Comment Re:Sounds like... (Score 1) 232
Spoken like a non-parent.
Man, I wish I hadn't used up all of my mod points yesterday.
Spoken like a non-parent.
Man, I wish I hadn't used up all of my mod points yesterday.
Well, the sources I'm finding are people who estimate costs as part of their jobs.
You give no reason for me to believe what you say, and no method on how you got your estimates. You're literally, "some guy on the Internet who said."
So, do you work in the electronics/consumer-products manufacturing business, or are you just some guy who surfs websites?
Most teachers get pensions. That often means half pay for the rest of your life after working 20 years. That is a huge savings.
Play with this spreadsheet. Assume a teacher earns $40k/year from age 25 to 45 and pulls $20k/year in pension from age 45 to 80. What salary and savings rate would be required for someone to have the same standard of living in the private sector without a pension?
First of all, starting teacher salaries are nowhere near $40K.
Second, where do you get this idea that teachers are retiring at 45 and living the high life?
Most important, you have to realize that contributions to the pension plans are deferred benefits paid in lieu of immediate salary. In other words, when the retiree collects a pension, he is collecting from the money that was put aside for him. The total compensation package is cash salary plus pension contribution.
The other option, of course, is for the employee to be given the pension money in cash up front and then he can invest it how he wants (or spend it, or whatever). Or, more likely, the employee will be told, "We are no longer contributing to your pension, and we are not giving you the pension contribution to you in cash," which is, no matter how you slice it, a significant reduction in compensation.
As for your BOM argument, the standard 20% only is component costs and does not include assembly which adds to overall manufacturing costs.
Assembly costs absolutely ARE included in the bill-of-materials cost.
And not every product is "standard.". Companies want their products to have 20% BOM and 30% margin but it doesn't always happen.
While there may be special cases, increasing the BOM cost -- read: reducing margin -- is frowned upon, and doesn't happen unless there's a compelling reason.
I am not an Apple historian. But from what I've seen, Apple marks their product up 100% from what it costs them to make.
And you have no idea about how consumer products are priced. The standard is that the bill of materials cost -- what it actually costs for the parts, PCB, enclosure, display, everything to build a product and put it in the shrink-wrapped box, ready for retail sale -- is 20% to 25% of retail list price. Which means that the $500 Widget -- made by any vendor -- costs $100 to build. So, in effect, the profit when sold at retail is, what, do the math, 250%? But don't forget that the manufacturer PAYS FOR EVERYTHING out of the difference between wholesale price and bill of materials cost: salaries, benefits, facilities, everything.
Did you even do a basic google search on the cost of an ipad? I just did, and it came up with cost estimates between 219$ to 350$.
And the iSuppli estimate is way too high. Don't believe it.
I'd guess that the hardware is subsidized by the increase in turn over from iTunes and the App Store - probably selling the iPad at close to cost price knowing that they'll make the money back through use.
Your guess is wrong.
Apple is probably selling them at a lower profit margin because they generate revenue through app sales.
Utterly wrong.
Yeah this is really interesting. Especially because Apple are known for overpricing things. Does anyone else sort of get the feeling that they are losing money on the sales and making it back in app store? If they were doing that - it's a completely different to their usual strategy.
Actually, Apple apparently has a healthy profit margin in the iPads. iSuppli's teardown of the original iPads estimates the costs of materials + Manufacturing at $230 to $346, depending on the model. Of course that does not include R&D, marketing and support costs, and it may be a little "optimistic", but still it suggests that Apple could actually charge less for the same products and still make a profit.
You don't understand product costs. R+D, marketing, salaries, overhead, facilities costs have nothing to do with a product's bill-of-materials cost. NOTHING. So imagine that iSuppli is correct with their $230 BOM cost (they're not). The R+D, etc all comes out of the difference between the BOM cost and the wholesale price. So if a product lists for $500, wholesale might generally be 60% of list ($300), leaving only $70 to pay for everything Apple needs to run its business? Absurd. So the BOM cost is substantially lower, more like $100 to $150. Of course Apple does have their direct sales channels, which cut out the middleman (like Dell) so there is added profit there, but there still is a cost associated with a retail operation.
