
Daring Fireball: Apple's Pricing Advantage - motvbi
http://daringfireball.net/2010/11/apples_pricing_advantage
======
cletus
I've had this argument far too many times.

Specifically regarding the iPad vie put several theories forward regarding the
7" vs 10" tablets:

1\. Apple has tied up the world supply of 10" capacitative touch screens.
That's not far-fetched;

2\. Price: as per Gruber's argument;

3\. Fear: no one wants to directly compete with the iPad so they're seeking
some form of differentiation. Nikon did this with DSLRs and Canon. It wasn't
necessarily fear but Nikon DSLRs weren't positioned directly against Canon
equivalents: they were in between; or

4\. Volume: to Apple's credit they bet big on a market with very little
evidence. To the victor the spoils. The rest are much more sheepish hoping
something sticks before going all in. This is much like the "shotgun
marketing" vie mentioned previously.

I'm reminded of a scene from "How I Met Your Mother" several years ago. Barney
made a video resume. His argument was that Corporate America wants someone who
looks like a bold risk-taker but does risk anything because taking risks gets
you fired.

There's a lot of true in that and the response to the iPad can be construed as
a collective aversion to risk by all the people involved.

Once more all this highlights the importance and strategic advantage of having
a committed product guy at the helm of a tech company.

~~~
netcan
All these might be true, but still be on-the-margin effects.

In the PC world (and I think the old audio player world), any new Apple
product was met a competitor with the similar specs (often better) at close to
half the price (taking into account sales and such). Like the post concludes,
if it was possible to make an android tablet (even a 7" one) that was a direct
alternative to the ipad at $350 someone would be

~~~
ZeroGravitas
Archos 10 inch tablet: $300.

[http://www.archos.com/products/ta/archos_101it/specs.html?co...](http://www.archos.com/products/ta/archos_101it/specs.html?country=us&lang=en)

I'm not saying it's the best tablet ever, though on a spec checklist it might
actually win (camera, HDMI out, USB host, multimedia formats etc.). I'm more
interested in the fact that the vast majority of Gruber-style pronouncements
about how special Apple is require you to not have any knowledge of what's
actually happening outside the Apple bubble.

It's also worth noting that the Samsung Galaxy Tab price has been on a
constant downward trajectory. Last I saw the Carphone Warehouse in the UK was
selling it for £489 for 32GB (compared with $599 for iPad 32GB) a £110
difference rather than the $30 dollar one Gruber quotes. Comparing list prices
favours Apple since they, somewhat unusually, rarely if ever sell below that
price.

~~~
adolph
Is the Archos 10 actually available anywhere? B&H says "Approx. Arrival
December." It's not even available on the Archos store:

<https://store.archos.com/archos-internet-tablet-p-5005.html>

~~~
ZeroGravitas
There's a brief review here from a guy who got his from the Archos store,
though apparently they're sold out at the moment:

[http://www.reddit.com/r/Android/comments/e3zeb/my_thoughts_o...](http://www.reddit.com/r/Android/comments/e3zeb/my_thoughts_on_the_archos_101/)

------
kemiller
Another factor here is that mobile devices are all a tier or two down from
personal computers in terms of the raw number of dollars. Seems like a 15%
premium is something people will consider paying if it only amounts to $30,
but might not if it's $300.

This was especially true in the early days of the PC revolution. The Mac 128K
sold for $2495 at the time, which is more than $5000 in today's dollars[1]. I
can't find any good stats on what a typical PC cost at the time, but let's say
it was half that. That's a HUGE difference; a mortgage payment (or more than
one!) and not something many individuals or businesses are going to pay, even
for substantially better quality.

Other factors:

* No amount of speed was enough. People bought computers to, well, _compute_ things, and there were real limits users experienced because of slow processors. This is no longer true for most uses. Faster speeds are nice to have, but it's no longer true that 20% faster number crunching is a huge win for many people.

* With such expensive kit, businesses were understandably reluctant to commit to any platform that didn't let them multiple-source parts and perform repairs. Backups were expensive or non-existent. By contrast, a defective mobile device is simply exchanged or written off.

