

Mac Makes 45% of PC Industry's Operating Profit - jseliger
http://www.slate.com/blogs/moneybox/2013/04/16/mac_profits_are_high_too_high.html

======
rayiner
I'm not sure what is surprising about this. PC makers (Dell, Lenovo, HP, Acer,
etc) produce fungible products in a market that's approaching perfectly
competitive. Lenovo makes only about half a billion of profit on $30 billion
in revenue. Acer made $11 million in profit on $3.8 billion in revenue in Q1
of last year. That's what happens in competitive industries--profits approach
zero.

Apple makes profits by not playing the game of selling a fungible product. If
you want a Mac, there is only one place to buy one. They can't charge whatever
they want--other PC's are substitute goods--but they have more pricing power.

It also says something interesting about competitive markets in the economic
sense. I think one of the reasons you see very little innovation out of the
Acers of the world is that they have no money for R&D. They make a few percent
on each item sold and can't afford to do anything other than figure out ways
to cut costs. I think that kind of situation is bad for innovation even if it
does result in cheaper goods.

------
mooism2
The chart on the page the article links to indicates that Apple makes 45% of
the profit from the PC industry (counting Macs as PCs), so less than the
entire Windows PC industry, I think.

But also: Apple's profits from selling Macs include Apple's profits from
licensing OS X; the figures for Windows PC vendors do not include the profit
Microsoft makes from licensing Windows. They're not comparing like with like.

~~~
nathan_long
That's a good point, but it helps explain, rather than invalidates, the
comparison.

Apple DOES make more per machine sold than Dell does. Part of that difference
is the fact that its price includes an OS.

------
bitcartel
The headline is misleading.

A pie-chart from the underlying data[1] shows that the author somehow forgot
to mention 21% of the profit from "Other" PC manufacturers.

What isn't in dispute is that Apple charges more than its competitors for what
is essentially the same Intel hardware, cobbled together in the same factories
in China and elsewhere.

Thus you could make an argument that Apple are the worst when it comes to
profiteering from impoverished workers, even though their hands are clean
thanks to the wonders of offshore outsourcing.

[1] <http://www.asymco.com/2013/04/16/escaping-pcs/>

~~~
astrodust
> Apple are the worst when it comes to profiteering from impoverished
> workers...

Seriously? What sensationalism.

Apple has been given a really hard time in the press, but they're also the
only ones out there pressuring their suppliers to cut overtime, a move
unpopular with the workers, and improve working conditions.

Where are all the other companies that use Foxconn and other suppliers doing?
What about clothing and fashion companies where the working conditions are
apocalyptically bad compared to Foxconn?

~~~
bitcartel
A key argument for offshore outsourcing is to take advantage of a lower cost
base so you can price your finished goods more competitively.

Apple have managed to keep prices high and thus maximize profit. If Mac
manufacturing returned to the US, where Victorian working conditions are
banned, it would probably be hard for Apple to keep those fat margins.

~~~
astrodust
Steve Jobs was asked about this aspect of Apple's success. It's not the
"Victorian" working conditions, which is hardly the case in a modern factory
like Foxconn runs, but resources.

If you want 5,000 skilled workers to assemble a new product that's shipping in
three weeks, in the manufacturing districts of China and Taiwan you can snap
your fingers and get them by the end of the day. In the US and Europe this
would take weeks, if not months. There's no on-demand talent pool like this.
It doesn't exist.

On top of that, if you want something made, nearly anything, you can get it
sourced immediately. You want magnets for your new iPad? There's a factory
down the road from Foxconn that makes billions of them. You want batteries?
Specialized rubber pads? A particular adhesive? A solvent? A new type of
display panel? It's all being made right there, and probably just miles away.
It could be on a truck to your factory within the day. No customs. No duty. No
logistics other than picking up a phone.

Don't forget Apple's original Macintosh computers were made in a state-of-the-
art plant in California, but the scale of overseas manufacturers, who were
making everything from toothbrushes to televisions, made it very difficult to
keep competitive. It's not necessarily the wages of the workers, or their
thrifty working conditions. It's the entire ecosystem.

Despite all this, Mac manufacturing _is_ returning to the US:
([http://tech.fortune.cnn.com/2012/12/08/apple-mac-pro-made-
in...](http://tech.fortune.cnn.com/2012/12/08/apple-mac-pro-made-in-us/))
Details aren't clear at this point, but it seems Apple's partnering with
Foxconn to open up domestic manufacturing for selected products. This will
probably make the supply chain a lot more complicated, but for something like
the Mac Pro, which is low volume, high margin, and on a much more relaxed
update cycle, it wouldn't be impossible. Same goes for other products like the
Mac Mini.

Let's not forget how horrible Victorian working conditions were. People in
those times would find working at Foxconn to be like living in a palace. Flush
toilets? Showers? Beds with mattresses? Company provided health care? A hard
limit on over-time? No beatings? Foxconn's wages are well above the norm in
that industry, even if thrifty by American standards.

~~~
bitcartel
The NYT just won a Pulitzer[1]

 _"...for its penetrating look into business practices by Apple and other
technology companies that illustrates the darker side of a changing global
economy for workers and consumers."_ [2]

[1] [http://tech.fortune.cnn.com/2013/04/16/apple-pulitzer-ny-
tim...](http://tech.fortune.cnn.com/2013/04/16/apple-pulitzer-ny-times/)

[2] <http://www.pulitzer.org/citation/2013-Explanatory-Reporting>

~~~
astrodust
Did you even read that first article?

