It's weird how Samsung, LG, and HTC are struggling to make a profit on their phones (some have very good phones like the LG G4 which even Chris Pirillo said it was a good phone), but Apple just keeps growing their profits. I wonder if it has to do with how they've limited number of phone models or is it purely brand recognition that's driving this growth.
Apple's actual market share is less than 20% of all smartphones worldwide, though their share of profits is at 92%. This is not about their phone selling more than other phones (they aren't necessarily), but rather how Apple manages profit margins. Their phones are much more expensive than the competition, command premium prices and thus yield premium profits.
And would that not mean that their phone is more desirable? Lots of things are desirable that are not affordable and are not, therefore, purchased in vast quantities.
Depends how you quantify "desirable" but since there are many more Android phones in the world than iPhones, some would say that means Android phones are more desirable. But either way, that really has little to do with profits. If I sell just one item in my entire life for a million bucks, something that cost me ten bucks to make, that is pretty impressive profits, even though it was not desirable since only one person bought it.
Yet, in at least North America, equivalent "high end" Android smartphones cost the same on contract and even off contract than iPhones. I can get an older iPhone 5c for free (probably a 5S is I go with a smaller carrier). Where are people paying a "premium" for the iPhone?
Is is that not enough people choose the flagship Android devices to move the needle? I'm genuinely curious/asking because it seems/appears there's some parity (price) between the current flagship Android devices and Apple's newest.
Also, profit formulas aren't that simple. You have consider Apple's costs vs their revenue for each phone, and also their contract terms with providers vs other phones. I don't know the details. But perhaps Apple earns more for their phone contracts even if consumers pay the same. One thing we do know is that Apple leads the world in an extremely well-oiled production pipeline and network of suppliers that no doubt also helps keep their costs down and thus their profits high. I doubt Android manufacturers are operating at that same margin.
Good points. I would imagine that Apple has a better supply chain, and more aggressive/favorable terms with each provider than competing smartphone makers. I'm not sure it accounts for the entire difference. I wonder if there's a middle area or marketplace where people pay disproportionally more on average which helps this figure (92%) climb so high.
> But perhaps Apple earns more for their phone contracts even if consumers pay the same.
Considering the demand for iPhones a few years ago I'd be amazed if this wasn't the case, I suspect the carriers also pay a chunk of the advertising if it's an exclusive deal.
I think this is it exactly. The number of people who buy high end Android phones is a tiny slice of the total Android market. The vast majority are the same people who bought Nokia candybars in the past--people looking for whatever they get for "free" on contract.
This is also why the Apple app store sells so well compared to the Google Play store. People with crap low end Android phones struggle to run many apps, and their phone didn't come with enough storage for them.
"...their (crap low end Android) phone didn't come with enough storage for them"
My brand new iPhone 6 only has 12 GB of usable storage. I'm currently using more than half with only a small selection of apps, photos and music. IMHO that's pretty crap - and I paid a premium for it (doh!)
Android phones for some reason rarely come with enough storage. It's easy to buy 8GB phones, and Android is less space efficient than iOS. The only saving grace is that they often include uSD slots, although convincing your apps to use that space can be difficult sometimes.
Those really are incredible figures when you think about it. 20% of market share reaping 92% of the profits. Is there any comparable in any other industry? Ever? I'm currently in the android camp but I have to say I'm astounded how Apple consistently pulls off these kinds of numbers.
I wonder if someone has done marketshare numbers with respect to flagship phones. I thought the Nexus 5 was a great phone for $350, but then the Nexus 6 went back to full flagship price and pushed me back to an iPhone for that amount of money.
My thought is, if Apple is pulling all of the profits then they are the flagship to buy if someone is in the market for a flagship phone. Otherwise, if someone is buying on price it is Android all the way.
In 2015, not proportional to that profit difference, no. iPhones are not dozens of times better than all Android phones. There's something else to it, the construction of some sort of successful moat that allows them to charge more.
Yes, that's my point. There has to be more to it than just "they're better", because no matter how Apple fanboy someone may want to be today, there's no conceivable way they are that much better. There must be some kind of moat. Full stack integration or some sort of big savings from owning the OS or something, because it has to be more than just "they're better". Besides, if it were just a raw "they're better" they'd have a much bigger market share, too.
I would kind of agree with you. I use android because I can simply plug it in and drag and drop any file I want. Yes, there's dropbox, etc. Those aren't options for me. Also, I love the way Android allows data to be shared between apps. I find it very intuitive.
If iOS had those things, I think I'd try switching, just to get something new.
It seems based on the tech site reviews that I've read, flagship Android phones have only now caught up to or surpassed iPhones with regards to camera quality with the latest iterations of flagship Samsung and LG phones.
If it were that simple, wouldn't they have more than 20% market share? It seems clear to me that iPhone owners are paying a premium for the branding, which is pure profit from Apple's perspective.
Even with price parity through on-contract upgrades, apparently not that many. We should expect Apple marketshare to be much higher if the iPhone really is so clearly superior and more "desirable" to any rational consumer.
I do not disagree; but keep in mind that I've never spoken of "clearly superior", only desirable.
Also, since when did rationality enter the discussion? A beloved wants diamonds so their partner buys them. But diamonds are not worth anywhere near what's commonly paid for them.
There is a far mix of rational/irrational behavior in most luxury purchases--it's not an Apple exclusive trait.
This is very close to correct. The better analogy is something like Tesla vs the generic commuter subcompact field. The generic consumer subcompact marketplace is extremely competitive and therefore there are approximately zero profits to be made, whereas the Tesla has one model at one price and basically no competitors.
