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Comment by Klinky | Hacker News Reader

I would have to say that 400% over estimated manufacturing cost is quite a bit of cream on top, at least for the iPhone 5.

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Because we all know that product development, distribution, and retail are free, right?

I'm hoping Samsung doesn't settle then, so we can all take a look at their per-device profit margins which Apple wants placed under seal. Since when does a company consider profit margins trade secrets? Maybe when the public discovers Apple has enormous profit margins from these devices yet pursues multi-billion dollar lawsuits against competitors with shoddy patents, there will be backlash.

Let's not forget marketing, technical support, and regular software updates!

When compared to the other end of the spectrum, such as the Google Nexus 7, which barely sells for more than production costs, 400% is a huge margin. I'd doubt you would find too many other companies out there who are making as large of a margin on their mobile devices as Apple is.

The Nexus 7 practically has no costs over and above production. Android itself is subsidized by Google's advertising business, which cuts out the software development costs. The industrial design and manufacturing quality are nothing special--I doubt they spent a year measuring people's ears just to discover the optimal headphone shape, or designed manufacturing processes to reduce the tolerances to microns. Google doesn't have retail stores in every metropolitan area where you can take in your Nexus 7 when it's acting up. When you take all these things into consideration it's surprising Apple's products are as competitive as they are.

Much of what you wrote is what Apple marketing wants you to think. It's kind of hard to know for sure how much effort was put into the EarPods or what's going on with the micron tolerances. Apple is not immune to errors, the antenna in the iPhone4, Apple Maps has major problems and Time Machine seems to be broken for many using OS X Mountain Lion.

Apple Stores are a big part of Apple marketing. The service received a these store can range from exceptional to terrible. They don't pay the people who do technical support or work in retail big bucks either.

I am not surprised Apple is doing so well, given the premium they charge for their devices.

> They don't pay the people who do technical support or work in retail big bucks either.

The fact that they hire those people at all represents an expense and a service that Android manufacturers just don't have. The operating costs for an Apple store are probably higher than Nexus 7 retailers like Gamestop, Sam's Club, Staples, Office Depot, or Kmart--and the level of service is largely a step ahead as well. Either way, it's still an expense that isn't accounted for in manufacturing margin, which was the original point of the exercise.

Seriosly, production cost again?

That has nothing to do with how competitively they are priced. If I can make something for less money than you can and we both sell it at the same price, we are just as competitively priced. Manufacturing cost has nothing to do with price competitiveness.

Apple uses its giant scale to literally buy up all supply of lots of components and other resources (factory output, air freight, you name it). It's tough to compete.

When you are producing a product that costs less or the same to make than other manufacturers products but you sell it for more, people are paying a premium for your product.

I don't agree, in my opinion you have to be priced more than similar products to count as "paying a premium". Like Monster Cable--same product but several times the price.

Walk into the store and you'll see that the best phones from both Apple and Samsung cost the same amount.

With phone subsidies you may be correct, though unlocked you're still paying more for the Apple product. Things like Macs and iPads do have premiums still though. Probably doesn't help my case that I highlighted the iPhone 5 which is heavily subsidized by the service provider for most people.

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