If it's a battle between manufacturers, Apple have already won.
Out there in the grown-up business world where CEOs don't wear trainers to board meetings, they have a saying - "sales are vanity, profit is sanity". The dot-com delusion of losing money on each sale and making it up on volume remains to this day.
While the margin on an android handset is low and falling, some analysts are suggesting that the per-unit profit on an iPhone is actually increasing. Android manufacturers have very little opportunity to defend their margins, because they have so little room for differentiation other than price and performance. That is one reason why we're seeing things like HTC Sense and MotoBlur.
HTC are very profitable at the moment, which is the best evidence for why you don't want to manufacture Android handsets. Remember where HTC started - making cheap, generic WinMob devices that were house-branded by networks. They broke the back of other WinMob manufacturers by viciously competing on price. They are now facing competition in the Android market from the likes of ZTE who are employing exactly the same strategy.
Here in the UK, you can buy a ZTE Blade for £99 ($160), prepaid with no contract. It's a handset with an 800x480 OLED display, a capacitive touchscreen and Android 2.1, upgradable to 2.2. Great news for consumers, terrible news for manufacturers. I have absolutely no idea how an Android manufacturer could defend against that.
I read an NPD report recently that stated that although Apple had less than a 10% share of the PC market, they had over 90% of sales over $1000. The average Windows PC price was $515, versus $1400 for the average Mac sale. I know which business I'd rather be in.
Are you on the board of Apple? Are you a shareholder?
Then why do you care?
Seriously, why does Apple's profit margin have any relevance to you, a consumer? I would really like to know.
See, I care about relative marketshares as a developer and as a user because that decides application reach, and application availability.
Profit margin of vendors....why would I care? Seriously, why, aside from some pathetic flag waving?
Some of the Android makers make low margins because they are essentially recovering from collapse, at least in the smartphone market. Motorola, SE, LG...was there some proprietary scenario where they would be rolling in loot right now on a proprietary platform? Seriously, do you think that? Is anyone stupid enough to think that?
If Motorola didn't adopt the Android last minute rescue, they would have been done. LG...SE...what option was there for them, given the entrenchment of the iPhone and the network lock in effect of the app market that was quickly becoming unipolar.
And delusions that Apple is immune to competitive forces is the sign of fervent blindness. Even Apple is warning that their margins are completely unsustainable, because no longer do you pay whatever it costs because that's the platform with the Facebook app and the Twitter app and the Foursquare app...but now you actually have options.
Why should a consumer care if a vendor is profitable?
Because profitable vendors offer many advantages to consumers: 1) better support, 2) more R&D for future innovation, 3) better product (result of better r&d, better parts, etc).
I've been buying Apple products for about 25 years. They tend to hold up well, have good support, and continue to offer me great new innovations.
Have you ever tried getting help from a vendor that you know is selling something at 5% margins? Good luck to you...
The customers of our startup(s) also want us to be profitable, because they buy into our vision and want us to succeed, and if a company isn't profitable, it dies, and everyone involved (customers, owners, employees) loses.
>Have you ever tried getting help from a vendor that you know is selling something at 5% margins? Good luck to you..
Dell has incredibly good support (and if you want wipe your arse support, you can pay for it and get it). Their products are also shockingly well built. Seriously, Dell servers are just brilliantly put together.
They manage to combine small margins with a decent product. Everyone wins.
On the R&D front, Apple is a marginal investor in R&D. The iPhone 4 software is great, but the hardware -- it's a collection of off the shelf products. The same stuff that goes in that 2% margin no name device.
Which of course is true for Apple desktops as well. Apple once tried to do their own thing, and it didn't turn out so well. So now it's the same commodity parts that you would find in every discount bin white box brand.
They said their margins would be lower next quarter in their earning call because of the change in the mix of products. They had advised the exact same thing for the quarter just posted but beat their advised estimate.
Looking at the problems other companies are having getting a iPad equivalent into production at the same or lower price point, I get the feeling the iPad doesn't have the traditional margin. Even with that, if they release new iPad models on the same 1 year cycle used for iPod / iPhone then I can see a lower price point next April.
Out there in the grown-up business world where CEOs don't wear trainers to board meetings, they have a saying - "sales are vanity, profit is sanity". The dot-com delusion of losing money on each sale and making it up on volume remains to this day.
While the margin on an android handset is low and falling, some analysts are suggesting that the per-unit profit on an iPhone is actually increasing. Android manufacturers have very little opportunity to defend their margins, because they have so little room for differentiation other than price and performance. That is one reason why we're seeing things like HTC Sense and MotoBlur.
HTC are very profitable at the moment, which is the best evidence for why you don't want to manufacture Android handsets. Remember where HTC started - making cheap, generic WinMob devices that were house-branded by networks. They broke the back of other WinMob manufacturers by viciously competing on price. They are now facing competition in the Android market from the likes of ZTE who are employing exactly the same strategy.
Here in the UK, you can buy a ZTE Blade for £99 ($160), prepaid with no contract. It's a handset with an 800x480 OLED display, a capacitive touchscreen and Android 2.1, upgradable to 2.2. Great news for consumers, terrible news for manufacturers. I have absolutely no idea how an Android manufacturer could defend against that.
I read an NPD report recently that stated that although Apple had less than a 10% share of the PC market, they had over 90% of sales over $1000. The average Windows PC price was $515, versus $1400 for the average Mac sale. I know which business I'd rather be in.