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Comment by FredPret

2 years ago

Perhaps a hardware engineer can help me out here, but I don't think Apple makes an unreasonable margin on the iPhone. Overall they make 26% [0]. Really quite reasonable considering highly-developed proprietary software is bundled with the device

They make a lot of money because they sell * a lot * of iPhones.

[0] https://valustox.com/AAPL

8 comments

FredPret

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lokar  2 years ago

And then, they make much much better margins on the App Store.

  • FredPret  2 years ago

    You're right - I didn't think of the App Store. That's a proper monopoly. "Services" are 23b out of 120b in total sales for them last quarter, but at a much higher margin. It cost them 6b to provide those services, but 58b to make 96b worth of hardware.

    Looks like 1/3 of their gross comes from services.

    Only some of the services are App Store - some of that money is from Apple TV and iCloud storage.

    App Store income looks to be app fees and also advertising.

    • flutas  2 years ago

      > and iCloud storage.

      Which is itself another area where Apple forces consumers to use it.

      You can't back up your iPhone to Google Drive or Dropbox. So here's your 5GB of space for any and all Apple devices you own, make it last or pay us monthly.

snakeyjake  2 years ago

For practically any hardware startup if their margins aren't >33% they will fail to scale, wither on the vine, and die.

My employer makes space hardware and our overhead R&D expenses are so high that if we made 26% margin we would be bankrupt in a year.

So I think ~30% is probably a minimum floor to shoot for.

Just looked it up and Samsung Electronics has a margin that has ranged from 30% to 46% over the last couple of years.

I think the majority of people on HN are software guys who are completely oblivious to the challenges of building physical items that exist in the real world which is why your comment is downvoted.

That and beyond its stated purpose it seems that HN exists to allow people to complain about Apple in a public forum.

What makes all of this so strange is that large software vendors often have astronomical profit margins that hardware companies can only dream of. SAP (~70%) MSFT (~70%) TEAM (>80%)

https://ycharts.com/companies/SAP/gross_profit_margin

https://ycharts.com/companies/MSFT/gross_profit_margin

https://ycharts.com/companies/TEAM/gross_profit_margin

Perhaps it is good that software companies have such high margins because if they didn't HN would be flooded with stories about how every company they get hired at goes out of business and management is clueless.