Using hardware as a funding mechanism to iOS isn't going to last when the chinese OEMs come with Android dogs.
Maybe they'll just follow their phone/computer model and not even try to compete in low-end?
No doubt about that. Competing in the low-end market is a loser's game. None of the low-end vendors last very long, and playing in that market only tarnishes the brand.
> aren't going to tell their huge customer to pound sand
A manufacturer such as Samsung won't allow one customer to take more than around 15% of production. Otherwise they become beholden to that customer.
So at a certain point they will indeed tell Apple to "pound sand".
Nonsense. If Apple, or any other OEM, comes to a vendor with the cash to buy the whole production capacity, guaranteed, the vendor will say "thank you, Mr Customer," because a guaranteed sale always beats hoping someone else will come along to buy your parts.
And yes, there are tons of examples of smaller parts manufacturers selling a device to a large OEM who is their only customer for it, and then that big OEM changes to another device (for all sorts of reasons), leaving that small guy with nothing. But that's not the big guy's problem; the small vendor should have diversified to other products and other customers. (And these small guys are fabless, anyway, so it's not like they have excess capacity going unused.)
>> No one who knows anything about electronics manufacturing thinks this. The $499 16GB iPad, by all estimations, costs under $250 to manufacture.
If it indeed costs about $250 to make, then after R&D and marketing costs... they might be breaking even.
No! You don't get it. The difference between the bill-of-materials and the wholesale cost -- the profit on each unit -- is what pays for salaries, R+D, benefits, facilities, marketing, everything else a company needs to operate. This is why the BOM cost is likely much less than the quoted $250.
No one who knows anything about electronics manufacturing thinks this. The $499 16GB iPad, by all estimations, costs under $250 to manufacture.
Correction: The hardware components and materials that make up the 16GB iPad cost under $250. There's a big difference. (That big difference includes assembly, testing, packaging, shipping, and amortization of design and software development costs.)
Correction: it costs much less than $250 to build a $500 iPad and put it in the retail box. The difference between the BOM cost and the wholesale price is what pays for the engineering (both hardware AND software) as well as everything else necessary for Apple to be in business: facilities costs, salaries for non-engineering staff, marketing, benefits, etc.
I believe he was talking about the cost to actually manufacture/assemble the components. The base components cost something, but so does the labor to put them all together. Over volume, $50-100 doesn't sound unreasonable to add to the cost of $250 for just the parts, for the completed device.
I would guess that it costs about about two bucks to assemble an iPad. Really. It costs Apple $100 to build a $500 iPad and put it in the retail box.
So you're basing your whole assumption that every $499 electronics product only costs at most $100 to make on your company and their products? Did it every occur to you that other products may not have the same cost/profit structure. The variation of component costs alone makes each product different. The iSuppli has estimated an iPad costs $250; however, they are only looking at estimated wholesale costs and some allowance for manufacturing. If a part was more expensive or harder to work with, they don't know. It's a reasonable estimate of the lowest manufacturing cost a product.
iSuppli has no idea what sort of deals Apple has worked with its suppliers. Apple has enough cash to buy parts for production runs in the tens of millions, so variations in components costs are irrelevant. The vendors want Apple's business, so they work hard to get and keep it. Apple (and every other manufacturer) knows to the hundredth of a penny what everything costs.
Obviously, you've not involved in the consumer-products business, otherwise you'd know that bill-of-materials cost that is 20% of retail list is pretty standard.
Actually a $499 electronics product most likely costs less than $100 if not less then $50 to manufacture.
If that was true Sony, Dell, Samsung, and every electronics company should each make hundreds of billions in profit each year based on your estimation of 80-90% margin.
You seem to forget that the product's profit -- the difference between the wholesale price and the bill of materials -- is what pays for EVERYTHING the company needs to run their business: salaries, benefits, facilities, electricity, garbage disposal, local/state/federal taxes, marketing, etc. EVERYTHING.
This is what cracks me up about Internet nitwits who decry profit margins, which said nitwits clearly don't understand. You can't build a $500 product for $450 and expect to stay in business.
"For the man who has everything... Penicillin." -- F. Borquin