Want an iPhone, you'll buy THE iPhone for whatever Apple wants to charge.
Want an Android phone, you'll select from a zillion basically identical competitors all more or less profit free (because competitor A can't extract an extra 5% profit if that would drive 100% of competitor A's sales to sellers B thru Z)
This shows the fallacy of "the smartphone market", there's the non-competitive iphone market with about 20% sales and the hypercompetitive confuseopoly market the other 80% buy into.
Why is it clear to you that the premium is purely a function of branding, and that physical attributes of the product are not also factored in somehow?
This is not a rhetorical question: I could imagine a study that would explore the influence of brand vs. size, density, materials, etc.
Most people would consider a Ferrari to be more desirable than a Toyota, yet Toyota sells many magnitudes more cars than Ferraris because Ferraris are out of reach for most consumers. If money were no object, many more people would own Ferraris in lieu of Toyotas (but not all, given that Toyotas may be more practical, more reliable, easier to maintain, etc.).
But that's just it. "Premium" is a subject term. I’ve used both (you mean Android, right? there's other platforms) and found that Android is garbage. So I'm paying good money for a good product. You're free to disagree about the quality but don't tell me I'm brainwashed without offering to pay for a psychiatric evaluation.
I suspect that this is a motte and bailey trick. Users of the iPhone claim that they use a better product, where by better they mean "objectively better", but when challenged on what it is exactly that makes it so much better, retreat to, "Well it's just my preference", and then as soon as the critics say, "That's fine if it's just your preference, but recognize that you're paying a massive tax for what you've admitted is just a subjective preference," they move back to, "Apple makes better products so they make more money." As if it's some kind of objective truth, even though they've admitted that it's not.
"People pay premium for a premium product" doesn't signify to me a subjective difference. Especially when it's used to argue that the premium paid has nothing to do with Apple's branding, an objective and extremely common reason that people pay premium prices for products that are objectively identical to their competitors.
Premium products usually cost more to make justifying the price. The point being made is that the cost to manufacture the iphone isn't any more than say an android device, so your just paying apples exclusivity tax.
It's probably a mix, they have only a few phones so they're easy to understand ("I have the bigger iPhone from last year" or "I have the HTC One M9" - the former is easier to remember and understand for non savvy people), and better brand recognition - despite being expensive is HTC considered luxury like Apply is?
This is true, fewer models make buying easier. Plus if you buy the current generation you are getting "top of the line", last generations still on sale is still usable.
Plus with just 2-3 models apple only has to pay for engineering and designing 2-3 models. Plus it saves on the software testing (which despite that still is a bit buggy).
As long as your use-case meshes with apples things are good.
"When Jobs returned to Apple in 1997, it was producing a random array of computers and peripherals, including a dozen different versions of the Macintosh. After a few weeks of product review sessions, he’d finally had enough. “Stop!” he shouted. “This is crazy.” He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. “Here’s what we need,” he declared. Atop the two columns, he wrote “Consumer” and “Pro.” He labeled the two rows “Desktop” and “Portable.” Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be canceled."
I'd consider the HTC One series and the new Galaxy S6 to be luxury phones on par with the iPhone or even better in some respects. The build quality and refinement is top notch.
All the money is in the flagship phones. If Apple has a good year for flagships (like finally releasing larger phones), and the others have a bad year (like the underwhelming Galaxy S5), Apple is going to make most of the money.
Apple captured the top 10% of world's population in terms of discretionary income, and so they are making massive profits. Their key demographic is well-to-do in developed countries and rich in developing/middle-income countries. There is a NYU Professor who mapped iOS and Android devices, and the map of LA showed really rich parts dominated by IPhone.
I am not sure if you are talking about the same but this may be the source[1]. Also the blog discusses about the relation between device usage to the degree of affluent neighbourhood[2].
Apart from Apple, the other company that was doing well at capturing profit from Android phones was Samsung -- e.g. this link from 2012 when the S2/S3 were selling well [1].
I believe the rise of Apple's profit share correlates with the rise of cheaper Chinese phone manufacturers like Xiaomi who operate on much thinner margins than Samsung.
Post-Xiaomi, a potential Samsung buyer could think about a cheaper replacement -- functionally Xiaomi is still Android, after all. Sure, an Apple owner can "go Android" too, but imho p(Samsung to Cheaper Android) > p(Apple to Android).
Perhaps it's related to the distribution channels. Apple sells through their stores and website, where they must take in a significantly better portion of the sale than through sales by carriers.
Google sells through a website, but I'm not aware of other manufacturers selling direct to consumer like this.
And that kids is what you get when you deal with carrier update plans for your devices, allow bundling of crapware with the phones and do your best to kill your operating system with fragmentation ...
A political decision that was bad is keeping on giving.
The point stands. People who have a choice (have enough money) choose iPhone rather than allow crapware and not having access to timely updates. I am very pissed with Samsung for not upgrading my Android from 4.4.2 yet. I used to be an iPhone user and while using iPhone I didn't have problems upgrading my phone to the latest version.
But there are "pure Android" options (e.g. Nexus and Moto X) that get timely updates that don't have any of those problems.
However, even those great phones still have the problem of having to compete against one another, and there is very little differentiation since Google owns the experience. I get some key innovations on Moto X that I don't get on iPhone (the ability to redden the screen at night is key for me, plus nice things like automatically detecting when you're driving so incoming texts and voice calls are read to you), but Moto X still has to compete with other high end Android devices so they are limited in the premium they can charge.