* In 1984, worldwide PC shipments totaled 6.3M units. Commodity parts were the only way to achieve any kind of economy of scale, not to mention the benefits of competition. 20 years later, it was 177M. [2] At that level, even a minority player can get the same economy of scale that the entire PC industry enjoyed a decade earlier.

Anyway. Nobody knows how this will all shake out. But the spectacular success
of the modular PC market doesn't mean it's the inevitable outcome.

[1] <http://bit.ly/9P293K>

[2] <http://bit.ly/a9XLJF>

~~~
netcan
The industry has changed and is continuing to change into a world that suits
Apple better. Getting in early and big (eg iphones & ipads) is letting them
influence the change even more in their favour.

What caught my eye in this article was: "Nobody knows what kind of CPU they
have in their phones." That's a world that suits Apple. Interestingly, PCs are
unique in that people take an interest in components. Do people know what kind
of wood and textile is used in their couch (beyond the external, visible
components.) The only products I can think of that compare are houses and cars
at many times the cost.

~~~
allenp
What you're describing is essentially the computer turning into an appliance,
and I agree this is what Apple is gaining tremendously from (and of course
encouraging).

I think you'd find that most enthusiasts or hobbyists have in-depth knowledge
of the components of their hobby and that "computer people" are no different.

Most people have no idea what is inside their computer - I think the majority
of PC owners don't even know the size of their harddrive, for example, and
that is something they might actually need to know, let alone RAM or CPU
specs.

~~~
netcan
I don't how "appliance" became the way people describe this, but yeah.

------
sdz
I think a related part of Apple's pricing advantage comes from the fact that
they are good at taking technologies developed for the iPhone and using it in
other places instead of reinventing the wheel for every product.

The iPod touch, Apple TV, and iPad are all variously stripped, screenless, and
scaled versions of the iPhone. They share the same processor and underlying
OS. This allows Apple to not just sell a lot of stuff, but to sell a lot of
the exact _same_ stuff. So not only are their marginal costs lower from buying
in bulk, their fixed costs of research and development are lower, too.

Could an iPad's cost $499 or an Apple TV $99 if they didn't sell the iPhone?
Probably not, and definitely not if they wanted to keep the kind of margins
they command right now.

~~~
mediaman
This reminds me of a quote from Bill Gates, early on in his career, in which
he says that Microsoft's business model is "creating variable revenue streams
from fixed engineering costs."

Although that's true of many software companies, Apple is proving to be very
adept at creating revenue streams across _multiple, very different_ product
categories from the same engineering investment.

------
jrockway
_First, Apple is the world’s leading volume buyer of a precious, expensive
component: flash storage. They get better prices and priority availability
from suppliers._

Do they get better prices than Samsung? Because Samsung is who designs and
makes the flash memory. (Also, Wikipedia seems to say that Sony buys more than
Apple.)

~~~
wtallis
If Apple has a long-standing contract for deliveries of flash, Samsung
probably can't easily say that they'd prefer to keep the flash memory for use
in their own gadgets. Considering that at times Apple has placed orders for
more than half of Samsung's annual output, such a contract is likely to exist.

~~~
jrockway
That was back when flash was new and exotic, right? Every music player on the
market is flash-based now, and so are many computers. Samsung's Wikipedia page
says that Apple accounts for about 2% of their sales.

~~~
napierzaza
Ugh ____ has 95% of the music player market.

Fill in the blank.

~~~
dagw
I'll answer "No one". Most numbers I can find place Apple in first place with
around 75%.

~~~
thomasz
Are those international numbers? I'm just wondering, because if I would buy
the cheapest nano, I'd have to pay 159€, which would be ~ 219$. That's not
really competitive. The cheapest Air costs ~1,377, a 15'' Macbook Pro ~2,410.

------
marze
Lucky for Apple's competitors they have Android, otherwise they'd really be up
a creek.

With the hardware volume purchasing advantage combined with the many-year head
start they have on the OS, it will be surprising to me if any competitor
obtains a 10% market share in the iPad or iPod Touch markets.

