By Nicolas Cruz
Apple is known for its expensive products. The latest iPhone, fully specced with a core A12 processor, 512 Gb of storage, 4 Gb of ram, and the latest OLED display, costs $1,500 dollars, But is there justification behind the price?
First let’s talk about the cost of Apple’s iPhones over the last few generations. The base model iPhone X costs $581 dollars to produce leaving apple with $418 dollars of estimated profit per iPhone. But the thing is, the older model iPhone 7 costs $225 dollars to produce, but only costs $750. Leaving apple with $525 of estimated profit, meaning that they made more money with the older generation iPhone 7 than with the new $1,000 dollar iPhone X.
Often times with products however, companies put billions of dollars into R&D. Apple found themselves spending 10.39 billion dollars into their R&D in 2016, and this trend isn’t exclusive to Apple. Alphabet, Amazon’s parent company found themselves funneling $13.9 billion into R&D, while Microsoft spends $12.3 billion into making their products better. For comparison, General Motors spends 8.1 billion into R&D.
I talked to an engineer at a tech company who would prefer to keep his name anonymous about the issue. I asked him about what goes into making the latest products. He talked a lot about market analysis and how customers react to current technologies. “Thousands of different software bugs [have to be resolved] before you have something worthy of customer interaction” he says.
If these issues aren’t resolved, then that could mean problems for customers and consumers. Last year Apple sold 216.76 million iphones, assuming they have a margin of error of 0.01%, that's still a whopping 21,676 iPhones that have to be potentially repaired. How companies handle this completely “depends on the issue and the company.” So it’s imperative for companies to nail it right the first time. “[Products] have to not only work, but work well,” he says.
Of course this isn’t just to get a good product. Companies have to put a lot into getting the best processors, cameras, storage. Sure products might be more expensive, but if we keep pushing innovation, wanting better screens, processors, and cameras, we can’t expect the price of these products to stay the same. This push of new tech is obviously going to cost more because companies have to spend more into getting this bleeding edge technology.
Apple is known for its expensive products. The latest iPhone, fully specced with a core A12 processor, 512 Gb of storage, 4 Gb of ram, and the latest OLED display, costs $1,500 dollars, But is there justification behind the price?
First let’s talk about the cost of Apple’s iPhones over the last few generations. The base model iPhone X costs $581 dollars to produce leaving apple with $418 dollars of estimated profit per iPhone. But the thing is, the older model iPhone 7 costs $225 dollars to produce, but only costs $750. Leaving apple with $525 of estimated profit, meaning that they made more money with the older generation iPhone 7 than with the new $1,000 dollar iPhone X.
Often times with products however, companies put billions of dollars into R&D. Apple found themselves spending 10.39 billion dollars into their R&D in 2016, and this trend isn’t exclusive to Apple. Alphabet, Amazon’s parent company found themselves funneling $13.9 billion into R&D, while Microsoft spends $12.3 billion into making their products better. For comparison, General Motors spends 8.1 billion into R&D.
I talked to an engineer at a tech company who would prefer to keep his name anonymous about the issue. I asked him about what goes into making the latest products. He talked a lot about market analysis and how customers react to current technologies. “Thousands of different software bugs [have to be resolved] before you have something worthy of customer interaction” he says.
If these issues aren’t resolved, then that could mean problems for customers and consumers. Last year Apple sold 216.76 million iphones, assuming they have a margin of error of 0.01%, that's still a whopping 21,676 iPhones that have to be potentially repaired. How companies handle this completely “depends on the issue and the company.” So it’s imperative for companies to nail it right the first time. “[Products] have to not only work, but work well,” he says.
Of course this isn’t just to get a good product. Companies have to put a lot into getting the best processors, cameras, storage. Sure products might be more expensive, but if we keep pushing innovation, wanting better screens, processors, and cameras, we can’t expect the price of these products to stay the same. This push of new tech is obviously going to cost more because companies have to spend more into getting this bleeding edge technology.