> The point stands. People who have a choice (have enough money) choose iPhone rather than allow crapware.
Not all people, I could easily afford an iPhone yet I stick with my Nexus 4 (which is currently Android 5.1.1 and noticeably quicker than 4 was on the same phone), it does everything I want from a smartphone and was a third the price of the equivalent iPhone at the time.
This is about Apple's massive profit margins, not some vendors inferior ecosystem which still does a decent job of making billions.
North America is accustomed to overpaying for their mobile phones and services so much that they can get the most expensive device for next to nothing because they sign a 2 year contract with a telecommunications provider who's plans are nothing short of gouging.
Now the real question is, how come no one is competing with iPhone dollar wise? I would love to see someone come out with a top-end $900 Android phone that is as stunning as an iPhone. It seems Android hardware vendors are more tuned in to bloating the OS with gimmicky features rather than creating tier 1 hardware.
Isn't this similar to the PC market? The beige boxes became a commodity, and all profits went to Intel and Microsoft. Dell, Compaq, Gateway, HP, etc. all barely made money in the consumer market. How will Samsung, HTC, et. al differentiate their devices?
Not exactly. The profits went to Intel and Microsoft because they were figuratively selling ALL the computers. Apple is gobbling the profits in a different way.
Samsung/HTC/others aren't failing to make money because their products aren't differentiated, it's because they're selling large numbers of low-end, low-margin products. The question is how they can compete with Apple on the high-end. Nobody's managed to do that.
Is this a surprise? The i-Sheep hardly ever pay retail, Apple's success is its ability to convince the phone companies to subsidize their phones more than the others, and receive larger kickbacks on the data plans
None of the other companies have a repeatably successful flagship phone that comes anywhere close to the iPhone in terms of brand recognition and prestige.
Some might argue the Samsung Galaxy, but the image associated with the galaxy is not one of luxury, but of practicality and a sacrifice in usability in exchange for for customization; the general Android vs. IOS argument.
Luxury breeds profit by turning users into silent evangelists/role models. Combine this with Apple's extremely strong ability to [1] set prices (Android is not a direct competitor, it's a whole different marketplace with its own internal competition) and [2] force costs onto partners (who wouldn't want to work with Apple and see that volume of business with those nice margins?) and it's no surprise that the iPhone is destroying competition on the profitability metric.
But roymurdock's point about Android not really being a direct competitor to iPhone is pretty much true. It is EXTREMELY rare, outside of the tech/developer set, for someone who has an iPhone to consider switching to Android, especially once they have a decent app investment.
I see a lot fewer iPhones among the non-tech/developer set than I used to. A lot of them are former iPhone users who have switched for one reason or another. I'm not saying they are a majority (they are not), but it is far from rare.
I would still argue that Android does not compete directly with IOS. People who are purchasing the iPhone are buying into more than just a phone: they are buying into the Apple lifestyle and joining the iPhone/Macbook/Apple Store experience.
People who are purchasing the S6 aren't buying into any lifestyle as far as I can tell. Maybe they'll share a common bond with some other S6 users, but I wouldn't call the Samsung ecosystem (what is the Samsung experience even?) luxurious. It takes more than just one product to build luxury and desirability.
In this case desirability is tied to fashion, people buy an iPhone because they see other people with an iPhone.
None of the Android phones has ever really gotten the same cachet that the iPhone does (Samsung nearly got it right with the S3) but it's down to perception and marketing.
In terms of device capability Android phones are considerably higher spec and just as usable (5.x is a big improvement) but it doesn't really matter, fashion and marketing wins out.
You see this in other areas, Sennheiser headphones are demonstrably higher quality (in sound and construction) than "Beats by dre" but if the difference is small enough then fashion wins out again.
... and yet, with all that horsepower, they still stutter and lag like crazy. An iPhone might be a less powerful computer, but you wouldn't know it from the UX (if you are upgrading every 2 years and running the iOS release that was designed for your phone - running too many versions ahead can produce a similar experience).
My Nexus 4 doesn't stutter or lag and it's two generations back, other manufacturers do seem to have more issues depending on what they did to the stock ROM.
I guess it's different for different people. My wife's Nexus 5 that she purchased a couple of months after I got my iPhone 4S has held up much, much better than the iPhone did. I was so frustrated with how laggy and crash-prone my iPhone was (especially next to my wife's still-awesome Nexus) that I ended up buying a G4.
It may be worth noting that the Nexus 5 came out more than two years after the iPhone 4S (Oct 31, 2013 vs Oct 14, 2011), and as of now it hasn't even been 2 years since the Nexus 5 was released.
That said, it has been less than 4 years since the iPhone 4S was released; they shouldn't be failing yet, and that reflects poorly on the iPhone (as well as iOS) in your case. However, I'm also not yet convinced that the Nexus 5 will be operating well in late 2017 - that's yet to be determined.
Interesting, I didn't realize that. We bought both of them new from the carrier a few months apart. We each just asked for an inexpensive model of the respective brands, so I guess that is largely down to the Nexus 5 being crazy cheap and Apple keeping the 4S in circulation for a long time.
I see people switch or contemplate switching pretty regularly. There are a lot of people that don't really buy into the whole Apple experience or even run mixed environments (iPad + Android smartphone being the most common one that I see).
>People who are purchasing the S6 aren't buying into any lifestyle as far as I can tell.
Nothing wrong with it, of course, but the perception that you "aren't buying into a lifestyle" is EXACTLY the lifestyle you're buying into.