~~~
martythemaniak
At this point, you should probably remember that Android came out 2 years ago
and managed to overtake the iPhone in that short time frame. I highly doubt
Apple will have even a plularity (let alone a majority) of the tablet market
in 2 years.

~~~
jsolson
> At this point, you should probably remember that Android came out 2 years
> ago and managed to overtake the iPhone in that short time frame. I highly
> doubt Apple will have even a plularity (let alone a majority) of the tablet
> market in 2 years.

More Android devices are sold than iPhones, yes. Add the iPod Touch to that
and I'm pretty sure Apple still has a substantial lead (and possibly growing).

Also, how many of those Android devices are being sold with 1.6 and aren't
able to upgrade the 2.x series due to manufacturer laziness or hardware
limitations? Is it really fair to compare an Android 1.6 device sold today to
an iOS device sold today? The iOS device will, based on history to date, be
eligible for OS upgrades for at least two years. The Android 1.6 device is
already two years out of date and not getting any younger.

~~~
yoden
Only 30% of iOS devices are iPod Touch. At android's growth rate, that'll
maybe stave it off a quarter or two.

~~~
ZeroGravitas
Last figures I saw (in a link posted here at HN) was double the iPhone sales
in Q3 . As someone pointed out in response to the obvious reply, even if you
add all the other iDevices, you still don't match that. So in sales they're
already ahead.

It'll take a few quarters of higher sales to catch up with Apple's installed
base, but since the entire market is growing, I don't think it'll take that
long.

------
mattmaroon
First of all, I priced this at work out of curiosity when buying some Mac Pros
and some Macbook Pros. You can get a PC with the same hardware specs as a Mac
Pro for about half the cost. You can also get a PC with the same specs for
about the same cost if you get one of the gamer brands, but just a Dell or HP
Quad core machine is far cheaper than a Mac Pro, assuming all things that can
be compared on an apples to apples basis are the same.

In notebooks the price disparity is not quite as large, but it's still large.
You'll get about the same notebook for $800 that you'd get for $1,200 from
Apple. Also, stuff like RAM upgrades and SSDs cost far more for the same
thing. Again though, you could find comparable Windows units for about the
same prices, or at least close, if you went with higher end notebook brands.

Second, in phones the price disparity is still large because of Apple's deal
with AT&T. They're getting not only the $600 unsubsidized prices, but some
extra fee as well taken from the contract. You might argue that AT&T is paying
that, not you, but your bill may be higher as a result, or you may be on AT&T
rather than Verizon since VZW wouldn't agree to that, etc.

Even in tablets, competitors definitely can match the iPad's prices. The Nook
is $250. I of more tablets costed below the iPad than above.

~~~
frou_dh
Mac Pros have Xeon CPUs and ECC RAM. Were you comparing with similar
"workstation" grade PCs?

(Whether the average Mac Pro user gets any real benefit from these parts is
another question)

~~~
yardie
Consider that now is the time when manufacturers are putting memory test
utilities into firmware and that intersects with systems coming with 4-8-12GB
of memory that take can take multiple hours to fully test. I would say its
worth it.

If the Mac detects a bad DIMM it locks it out and informs you which one. You
don't have to have do the RAM shuffle to find out which one is the bad DIMM.
Your computer also doesn't crash because of it (it shouldn't but I've seen
instances where even ECC couldn't recover).

------
_delirium
I've noticed this even with normal laptops at the smaller end. If you're
looking for a 15" laptop, you can find a lot cheaper PCs than the $1,799
MacBook Pro. But if you're looking for a 13" laptop with roughly equivalent
processing power and weight, it's hard to find a PC laptop much cheaper than
the $1,099 MacBook or $1,199 MacBook Pro. Some are considerably more, because
while Apple prices the 13" at the bottom of their range, a lot of PC
manufacturers price the "ultraportables" as a premium item.

~~~
cheald
Having just recently priced laptops, I didn't have this experience. A 13" MBP
is $1200 for the bare-bones options (4GB RAM, Core 2 Duo, 250GB 5400 RPM
SATA). It weighs about 4.5 lbs. They want an additional $400 for an extra 4GB
of RAM (wtf?)

