Jan Dawson, writing for Tech.pinions:
Apple, which might be described accurately, if incompletely, as a player in the consumer electronics market, makes telecom-like margins while competing with those barely profitable vendors. And just as interesting is the fact that, as players that have historically only competed indirectly in the consumer electronics business enter it, at least some of them are choosing to follow Apple’s route to the high end of the market.
And, explaining a chart that shows Apple margins towering over the rest of the industry:
Apple is the one exception to all of this, with between 25% and 30% operating margins during the latter half of this chart, while everyone else scrambles at 5% or lower margins. How does Apple achieve this distinction? Well, it’s due to a combination of factors but it’s probably best summarized this way: Apple provides premium products at a premium price, and is able to justify the premium through differentiation based on a tightly integrated approach to hardware and software.
Apple has always favored this approach, high margins maintained by controlling all the hardware and software. This has been Apple’s approach since the release of the Macintosh way back in 1984 (with a brief, pre-Steve Jobs-return, when they allowed other folks to license the Mac OS). Apple builds the software in house and designs all the hardware in house.
How are things working out for the Android universe?
It’s increasingly clear that both OS vendors turned hardware vendors have decided to embrace the high end along with its high margins, while leaving the scale and the thin margins to their OEMs. Meanwhile, their OEMs continue to struggle to make the business work, with several exiting segments of the market entirely and several others clearly having a hard time staying afloat. Sony has abandoned PCs and continues to struggle in smartphones, HTC increasingly looks like it’s on its last legs as an Android vendor, Toshiba is considering spinning off its PC business, and Samsung’s smartphone business – once the poster child for success making Android phones – continues to slip. It sometimes seems as if the only vendors making Android phones and Windows PCs who aren’t struggling in some way are the licensors of the operating systems.
Interesting post.