Maybe not S6 users in particular, but buyers of high-end Android phones in general absolutely are: that of being too smart for Apple and better than all those iSheeple. That's just as much a part of the Android experience as cult membership is of the iOS experience.
I don't understand why people say that IOS is more usable than android. Android phones tend to have a much better "phone" usability in my mind. For instance, I can go to my recent calls on an android device and just swipe to the right to send a text to someone. In IOS, I have to click the i icon to go to that contact, click send a message, then click the phone number. Or the built on "swype" keyboard on my old note 2 is much better than the default apple keyboard on my current i6+. Really, the only thing that I would call noticeably better on my iphone over my note 2 is the camera functionality.
I got a nexus 6 last night-simple things like pinch to zoom and animations tend to stutter, tapping small touch targets in chrome is very hard (iOS has a nice assist there), Firefox freaks out and fails to render HN with nontrivial frequency, etc. Android does seem to support more customization but iOS but iOS's existing features actually work.
I have none of these issues on my Nexus 6. Firefox on Android is rather buggy, but that's not the fault of the OS. A real Firefox on iOS doesn't exist and likely never will other than the Firefox-ish browser they're working on that will be stuck using Mobile Safari for rendering.
This is called a "Winner takes it all market". What is interesting is that smartphone became such a market considering the profits, because when considering the revenue it is much more fragmented.
This quote stands out the most, "One key to Apple’s profit dominance: higher prices. Apple’s iPhone last year sold for a global average of $624, compared with $185 for smartphones running Android"
Literally Apple can command a 3x price premium in the same product category. I'd like to see Android flagships broken out from this number, however.
The issue of Apple profit dominance is pretty complex and I'm sure there are really smart people looking to understand and attack it.
As a consumer, I'm glad other companies aren't extracting as much profit this way. I'm quite happy with my Moto G which I got for a small fraction of what I would have paid for an iPhone, and it's just as good for my use.
That average price includes phones of low specs and high specs, while Apple only does high(ish) spec. The Samsung Galaxy is similarly priced to the iPhone.
There is plenty of price premium built in there though, that's for sure.
Apple only does premium phones whereas Samsung et al do premium as well as mid-market as well as down-market devices.
The iPhone is basically always more expensive than the equivalent Samsung Galaxy device. The Galaxy S6 is currently $549 for a 32GB version with a high-res 5.1" QHD screen (better than 1080p). The semi-equivalent iPhone 6 is $649 for a 16GB version with a mid-resolution 4.7" screen (approximately 720p) is a full $100 more expensive than the S6. Upgrading the iPhone to the next memory size up (64GB) adds $100. Upgrading to a high def screen (6 Plus with a 5.5" 1080p screen) is another $100.
One big reason Apple makes so much more profit than everyone else is that they sell lesser specced phones for a higher price than the competition's higher specced phones. Most people think of the iPhone 6 as being equivalent to the Galaxy S6 despite having a smaller, lower resolution screen, 1/2 the storage space for music and pictures, slower processor, etc.
It helps that most consumers can "sweep" the price of their phone under their 2 year service contract. Especially considering that cost of services don't fluctuate when not in a contract, or when you get a cheaper phone.
Damn, I wish the FCC or CRTC would put the ban hammer down and force mobile service contracts to be adjusted based on the retail price of the phone. I just don't understand how they stand to gain so much when a customer chooses to get a cheaper device.
I see Nokia got around 2/3 the profits in 2007 when the iPhone started. I guess the profits tend to flow to those who have the best designed phones. I wonder if it'll still be Apple in another 8 years.
But 2007 was really before the whole app ecosystem took off. For anyone who has invested a significant amount in apps, there are much higher switching costs now than there were in 2007. Plus, besides just the actual monetary costs, people USE their smartphones MUCH MUCH more than in 2007, so there is a much greater cost in just having to learn a different OS.
The costs for switching isn't that high. Most people don't spend a lot of money on apps. More than half of the money is spent on games anyway. These are played for a while and then new games are purchased.
The handful of productivity apps won't exceed 20$ for the vast majority of users.
I buy lots of apps and games. Every time I switched platforms (webOS -> Android -> iPhone -> WP), I spent around 15$ to cover my initial needs. Compared to what I pay for a phone, it's negligible.
I probably spent more on Palm OS apps than I ever have on my newer smartphones. I remembering buying CD's for $10-$20 to get stuff like word processors and dictionaries.
8) They have fewer products and so can drive down the cost of manufacturing.
9) They are run by smarter people not marketing departments.
10) They do all of the above TOGETHER and all of the above support each other. If they start missing one the others start to be less desirable/possible too.
1) Who else had 60fps smooth UI on a phone/tablet before Apple?
9) Marketing drives gimmicky features and empty specs - Samsung's hover touch and gaze detect that is off by default because using them is a pain, 4 slow cores instead of 2 fast ones, OS defaults that favor energy burning features (location services, true multi-tasking), screens with higher res that are indistinguishable to retina screens but with worse color profile.
Some companies have fixed some of those pain points with their recent models, but it's too little too late for the existing consumer base who buys flagship products.
1) What are you on about? Who said anything about 60fps UI? OP mentioned physical keyboards. That was what my comment was directed towards. There were touchscreen only phones before iPhone that didn't have physical keyboards.
60 fps... That's like jumping in and saying, who had true HD phones first? We could spend all day telling each other who had what before who.
But the huge, smug grin on her face was probably telling...