A Dell Inspiron 14" with the same specs clocks in at $665 at 4.9 lbs (which is
still under the 5lb "ultraportable" mark). A Lenovo U350 with similar specs
clocks in at $700 and 3.5 lbs.

The Apple tax is very definitely still in play.

~~~
cletus
And this, ladies and gentlemen, just proves Gruber's argument that many people
buy PCs based on bullet point specs having never seen the enclosure.

With MacBook Pros you get:

\- a backlit keyboard with ambient light sensor;

\- a high quality display;

\- significantly better battery life than any Windows lapt I've ever seen (due
in part to software admittedly);

\- the best trackpad I've seen on any laptop ever (seriously... Why do Windows
laptop trackpads STILL suck??);

\- better graphics than much of the laptops Macbooks are compared to;

\- a pleasing industrial design.

3 years ago I would've agreed. Now? The "Apple Tax" is small to nonexistent.

Upgrades are often expensive. That's still true but ever big PC manufacturer
does this. Dell is probably the worst offender, offering a really crappy spec
for a low headline price and then offering, say, a CPU anyone can buy for $300
outright as a $400 upgrade from a $100 CPU. And that's with Dell's buying
power.

And yes I know it isn't quite that simple: Dell may have a quota of CPUs they
neex to move, etc but the assertion that they charge through the nose for
upgrades is (IMHO) irrefutable.

~~~
cheald
I've seen a lot of MBPs. I've used them. They're really nice. I don't dispute
that at all.

My Fedora/Win7 laptop has a backlit keyboard, stunning display, and a great
industrial design with an aluminum body. The trackpad is dodgy and the battery
life isn't as good as an MBP's, but it also has two batteries that are user-
swappable. It doesn't run OS X. It also has HDMI out and a Blu-Ray drive, two
"premium" features you aren't going to find on the MBP. It cost half of what
an MBP would.

Apple sells a premium product, without a doubt, and more than that, they sell
a user experience. It's a great one. They make really solid products. You pay
a premium cost for that premium product.

The original assertion was that low-end MBPs basically cost what their
competing PC counterparts do - and that's just not true.

~~~
nikster
There's usually a lot of selective perception involved in things like this.

When you say "X may not be as nice" - that may be irrelevant to you, or hugely
relevant to the next person. The point is, it's not the same.

Last time I had a forum argument with a guy who said he could build me a Mac
Pro equivalent Dell for half the price. I went to Dell's website - no way.
Best I could do was something like $50 less on a $3000 machine. So I dared him
to prove it, and he came up with a machine that was worse in every way (oh we
don't need a Xenon CPU, let's just go with a C2D... and things like that) and
cost half as much. Total joke.

Your laptop that costs half as much - show us a link to the full specs page.
This is the internet - prove it.

~~~
cheald
Mine's an HP Envy 17. I don't typically like HP's notebooks, but this one was
too tasty to pass by. I priced out just about everything out there for a new
mobile dev workstation, including custom builds, and this one rang all the
right bells.

<http://bit.ly/d4oj8G>

------
buro9
I believe that the price advantage comes not insignificantly from the market
side of reselling software, apps, music and video and taking a not
insignificant slice of the sale of those items.

If you remove the market from the equation Apple's bottom line isn't as
impressive, in fact the rise of Apple in recent years is coupled to the rise
of their market place.

So strong is their domination over music distribution that I'm starting to
think that when an investigation starts against Apple that the target should
be to split Apple into two companies; one for hardware (and OS) and one for
the markets. Only then will Apple operate on a level playing field with
regards to other hardware manufacturers, as it is the advantage of the market
that enables them to subsidise the price of hardware, and as they have grown
dominant in hardware (especially in music players) they should be treated as a
monopoly of that market and competition encouraged (by just levelling that
playing field slightly).

