iphone market share

Profit Distribution Chart for Each iPhone Sold

iPhone Profit Distribution Chart

Recently, there are two reports being the limelight of many people that are relevant to the Apple iPhone. One of the reports is called “Capturing Apple’s Global Supply Network Profits”. The report is having a profit distribution diagram attached with it. From the diagram, it is noticeable that each of the iPhone that being sold by Apple in last year, the company is making 58.5% of the profits from the total selling price. While suppliers of raw materials accounted for 21.9%, major supplier of electronic components accounted for 4.7%, and China labors only receive 1.8% of the profits. Another breaking news is regarding the cost of iPhone 4S, some people have done a full analysis of iPhone 4S and concluded that the true cost of the phone is only about RMB 1150 (approx USD 180), splitting the calculation for different components, the touch-screen display is RMB 235.30 (approx USD 37), battery costs about RMB 37.50 (approx USD 6) and bla bla bla…

By going through such comparison, many people are amaze of the big appetite of Apple as they think the company is simply profiteering and reaping profits from China manufacturers as well. Some other people also conclude that the reasonable price for a smart phone like iphone 4S should place at RMB 2000 (approx USD 310).

However, what I think is that, to some extent, to analyze the chain of distribution or the accounting cost is actually not making too much sense. Even if the cost for producing an Apple iPhone may only just RMB 1000, but can anyone produce other “Apple” smart phone if the necessary hardware are providing? The core of the smart phone industry is about creativity, Apple has invested heavily in Research & Development, and only managed to come out with this change-people-way-of-life technology, how we going to determine the cost for that? And also how can we calculate the value of those creativity ideas? If you are insisting on doing the comparison, then you will only show to other people how short-sighted you are. There are plenty of less famous smart phone brands available on the market which are cost less than iPhone, but why most of the users are still flocking for iPhone? We can only conclude that the core technology and creativity is the key for this.

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