I tend to have Apple devices nowadays but I have to say this is a bit concerning. One would hope that there's enough money to go around to encourage innovation and competition. If it stays this dominant for one vendor, it surely will cause things to stagnate.
> If it stays this dominant for one vendor, it surely will cause things to stagnate.
It might, although I could also see the opposite: if everyone is doing okay, selling enough to get by and grow with the market, there might be less push to get out there and try new things. Instead, companies would compete on price, on advertising, on superficial design. But if there are lots of companies struggling to find a foothold, then they'll be lots of motivation for trying new things, in search of anything that'll work, and give them an advantage. There's no margin for them to be complacent.
The headline makes it sound like Apple is doing better compared to Samsung than it really is -- as the article details, Samsung makes 15% of the profits. Apple and Samsung's share of the profits combined exceeds 100% because some manufacturers are losing money.
Yeah, it's an odd stat. For instance, if someone new enters the phone market, and spends a ton of money and loses a LOT of money, the total profits for the industry go down, and if Apple makes the same dollar profit as the year before, their profit share number goes up. If the next year, that new competitor goes out of business, their loss is not included in the total profits of the industry, and Apple's share of the profits goes down.
So you could make a pretty convincing argument that this profit percentage number is kinda meaningless. Why not just look at gross profit? Dollars compare to dollars pretty well.
The article also notes that Microsoft took a huge loss on Windows Phone writing down the acquisition of Nokia. That's not a loss they're going to repeat -- Windows Phone may well continue to lose money, but not that level of money.
> For instance, if someone new enters the phone market, and spends a ton of money and loses a LOT of money, the total profits for the industry go down, and if Apple makes the same dollar profit as the year before, their profit share number goes up.
I think it said that the 92% figure was based on the top 8 manufacturers, which are mostly stable in terms of who they are from year to year.
What a curious thought, that i seem to see repeated over and over.
What exactly is more expensive about the apple product here:
Apple iphone 6 - $649.92 full retail price
Samsung galaxy s6 edge - $779.76 full retail price
LG G4 - $599.76 full retail price (on sale)
HTC One M9 - $649.92 full retail price
This puts the iphone as the second least expensive flagship phone currently available, prices are all straight from tmobiles site.
If we expand the storage and bump to the top models:
Samsung galaxy s6 edge - $959.83 full retail price
Apple iPhone 6+ - $949.99 full retail price
Was your point only that everyone who buys a flagship smartphone is paying 'waaay too much' for their cellphone?
If your point was that Apple's smartphones are somehow the most expensive ones, then you are simply incorrect; this is the belief i was trying to counter with these numbers.
I paid $1 for my Galaxy S5 upgrade, with a two year contract extension. Essentially I got the phone for free because I planned on keeping my carrier for the next two years anyway. That cost was subsidized by my carrier, and probably indirectly by Samsung also. I've never paid sticker price for an Android phone, and I don't know anyone who has.
"One key to Apple’s profit dominance: higher prices. Apple’s iPhone last year sold for a global average of $624, compared with $185 for smartphones running Android, according to Strategy Analytics. "
You can't say the same when buying an iPhone. There's more complexity to this than sticker price. The numbers don't like, Apple pulls in 92% of the market's profits while selling less than 20% of the phones. Use logic and tell me what that means.
>Was your point only that everyone who buys a flagship smartphone is paying 'waaay too much' for their cellphone?
Your statistic only shows that android serves all market segments, and does nothing to show that Apple phones are more expensive than the phones with which they compete. Yeah the Moto G is less expensive than the iPhone, if thats your point the discussion should stop there, because we are comparing a budget segment phone to a flagship segment phone.
>I paid $1 for my Galaxy S5 upgrade, with a two year contract extension. Essentially I got the phone for free because I planned on keeping my carrier for the next two years anyway. That cost was subsidized by my carrier, and probably indirectly by Samsung also. I've never paid sticker price for an Android phone, and I don't know anyone who has.
Ok, so lets do a price comparison that way
With a 2-year contract on verizon (couldnt find contract prices on tmobile):
LG G4 - $199.99
HTC One M9 - $199.99
Samsung Galaxy s6 - $199.99 (after $50 mail in rebate)
Samsung Galaxy s6 edge - $299.99 (after $50 mail in rebate)
iphone 6 - $199.99
iphone 6+ - $299.99
The galaxy s 5 is the same price as the 5S, both last years flagships
Because they are buying cheaply made, cookie-cutter phones packaged into shiny aluminum bodies made en masse at Foxconn, often with severe disregard for safety.
There are endless issues with iPhones(screens, wifi, battery, cameras, etc), but in USA they at least will replace it withouth hassle. (And often "refurbish" it and sell it in "less important markes"). Possibly that's why outside few countries iPhones are nearly non-existent. They simply do not stand up to competition, given mid-range features, extreme price and obstructionism to replacing defective units).
Apple and Beats by Dr. Dre fit very nicely.
I am surprised. I have friends and family members with iPhone 6 and 6+ and they are very nice but I think my Note 4 is even better. The quality of the videos and pictures I take are unbelievable. The Android OS is configurable and easy to use.
I do have a theory: I see some people install hundreds of crappy apps on the Android devices; perhaps that hurts performance? I use my Androids as is, except for a very small number of additional apps.
Because of Apple stores, iPhones have an enormous amount of good support. In Manhattan there are 6 stores including one open 365/24/7. You could make a Genius Bar appointment at 3 AM if you wanted. The people are nice and the support is good including 1-800-MyApple.