I realise that these views aren't in line with the opinion of the vast
majority of people I speak to, especially online and in circles who use Apple
gear. But this is long term speculation stuff, the "What-if"... years ago I
speculated how dominant itunes could be and it mostly has come to pass and is
still increasing (25% of all US music, 69% of digital music as of mid-2009).

~~~
wtallis
You seem to be operating under some misconceptions about antitrust law in the
US. Being a near-monopoly is not illegal. Abusing your monopoly to force your
way into a new market is, but simply using profits from one product line to
fund R&D on a new product doesn't count.

Even if Apple has achieved a near-monopoly over digital music or sales or
portable music, it's not at all clear that they have had the opportunity to
abuse that monopoly. There have been cases (Psystar, etc.) that have tried to
get the bundling of Mac OS X and Apple computers ruled as illegal tying, and
they have failed. For the foreseeable future, there will not be grounds for a
federal antitrust case against Apple.

You should try to conceive of Apple as the poster child for a successful
business strategy: vertical integration. A large part of the success of
Apple's expansion beyond computers is due to the fact that they can and have
ensured that the products work well together, and that most of the products
they have introduced have been natural complements of their existing products.

You also seem to be somewhat ignorant of the timeline of Apple's rise over the
past decade. The iPod was on the market and gaining traction for a year and a
half before the iTunes Music Store opened. At the time the iTunes Store
opened, DRM was mandated by pretty much all the content owners. If this
contributed to Apple getting a monopoly on digital music sales, the blame
should fall on the music studios for not insisting that the online stores they
deal with use a single interoperable DRM system, and not on Apple, who had no
incentive to promoting interoperability with other music stores and players.

The profits of the iPod+iTunes Store combo provided most of the funding for
the Intel switch and the development of the iPhone. Like the iPod, the iPhone
was on the market and gaining traction for about a year and a half before the
App Store opened. It's hard to argue that Apple's computers have been helped
much by the iPod and iPhone other than by generally strengthening the Apple
brand.

Each step of the way to their current position, Apple has done it by
introducing products that can be at least moderately successful on their own,
without the hardware/software tying you are complaining about. None of those
individual steps has been anywhere as close to monopoly abuse as, say,
Microsoft's entry in to the video game console market, which faced no
significant legal challenges. Nor has Apple clearly erected any artificial
barriers to entry for competitors. Their agreements with content producers are
not exclusive, and now that DRM is not applied to music sales, there's no
significant barrier to using music purchased through iTunes on other music
players. To the extent that Apple has created any barriers to competition, it
has only been by raising the standards for usability and quality.

------
trotsky
I see daring fireball has never heard of archos.

[http://www.engadget.com/2010/08/31/archos-unleashes-five-
fiv...](http://www.engadget.com/2010/08/31/archos-unleashes-five-five-new-
android-froyo-tablets-we-go-h/)

~~~
rimantas
Let's see:

    
    
      I would love to buy a $229 Android device that’s the
      equivalent of the iPod Touch
    

Which one of the Archos is equivalent to iPod touch?

~~~
trotsky
Well, I had the archos 10" tablet in mind when I made that post.

Archos clearly intends the 4.3" device to compete in the ipod touch space. The
fact that it lacks a capacitive screen means it really doesn't, and seems like
a mistake. But given Archos' price points ($200 4.3" resistive and $275 7"
capacitive) it's hard to believe that component and manufacturing prices would
prevent them from shipping a closer mimic.

------
b3b0p
When I purchased my Apple machines I also took into account the cost of the
tools I would be using the operating system.

Macbook Pro + Xcode + Mac OS X

vs

Lenovo or Dell upper end model + Visual Studio + Windows 7

Visual Studio adds a considerable amount to the final cost, but I'm also
willing to put down a fair amount more for having Mac OS X.

~~~
ChRoss
Can you also add the cost for becoming Apple Developer then?

~~~
mbreese
Umm... $0.00?

It costs nothing to become an Apple Developer. It costs $100 to be an iPhone
developer, or $100 for their Mac developer program. Both of which give you
previews of OS updates and the ability to sell your software in their stores.
Otherwise, you don't have to pay anything.

------
jedbrown
The T-mobile Vibrant (aka Galaxy S) is $499 off-contract from T-mobile, with
16 GiB of internal storage. You can call them and unlock it for free
immediately. This is slightly different from the quoted $600 with 8 GiB
internal. /pedantry

------
teyc
Apple priced iPad very aggressively. No question about this. This is a brand
new product category and Apple wanted to own it, and priced it that
competitors find hard to compete. In fact, Jobs had warned about this, saying
margins with iPad will be lower (i.e. no Apple tax). It was on the strength of
this comment that I bought an iPad, something I would not normally do. In
contrast, all the Windows tablet systems are still priced in the 3k mark.

------
nowarninglabel
The 2nd paragraph: "Now, even putting quality aside, competitors can’t match
Apple’s prices."

Does not jive with the prices mentioned later:

Apple Ipad - $599/$699 for the 16/32 GB models

Samsung Galaxy S - $594

HTC A8181 Desire - $527

I don't know what the author's definition of "match" is, but seems to me
Android tablet makers have matched prices quite well. *Edit: fixed my
formatting

