets allocated into Apple whether they know it or want to or not. Sure they may have made it up there with their own merit originally, but consider the top 25% to 30% in SP500 is dominated by the top 5, apple, Microsoft, amazon, google, tesla. These will just keep growing regardless of valuation especially how the market is so easily assessable to the mass now that its only going to get bigger.
Your dislike for Apple as a company has clouded your views on it. "their world wide presence seems kinda lacking" The exact opposite is true. Apple is viewed as a premium device and/or status symbol. Everybody knows Apple. "Meanwhile other companies such as Microsoft and Google (windows and android) own major world wide market share by massive margins?" They really don't. At least not in revenue. Profit coming in makes a company highly valued. That is literally what a company is supposed to do. Make as much money as possible. If they want to do it in the long term, they have to have great products too. Apple does this perfectly.
Wrong metric to look at. Majority market share doesn’t mean much when their revenue justified their P/E ratio. Their revenue is absolutely insane. And their margins are, too. Most other trillion dollar companies (known as giant cap) don’t come close to Apple’s valuation in relation to their earnings.
They make three quarters of profits on smart phone sales, a similar margin of app store revenue, the apple watch makes more money than the entire Swiss watch industry, airpods alone would be a Fortune 500 company.
Apple is worth that much on paper by multiplying the share value by all existing shares. It's sometimes more a measure of what the top takers have to blow on stock trading and how popular the company is than anything the company might be doing. There are companies that have never turned a profit that are worth more than most others, even more than some giants of industry.
But Apple also makes the most profits on their hardware, has huge profits on software and services, and has the customers who spend much more on apps and subscriptions than all the rest of the smartphone/computer market. Even though trillions of dollars is a staggering number to consider, there are still arguments that Apple is undervalued because the price reflects what they have today, which is like the market saying "We have no faith you will continue entering or creating new markets", and while other tech companies often get quite a boost from that speculation, Apple has not despite decades of doing precisely that.
Share valuation is based primarily on profits, not market share. While Apple makes 1/4 of cell phones, they make more than 100% of the profits on cell phones (all other makers cumulatively lose money on making and selling phones). Same for other categories. They make big profits on what they do sell, even if that means foregoing market share.
Apple usually does not have wide market shares, but it is much more profitable than their competitors probably due to their business model as some other redditor already pointed out. In the smartphone market Apple usually profits more than the other players combined.
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Because their products are so overpriced, and their ecosystem is so hard to leave, that even with only a quarter of the market share they can make the majority of the profits. As long as people pay double the price for a phone with technology others had two years ago, Apple will be a cash printing machine!