I use iPhone's FaceTime Audio a lot domestically and internationally since it has better audio quality (HD audio) then the regular network. Verizon is now offering HD audio but only on their newer phones and only within the Verizon network.
On the iPhone 6, FaceTime Video over cellular uses half the bandwidth of previous models.
So why are so many companies jumping in if there were not much profits? I see variety of low end Android sold in India, surely they would exit if they don't make a profit.But many are now upping the specs and releasing good quality mobiles. I checkout out a 400ppi mobile with Android 5 which seemed better then my N4. It seems at least in India the mid to high level mobiles sales might fall back.
You really have to wonder why any one would even want to consider getting into this business at this point. It's a blood bath and there is only one winner it seems.
125 comments
[ 3.0 ms ] story [ 194 ms ] thread[Edit] Wow, everybody, I meant more desirable as in; people are willing to pay more. I know FTA that they are only 20% by volume.
Is is that not enough people choose the flagship Android devices to move the needle? I'm genuinely curious/asking because it seems/appears there's some parity (price) between the current flagship Android devices and Apple's newest.
Considering the demand for iPhones a few years ago I'd be amazed if this wasn't the case, I suspect the carriers also pay a chunk of the advertising if it's an exclusive deal.
This is also why the Apple app store sells so well compared to the Google Play store. People with crap low end Android phones struggle to run many apps, and their phone didn't come with enough storage for them.
My brand new iPhone 6 only has 12 GB of usable storage. I'm currently using more than half with only a small selection of apps, photos and music. IMHO that's pretty crap - and I paid a premium for it (doh!)
My thought is, if Apple is pulling all of the profits then they are the flagship to buy if someone is in the market for a flagship phone. Otherwise, if someone is buying on price it is Android all the way.
They make more desirable phones because they make iOS.
People don't so much care about the iPhone; they want iOS and the safety, convenience, and integration with the Apple software ecosystem.
Apple has leveraged this into a hugely profitable position by making the only hardware supported by this OS.
The iPhone is crap when evaluated on battery life or camera quality, for example.
It's software that's eating the world.
If iOS had those things, I think I'd try switching, just to get something new.
Also, since when did rationality enter the discussion? A beloved wants diamonds so their partner buys them. But diamonds are not worth anywhere near what's commonly paid for them.
There is a far mix of rational/irrational behavior in most luxury purchases--it's not an Apple exclusive trait.
Want an iPhone, you'll buy THE iPhone for whatever Apple wants to charge.
Want an Android phone, you'll select from a zillion basically identical competitors all more or less profit free (because competitor A can't extract an extra 5% profit if that would drive 100% of competitor A's sales to sellers B thru Z)
This shows the fallacy of "the smartphone market", there's the non-competitive iphone market with about 20% sales and the hypercompetitive confuseopoly market the other 80% buy into.
This is not a rhetorical question: I could imagine a study that would explore the influence of brand vs. size, density, materials, etc.
"People pay premium for a premium product" doesn't signify to me a subjective difference. Especially when it's used to argue that the premium paid has nothing to do with Apple's branding, an objective and extremely common reason that people pay premium prices for products that are objectively identical to their competitors.
Plus with just 2-3 models apple only has to pay for engineering and designing 2-3 models. Plus it saves on the software testing (which despite that still is a bit buggy).
As long as your use-case meshes with apples things are good.
Laptops are horrible at this, do I want the MX50S, MX50X, MX51, MX51S and on and on.
With Apple it's Macbook, Macbook Pro, Macbook Air.
It's a smarter strategy and I wish more manufacturers did it.
"When Jobs returned to Apple in 1997, it was producing a random array of computers and peripherals, including a dozen different versions of the Macintosh. After a few weeks of product review sessions, he’d finally had enough. “Stop!” he shouted. “This is crazy.” He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. “Here’s what we need,” he declared. Atop the two columns, he wrote “Consumer” and “Pro.” He labeled the two rows “Desktop” and “Portable.” Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be canceled."
https://hbr.org/2012/04/the-real-leadership-lessons-of-steve...
[1]. https://www.mapbox.com/labs/twitter-gnip/brands/#5/36.280/-2...
[2]. https://www.mapbox.com/blog/visualizing-3-billion-tweets/
Samsung alone outspends Apple on marketing. Samsung needs to continuous battle against the other Android phones.
If you want an Apple phone either you pay what they are asking or you don't get it.
I believe the rise of Apple's profit share correlates with the rise of cheaper Chinese phone manufacturers like Xiaomi who operate on much thinner margins than Samsung.
[1] http://www.digitaltrends.com/mobile/how-apple-and-samsung-co...
Post-Xiaomi, a potential Samsung buyer could think about a cheaper replacement -- functionally Xiaomi is still Android, after all. Sure, an Apple owner can "go Android" too, but imho p(Samsung to Cheaper Android) > p(Apple to Android).
Google sells through a website, but I'm not aware of other manufacturers selling direct to consumer like this.
Most recent example: My nexus 7 periodically does something that kills the battery, and the touch/tap responsiveness is quite laggy.
I could go on and on. Apple devices have significantly better usability and many fewer warts than Android devices.
IMHO the only people who think the two platforms are on par are people who look only at hardware specs.
A political decision that was bad is keeping on giving.
Apple victory was given to them
However, even those great phones still have the problem of having to compete against one another, and there is very little differentiation since Google owns the experience. I get some key innovations on Moto X that I don't get on iPhone (the ability to redden the screen at night is key for me, plus nice things like automatically detecting when you're driving so incoming texts and voice calls are read to you), but Moto X still has to compete with other high end Android devices so they are limited in the premium they can charge.