~~~
andreyf
He's talking about cost of actually building the device. A big part of the
iPhone's consumer price ($700 for 32gig) is markup, as he points out in
comparing it to the price of the iPod touch, which is $300 for a comprable
model.

In other words, he's claiming that Apple _could_ undercut the A8181 Desire or
the Galaxy S on price, but keeping the customer choose between "FREE* shiny
new phone" or "$200* shiny new phone" reinforces the perception of Apple as a
premium brand.

* with 2 year contract

~~~
nowarninglabel
If that is what the author is talking about, then the author is still off (at
least based on this analysis):

Galaxy S $205 build cost - <http://bit.ly/bocdoe>

Apple Ipad $264.27 - <http://bit.ly/aW8mvu>

(bit.ly links cause the links are huge, goes to Isuppli)

~~~
andreyf
Uh, the iPad costs a lot more to build than $264.27: do the math on their
earnings reports: Apple is hardly making any profit off of them. And the iPad
has a screen 4x the size of the Galaxy S. You just can't compare the two...

~~~
nowarninglabel
Again, the author was the one that used the Galaxy S as a comparison, it's in
the article. As for the figure, I gave the caveat that you have to believe the
source, though I think the source is pretty well researched.

------
fragmede
iPad aside, the tablet form factor has been tried and failed before. The
original 7" EEE, which retailed for $400 bore a whole new 'netbook' segment.
That was a multi-million dollar gamble which ultimately paid off. Give the
previous failures of tablets, that no one is stepping up to the plate to try
again at that price, even given Apple's success (hey, they're Apple) isn't
surprising.

------
heiti
It's a bit disappointing when "the world" and "USA" are used interchangeably.
The US market is fairly small. Things are quite different in other places.

~~~
maxawaytoolong
The USA is the world's largest consumer goods market, surpassing the next one,
Japan, by a factor of 5.

[http://en.wikipedia.org/wiki/List_of_largest_consumer_market...](http://en.wikipedia.org/wiki/List_of_largest_consumer_markets)

~~~
ugh
That’s interesting but is it also a good reason to use “USA” and “the world”
interchangeably?

Germany, the UK, France, Italy, Spain, the Netherlands, Poland, Belgium,
Greece, Sweden, Austria, Denmark, Portugal, Finland, Ireland and Romania
combined – all EU member nations – are about equal to the US. They have a
larger combined population (about 460 million v. about 310 million) but the
USA certainly don’t beat them by a factor of 5 even taking population into
account, more like a factor of 1.5.

Oh, and 10 divided by 2.8 is 3.6, not 5.