Mike Daisey made up things. Big time. He invented things. His report was half
fabrication, half stretching the truth. The New York Times, for all their
credibility, did really go out of their way to paint a dramatic picture. Such
is what happens when you want awards, and not the truth.

In any case, all this did spur Apple to crack down hard on Foxconn, but the
infractions they've found so far are pretty minor. A handful of under-aged
workers that submitted fraudulent paperwork. Some industrial accidents that,
while unfortunate, do happen at a plant with 800,000 workers.

The deeper down in the supply chain, the more problems you'll find, but at
least some are doing the right thing.

While working at Foxconn isn't as nice as working at, say, an American
automotive plant, it's actually not a bad career for someone who's in their
twenties, with no academic accreditation and looking to make a living.

If I had a choice between working in a toilet factory, a forge, or a Foxconn
factory, I would go with Foxconn every single time.

All your rage seems misdirected. What about the people who built the American
Embassy in Iraq and had to live in containers in the middle of the desert, who
had their passports taken away, and who might never have been paid at all once
"living expenses" were deducted from their pay?

Ah, but there's no "Apple" in the headline there, so it won't get any
traction.

~~~
bitcartel
Apple has the public's eye, which is why they're getting picked on, just like
Nike was a few years ago.

The fact that Apple enjoys such fat margins makes them look, at least to some
people, that bit more egregious than their competitors.

I don't know if the Pulitzer was deserved or not, but I feel it was a tech
story worth covering.

~~~
astrodust
Worth covering, sure, but don't get all frantic about it.

How many times does Apple have to strong-arm their suppliers into doubling
wages ([http://www.forbes.com/sites/timworstall/2012/05/28/apples-
fo...](http://www.forbes.com/sites/timworstall/2012/05/28/apples-foxconn-to-
double-wages-again/)) before people are happy? I haven't heard of any other
company doing this.

Apple uses the same factories, the same suppliers, and the same logistics as
everyone else. Why do they have such high margins, then? Could it be they know
how to run a business better?

Remember Apple focuses on creating a handful of products and manufacturing the
hell out of them. HP, by contrast, has over two thousand different printer
models. Why do you need so many models? How can you build up enough volume on
any of those to cut manufacturing margins?

Sony's PS3, by contrast, is basically a single unit, so they can slash margins
tremendously. The only variations are accessories and an easily replaced hard
drive.

Apple comes as close to that model as they possibly can. There's actually an
unusually large diversity of notebooks now with the Retina machines being
introduced, but that's still a fraction of what Dell or HP has in their line-
up.

Samsung's starting to "get it" and they're promoting their flagship phone
instead of any of the hundreds of others they have.

------
davidf18
The price also includes great service. In Manhattan there are 5 Apple stores
-- one is 10 minutes away from me and one is open 24/7/365 just in case I need
some Genius Bar help or some Apple accessory.

For an extra $100 per year (30 cents per day) you can purchase the One-to-One
service that allows you to schedule one hour appointments for one-to-one help
as frequently as you like.

No other PC firm offers that kind of service.

Also, Running Parallels with Windows and Office 2013 gives you what most
people use a Windows laptop for Office.

------
mindstab
Kind of a hard comparison. the rest are just hardware where as Mac is a
hardware/software company and also sell other form factors than pc like phones
and other portables. So its not a fair comparison at all. Apple to oranges
like. Should think about including other hardware from Samsung, HTC, to Intel
and software like Microsoft.

Kinda of a "We picked a few companies that are sorta randomly similar and look
this other company is doing better". Means nothing

~~~
boundlessdreamz
Huh? The comparison does not include iPhones/iPads

------
ksec
Apple makes money on both hardware and software. So while all those
manufacture have to pay for its OS ( Windows ) to M$, Apple gets those
themselves as well with MacOS.

Which is why Apple is much more profitable when you are discounting Microsoft
from that equation.

And If you are talking about Hardware, ( which by the way includes both
component inside and exterior as well ), please makes an proper comparison
before jumping in to say they are insanely expensive. While i am not saying
that they are not, it is not a huge difference as some have put it.

------
Oxxide
huge markups on cheap hardware leads to profits, Slate reports.

~~~
dclusin
Huge markups on RAM, mainly.

~~~
Adirael
You're not really paying for the RAM, you're paying for the RAM plus
installation. It's cheaper to produce 2, 4 models on an assembly line and if
you wan't to have 4x RAM just charge you a lot.

I just buy the model with the less RAM and upgrade myself, in some models it's
covered in the instructions and are not too hard to upgrade.

------
cooldeal
45% is not greater than 55%. Headline is wrong.

[http://www.asymco.com/wp-content/uploads/2013/04/Screen-
Shot...](http://www.asymco.com/wp-content/uploads/2013/04/Screen-
Shot-2013-04-16-at-4-16-4.16.46-PM-620x587.png)

------
recoiledsnake
Why isn't Microsoft's Windows division included in "the entire PC industry" ?
Or even Intel?

~~~
scott_s
Because they don't sell computers.

~~~
astrodust
Intel does sell computers, but not very many. Example:
[http://www.pcworld.com/article/2020577/how-we-built-a-
tiny-h...](http://www.pcworld.com/article/2020577/how-we-built-a-tiny-home-
theater-pc-with-intels-nuc.html)

~~~
bergie
And Microsoft sells computers now too (Surface Pro, but not RT in this
context). I suppose they're both in the 'other' category