Not all people, I could easily afford an iPhone yet I stick with my Nexus 4 (which is currently Android 5.1.1 and noticeably quicker than 4 was on the same phone), it does everything I want from a smartphone and was a third the price of the equivalent iPhone at the time.
The selection is low, but the Nexus lines have served many well. I'm super excited to see some new phones later this year. (i hope)
I prefer Androids for 2 reasons:
1. Unlocked bootloader 2. Root 3. Screen size
But the fragmentation of the ecosystem since 2.2 still hurts (and seems like 4.2 is the new gingerbread)
North America is accustomed to overpaying for their mobile phones and services so much that they can get the most expensive device for next to nothing because they sign a 2 year contract with a telecommunications provider who's plans are nothing short of gouging.
Now the real question is, how come no one is competing with iPhone dollar wise? I would love to see someone come out with a top-end $900 Android phone that is as stunning as an iPhone. It seems Android hardware vendors are more tuned in to bloating the OS with gimmicky features rather than creating tier 1 hardware.
Samsung/HTC/others aren't failing to make money because their products aren't differentiated, it's because they're selling large numbers of low-end, low-margin products. The question is how they can compete with Apple on the high-end. Nobody's managed to do that.
Some might argue the Samsung Galaxy, but the image associated with the galaxy is not one of luxury, but of practicality and a sacrifice in usability in exchange for for customization; the general Android vs. IOS argument.
Luxury breeds profit by turning users into silent evangelists/role models. Combine this with Apple's extremely strong ability to [1] set prices (Android is not a direct competitor, it's a whole different marketplace with its own internal competition) and [2] force costs onto partners (who wouldn't want to work with Apple and see that volume of business with those nice margins?) and it's no surprise that the iPhone is destroying competition on the profitability metric.
People who are purchasing the S6 aren't buying into any lifestyle as far as I can tell. Maybe they'll share a common bond with some other S6 users, but I wouldn't call the Samsung ecosystem (what is the Samsung experience even?) luxurious. It takes more than just one product to build luxury and desirability.
None of the Android phones has ever really gotten the same cachet that the iPhone does (Samsung nearly got it right with the S3) but it's down to perception and marketing.
In terms of device capability Android phones are considerably higher spec and just as usable (5.x is a big improvement) but it doesn't really matter, fashion and marketing wins out.
You see this in other areas, Sennheiser headphones are demonstrably higher quality (in sound and construction) than "Beats by dre" but if the difference is small enough then fashion wins out again.
More cores != better usable specs.
If you prefer security and privacy, there's a strong case for iOS.
If you prefer day-of-release software updates, there's a strong case for iOS.
If you prefer robust photography solutions, there's a strong case for Apple's camera hardware and software.
If you want to create audio, there's a strong case for the low latency of Apple's stack.
Android phones equivalent to the price of an iPhone have higher resolution screens, more storage and RAM.
Android phones half the price of the iPhone have equivalent screens, storage and RAM.
I have Nexus devices so I get day-of-release software updates (even my Nexus 7 2012 is running 5.1.1)
I couldn't care less about photography solutions or audio so that really doesn't apply.
Privacy, agreed, Android is a data hoover out the box.
That said, it has been less than 4 years since the iPhone 4S was released; they shouldn't be failing yet, and that reflects poorly on the iPhone (as well as iOS) in your case. However, I'm also not yet convinced that the Nexus 5 will be operating well in late 2017 - that's yet to be determined.
Nothing wrong with it, of course, but the perception that you "aren't buying into a lifestyle" is EXACTLY the lifestyle you're buying into.
Maybe not S6 users in particular, but buyers of high-end Android phones in general absolutely are: that of being too smart for Apple and better than all those iSheeple. That's just as much a part of the Android experience as cult membership is of the iOS experience.
edit: agreed with sibling comment that camera appears to be the only technically superior offering.
Literally Apple can command a 3x price premium in the same product category. I'd like to see Android flagships broken out from this number, however.
The issue of Apple profit dominance is pretty complex and I'm sure there are really smart people looking to understand and attack it.
There is plenty of price premium built in there though, that's for sure.
The iPhone is basically always more expensive than the equivalent Samsung Galaxy device. The Galaxy S6 is currently $549 for a 32GB version with a high-res 5.1" QHD screen (better than 1080p). The semi-equivalent iPhone 6 is $649 for a 16GB version with a mid-resolution 4.7" screen (approximately 720p) is a full $100 more expensive than the S6. Upgrading the iPhone to the next memory size up (64GB) adds $100. Upgrading to a high def screen (6 Plus with a 5.5" 1080p screen) is another $100.
One big reason Apple makes so much more profit than everyone else is that they sell lesser specced phones for a higher price than the competition's higher specced phones. Most people think of the iPhone 6 as being equivalent to the Galaxy S6 despite having a smaller, lower resolution screen, 1/2 the storage space for music and pictures, slower processor, etc.
Damn, I wish the FCC or CRTC would put the ban hammer down and force mobile service contracts to be adjusted based on the retail price of the phone. I just don't understand how they stand to gain so much when a customer chooses to get a cheaper device.
(http://9to5mac.com/2015/07/13/apple-smartphone-profit-share/)
The handful of productivity apps won't exceed 20$ for the vast majority of users.