~~~
maxawaytoolong
The article doesn't actually use "the USA" and "the world" interchangeably. It
just says that Apple is the #1 buyer of flash memory in the world. I regret
making my initial comment because in the context of the article, the comment I
was responding to makes little sense.

~~~
heiti
Sorry for the ambiguity on my part. I meant that the claims made about iPhones
price are based on USA. In many other markets the price differences of iPhone
and HTC Desire are quite significant(where i am, it's $940 vs $620). Not to
mention that you can get a $210 android phone. Money is not that important for
lots of people but looking at the world its very important.

Also iPod's market share is dwarfed by music-phones. It might be true for US
and many other rich countries that people don't use that feature and use their
iPod instead but in a significant part of the world people cannot afford to
cash out $250 for iPod nano just to get a better user experience from their
music player. Yes you can get a iPod shuffle for $65 but thats not an upgrade
anymore.

Same goes for MacBooks. The equal quality products might have a fairly small
price difference, but many people cannot afford to cash out $1400 for a
laptop. Especially if there is an alternative available for $500. They are not
comparable based on specs and quality etc, but they are comparable in that you
can browse facebook, look at pictures and IM on both of them.

Anyway, i agree with Apple making great quality products and that they are
nowadays more affordable than ever. I just don't agree with making conclusion
about the world based on one quite rich country and belittling other
manufacturers who build affordable products for the ones who cannot afford
those premium prices.

------
jamesk2
The Android vs. iOS marketshare race is one in which iOS is hobbled because of
iOS's exclusivity. When the iPhone 4 hits Verizon next year, $199 Android
phones will take a massive hit in demand and they will quickly be dropped in
price to spur demand.

Apple has dropped it's prices to compete before. It'll be really interesting
if Apple drops the price of the iPhone below the top of the line Android
phones.

------
tibbon
This puts a hole in the "Apple is more expensive" claim (which I've believed
to be false for years)

------
guelo
While it is true that Android phones haven't been able to undercut iPhones by
much, the argument doesn't hold up for tablets and iPods because these markets
haven't really been entered by the Android manufacturers yet. The Samsung
Galaxy tablet is at the forefront but the real wave of Android tablets is
months away waiting for the release of Gingerbread. Expect a lot of
announcements around CES time. As for the iPod market, Android has a lot of
catching up to do with it's media software so that will probably be a bit
further out.

~~~
swombat
Great, so they'll have an iPad competitor out round about the time that the
second version of the iPad comes out and blows the current iPad out of the
water, then?

Colour me unimpressed.

------
eftpotrm
Apple cheap - hmm, not sure I buy that.

Why does an iPhone cost more than an iPod Touch, a standard 2G phone and a 3G
USB dongle? That's all the hardware is.

Why does an iPad with a 10 inch screen cost twice as much as a netbook with a
10 inch screen and a keyboard?

Apple may have found some good niches to milk for cash with some attractively
designed products, but cheap they most definitely ain't.

~~~
metageek
> _Why does an iPhone cost more than an iPod Touch, a standard 2G phone and a
> 3G USB dongle? That's all the hardware is._

Currently, that's not true. The iPhone 4 has a much better camera than the
current iPod Touch. Not sure if there are any other differences.

~~~
eftpotrm
OK, sorry, a generation out of date :-) Still, a 5mp lens/CCD/flash package,
even allowing for miniaturisation, isn't more than a few tens of pounds at
absolute maximum. There's still a hefty markup IMHO.

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fs111
Does he even read the things he links to? The amazon page of the HTC desire
says 499$, that is not "just under 600$". Why do people link to this fan-boy
all the time?

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elai
Gruber, they're not competing on price.

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gcb
apple tax is no more in price of the device, as those are cheap for apple now.

Apple tax today is control!

While mobiles are moving farther from the locked-in model (i get my phones
unlocked for some 5 yrs, and before that, used to unlock them) apple is moving
computers to it.

An apple store on the desktop, with DRMed software, is a full circle to
mainframe in computer history.

Heck! the iphone, with subsided price along with mandatory monthly bills and
approved catalog of software and only one choice of network is already as
close the main frame as you can get!

It would be interesting to compare the at&t iphone contract with a 70's IBM
mainframe lease one. anybody has one around? :)

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ck2
Yup, Apple's factories have the suicide rate to prove all that goes into their
products.

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zdw
tl;dr version: Apple has the volume advantage because it buys a huge amount of
flash memory, displays, etc. that it can make products at price points other
vendors can't compete with without cutting corners.

~~~
jseliger
This is not accurate and ignores the bottom paragraphs, which are about how
companies compete on design and quality in phones whereas they don't do so in
PCs, which are more frequently judged based on specs. You can see this when
Gruber transitions: "But there’s another major factor at play, which I believe
is more important than volume pricing."

The above comment is an example of why you frequently shouldn't trust the
"tl;dr version:" those versions are frequently wrong, or they sheer away a
sufficient amount of detail as to become wrong.

