Apple Does NOT Overprice Their Products | Change My Mind

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Apple has a reputation for selling overpriced tech. While their products are quite nice, people often think that Apple stuffs in massive profit margins into each of their products. This is true for many of their meme products like their $1000 monitor stand and their $700 wheels, but in terms of consumer products, Apple is actually quite fair. If we analyze their quarterly report and normalize the numbers to the iPhone 13, we see that Apple only has a net margin of 20% or about $160. Now, are these super competitive margins in the single digits? Absolutely not. But, it's also not the crazy high 30-40% margins that many expect Apple to have. Moreover, most people don't buy iPhones for retail prices. They get it for $100 to $200 off by shopping for deals, going through their carrier, trading in their old phones, buying older generations, and so on and so forth. So, in terms of out-of-pocket cost that makes its way to Apple's pockets, for most people, it's well below $100 per iPhone. This video explains why Apple's consumer-level products are not overpriced, and why Apple's pricing is actually quite fair.

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Timestamps:
0:00 - Apple’s Profit Margin
1:26 - Cost Of iPhone
6:19 - Alternative Modes Of Monetization
7:57 - Higher Cost Of Business
9:41 - Overpriced Products Explained

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Disclaimer:
This video is not a solicitation or personal financial advice. All investing involves risk. Please do your own research.

[_Super_Hans_]

Interesting, I never really thought about it that way. This reminded of the fact that "luxury" fashion brands do exactly the same thing, D&G aren't making most of their money on fur coats that cost thousands of dollars, they're making it on the cheaper stuff, belts, perfumes, wallets which millions of people are buying because it's seen as an expensive brand, but they can still afford it.

Thanks for the perspective.

[monkemode]

Also Apple purposefully makes their products seem expensive for marketing. They don't talk about value for the money, they focus on features and luxury. They know almost no one is going to buy their $700 wheels but that wasn't the point of them, it was to make Apple seem more exclusive.

[MightyJabroni]

Dude, shrinking Apple's relative margin by comparing them to the likes of Facebook, Visa and Google (completely different business models and products) makes little sense. Compare them to other hardware maufacturers and the "Apple tax" becomes pretty much undeniable. Also, how they monetize users via their service periphery is pretty obvious. Namely in the shape of exorbitant repair fees (which are artificially enforced) and the need to have special cabels/adapters in many very mundane use cases.

And in the case of Macbooks, their margin is well higher than 20%.

[tanchienhao]

I think what bugs me about apple is less of their products price but more of their anti-right-to-repair activities like id-ing their batteries, many companies do the same but apple is one of the biggest offenders imo... its really horrible for sustainability :(

[lattice.d]

What you didn't talk about was their ludicrous pricing outside of the US. That contributes to its luxury status around the world simply because they are taxed to death.

[Malte.Research]

The analysis regarding the e.g. „screen stand“ is good:) However margin wise Apple should be compared to other hardware businesses. Also Apples strong ecosystem lock-in effect and its resulting ability to cross- and upsell could then be factored in. In addition Apple only allows downloads via the App Store (taking a solid cut on most transactions) and also puts their other services in a prime position on their phones that no competitor enjoys. Once this is factored in, and a comparison to other hardware manufacturers takes place, the results could turn out very different.
Would be curious to see:)

[furn]

Well this totally changed my perspective on things, although I have to state, in countries that aren't The US Apple products are still EXTREMELY expensive, even taking shipping, import taxes, deliveries and storage into consideration. In South Africa we have exactly one licensed 3rd party seller that most closely resembles an Apple store (we don't have those here) and they price their products however they want because "it's Apple" heck their base iPhones often cost the same price as an iPhone Pro in The US, don't even get me started on the pro models, on some contracts the iPhone 11 PM went for around $2500 at launch in this country that's enough to buy you a second hand car. So after watching this sure, Apple products may not be overpriced but that only applies to Americans, outside The US they are still very much overpriced.

[Lena-vwye]

Wow after going through the breakdown I've got to say that, maybe you are right. 10 - 20% is not much, although it is a lot of money in the end because of the scale. Even products that I sell personally I build my brands on the idea of 30% profit margins minimum out the door. With so much personal tailoring, software optimization, and research & development; Apple is providing good value and brand ratio. Their products hold their value, their products mostly last, are well designed whether software or hardware. I personally do not use Apple products, but I can confidently say that I invest in them because they are an actual good company.

[johniii]

Margins are always lower in hardware. Their margins are top of the curve for their type of products. Some of their products are definitely overpriced in the laptop and desk top space.