I buy lots of apps and games. Every time I switched platforms (webOS -> Android -> iPhone -> WP), I spent around 15$ to cover my initial needs. Compared to what I pay for a phone, it's negligible.
Apple invests only a small proportion of its profit into R&D. http://appleinsider.com/articles/15/01/28/apples-rd-spending...
Samsung invests more absolutely and more proportionally. http://www.strategyand.pwc.com/global/home/what-we-think/glo...
Of course, much of an iPhone is also made by Samsung. Not sure why creaming off profits is considered a good thing or sustainable . . .
1) Timing/Being First (remeber before apple when everything had a hardware keyboard?)
2) Branding and Advertising
3) Product Hardware (features are all just right - camera, battery, performance, screen etc.)
4) iOS + App Store (no-one wants to change their apps)
5) New features first (consistently first with new features - iphone, retina, gorilla glass, siri, touch id)
6) Android + whatever seems inferior (and largely is)
7) They charge lots more money
8) They have fewer products and so can drive down the cost of manufacturing.
9) They are run by smarter people not marketing departments.
10) They do all of the above TOGETHER and all of the above support each other. If they start missing one the others start to be less desirable/possible too.
... this is boring...
9) Wait, what? Did you really just say that?
If Samsung had Tim Cooke in charge they would produce much better phones. Not even slightly contovertial IMO.
You left out point 10 which was the whole point of the comment. Glad you liked it ;-)
Some companies have fixed some of those pain points with their recent models, but it's too little too late for the existing consumer base who buys flagship products.
60 fps... That's like jumping in and saying, who had true HD phones first? We could spend all day telling each other who had what before who.
But the huge, smug grin on her face was probably telling...
I tend to have Apple devices nowadays but I have to say this is a bit concerning. One would hope that there's enough money to go around to encourage innovation and competition. If it stays this dominant for one vendor, it surely will cause things to stagnate.
It might, although I could also see the opposite: if everyone is doing okay, selling enough to get by and grow with the market, there might be less push to get out there and try new things. Instead, companies would compete on price, on advertising, on superficial design. But if there are lots of companies struggling to find a foothold, then they'll be lots of motivation for trying new things, in search of anything that'll work, and give them an advantage. There's no margin for them to be complacent.
So you could make a pretty convincing argument that this profit percentage number is kinda meaningless. Why not just look at gross profit? Dollars compare to dollars pretty well.
I think it said that the 92% figure was based on the top 8 manufacturers, which are mostly stable in terms of who they are from year to year.
What exactly is more expensive about the apple product here:
Apple iphone 6 - $649.92 full retail price
Samsung galaxy s6 edge - $779.76 full retail price
LG G4 - $599.76 full retail price (on sale)
HTC One M9 - $649.92 full retail price
This puts the iphone as the second least expensive flagship phone currently available, prices are all straight from tmobiles site.
If we expand the storage and bump to the top models:
Samsung galaxy s6 edge - $959.83 full retail price
Apple iPhone 6+ - $949.99 full retail price
Was your point only that everyone who buys a flagship smartphone is paying 'waaay too much' for their cellphone?
If your point was that Apple's smartphones are somehow the most expensive ones, then you are simply incorrect; this is the belief i was trying to counter with these numbers.
edit: formatting
"One key to Apple’s profit dominance: higher prices. Apple’s iPhone last year sold for a global average of $624, compared with $185 for smartphones running Android, according to Strategy Analytics. "
You can't say the same when buying an iPhone. There's more complexity to this than sticker price. The numbers don't like, Apple pulls in 92% of the market's profits while selling less than 20% of the phones. Use logic and tell me what that means.
>Was your point only that everyone who buys a flagship smartphone is paying 'waaay too much' for their cellphone?
Your statistic only shows that android serves all market segments, and does nothing to show that Apple phones are more expensive than the phones with which they compete. Yeah the Moto G is less expensive than the iPhone, if thats your point the discussion should stop there, because we are comparing a budget segment phone to a flagship segment phone.
>I paid $1 for my Galaxy S5 upgrade, with a two year contract extension. Essentially I got the phone for free because I planned on keeping my carrier for the next two years anyway. That cost was subsidized by my carrier, and probably indirectly by Samsung also. I've never paid sticker price for an Android phone, and I don't know anyone who has.
Ok, so lets do a price comparison that way
With a 2-year contract on verizon (couldnt find contract prices on tmobile):
LG G4 - $199.99
HTC One M9 - $199.99
Samsung Galaxy s6 - $199.99 (after $50 mail in rebate)
Samsung Galaxy s6 edge - $299.99 (after $50 mail in rebate)
iphone 6 - $199.99
iphone 6+ - $299.99
The galaxy s 5 is the same price as the 5S, both last years flagships
This seems, to me, to be saying that people are overpaying given Apple's huge profit margins.
If the prices are the same to the consumer, and Apple is able to extract greater profit, how is that a poor reflection on the consumer?
I do have a theory: I see some people install hundreds of crappy apps on the Android devices; perhaps that hurts performance? I use my Androids as is, except for a very small number of additional apps.
I use iPhone's FaceTime Audio a lot domestically and internationally since it has better audio quality (HD audio) then the regular network. Verizon is now offering HD audio but only on their newer phones and only within the Verizon network.
On the iPhone 6, FaceTime Video over cellular uses half the bandwidth of previous models.
http://www.phonearena.com/news/New-Apple-iPhone-models-use-h...
If anyone else is curious, this does a decent job of explaining it. http://www.digitaltrends.com/computing/h-265-hevc-encoding-e...