[dankmemes]

20% is still extremely high for Apple. Other companies with similar ecosystem-based approaches usually have very tiny margins if any on the purchase of the Main device. They get their money from accessories and software with high margins. But apple still has extremely high margins on those too

[FunEdits]

Comparing Apple hardware product margins with other software service providers didn't fit with me

[mateohernandez]

This hasn't aged well... ugh... especially now that Apple is extremely overpriced with their Vision Pros, Pro Max models, and even their standard models, all priced over $700.

[amrohendawi]

All these numbers are manipulated. Many smartphone manufacturers offer more for less price and they still make money.
An iPhone lightning cable costs 25€ here in Germany. How can a lightning cable cost that much money?? it still behaves as normal retail cables for 2-5€
A very simple HDMI+USB-C Macbook adapter costs 80€, while the competitors offer similar quality with many more sockets for 1/4 the price.

I'd like to see the detailed calculation of those iPhone manufacturing costs because a single iPhone that sells for $800 CANNOT cost over $500, unless R&D, shipping, and marketing etc. are also included.

[timmy]

As someone who does circuit-board and firmware development, I would be truly amazed that manufacturing the Iphone costs Apple 500 USD / phone.


Every new iteration of Iphones looks almost identical to the previous version, so very little new development and changes are required. This means that, even when Apple releases a new Iphone, the manufacturing plants have their equipment already 99% readily configured and very little training is required for employees. This makes mass production extremely efficient and cheap.

Most electronic components are in addition dirt cheap, compared to the end product itself. I myself order capacitors and resistors in quantities of 1000, for less than 10 to 15 USD. Price drops the more you order at once. Most broadly used electronics components (charging chips, power monitoring ic's, voltage controllers, temperature sensors, switches, ...) are less than 5 to 10 USD, these prices also drop the more you order at once. The typical empty circuit-board (without components) is priced based on size and complexity, I would estimate that this costs Apple about 10 to 20 USD. The most expensive parts are commonly the display, memory and CPU/GPU, together totaling to about 100 to 150 USD, if you order them from other brands. Apple uses their own CPU based on the ARM-architecture, which probably makes it even cheaper except for some licencing fees they have to pay ARM for using their architecture.

When I'm designing something myself I always order prototypes locally in low quantities (8-12 samples). This costs me about 100 to 200 USD for on average 10 empty circuit-boards. Increasing my order size tenfold (ordering 100 samples) would only double the price, 100 boards costing me about 200 to 400 USD. Ordering 10 circuit-boards locally with the components already soldered on them is a bit more expensive, priced between 600 up to 2500 USD. But same as previously, I can increase my order tenfold for only twice or three times the price. The price drops massively if I outsource production to a third world country.


Apple paying 500 USD to manufacture Iphones sounds reasonable, if they order them in quantities of 10. They in reality order them in quantities of millions, which in my experience should lower the price by at least 50% or even up to 75%.

[TheSistineChappal]

Apple makes more money by tieing in customers to their ecosystem. They make billions form just selling Airpods and apps.

[dreamgirlkriti]

You can't compare salaries in two countries. Cost of living is different in both countries. USA Is overpriced in everything, hence higher income. Income - expenses in USA might be lower than China

[ecocodex]

Apple made 94.6 billion in net income in 2021, yet paid 2.2 billion in income taxes. Think about that for a second. They sell the newest iPhone for, according to you 300-500 dollars above manufacturing price, on top of products like iTunes (software), airpods, iPads, Apple TV, cases, etc. They are the only company ever to be valued at over 3 trillion dollars.

Despite this HUGE amount of income they receive, especially when you take into account the fact that they have a history of brutally treating and underpaying their workers, using unethically-sourced materials, etc.

Despite ALL OF THIS, I am supposed to feel sorry for them because they paid a whopping 3% in income taxes.

Get outta here.

[CommandoMaster]

Apple products don't go on sale, so the information in the video is incorrect. There is no waiting for Apple sales from any stores. U can buy used, or trade in ur old phone, but that's still doesn't mean their phones aren't overpriced. Other companies phones have better specs at lower prices.

[s.lingesan]

Apple makes good phones at relatively reasonable price. No problem with that. My problem is that they control the products after they sell it. They make decisions for you without leaving option to the user. It might be OK for normal users, but for me that is a deal breaker. I want to have maximum control of my device. Emphasis on "my".

[Ahmed-tohi]

What i hate about apple, is their repair service!
Also when you buy an iPhone you get like 70% of the phone and to use the rest of the features, you'll need: macbook, airpods, apple watch, also a charger to use the lightning cable, and + their services if you want all the features.