> Cause in healthy capitalism, a competitor could step in and sell it for $999 and Apple would lose market share quickly.
No they can't. You're neglecting the various moats that an entity like Apple enjoys with the iPhone.
First you have to be able to actually build a similar or superior product. You can't do it. Elite of elite tech engineering companies like Samsung can just barely keep up generation after generation. The investment required to build your $999 competing phone is comically enormous. You won't even be able to get access to enough chips to do it, much less have the manufacturing capacity to deliver at any meaningful scale given the components.
Do you have tens of billions of USD in cash ready?
You need to build a brand that consumers desire, such that they'll even want to spend $899 or $999 instead of picking up the iPhone at $1000.
Do you have another block of tens of billions of USD in cash ready, for marketing, brand building, advertising?
You need an extraordinary logistics system globally.
Do you have another block of tens of billions of USD in cash ready to build, deploy, refine your global logistics network?
Apple has ~$114 billion in annual operating income, most of it (including its ecosystem) is riding on the back of the iPhone. If it could be done, somebody would take that giant pot of gold from them. Even if a competitor could take 1/4 or 1/2 of that pot of gold, they'd move on it in a heartbeat. They can't do it, not even remotely close.
And then time. It'll take you a decade to get there, absolute best case scenario.
What Apple is reaping, is decades in the making, and required hundreds of billions of dollars in capital to be deployed over that span of time. Good luck.
That's an interesting take. I jumped to a Pixel for the 10x periscope camera, presumably offered because they were willing to take less profit on it than Apple, who couldn't find a way to charge more for it within the suite of features they were offering last fall.
But you're saying that moats wouldn't exist if the phones cost 1 cent? Why? I'm claiming that the cost of the iPhone in that world is from the included software, and the included software is their "moat". Cheap parts doesn't give you a "blue bubble" on iMessage. That's what the end user is paying for.
> you're saying that moats wouldn't exist if the phones cost 1 cent? Why?
Because if iPhones cost 1 cent to produce, the cost of everything that goes into producing them would have to be trivial. Which means any competitor could easily do the same as Apple is doing.
Of course that's not the case in our actual world; in our actual world, it would cost a huge amount of money for any competitor to do the same as Apple is doing. But that's my point: that very fact is why it costs Apple a lot more than 1 cent to produce an iPhone. Apple has expended huge costs on developing the product and keeping it ahead of competitors, and those costs amount to a lot more than 1 cent per iPHone. The high price they charge for iPhones is how they recoup those costs.
In other words, in the hypothetical I was responding to, Apple could not have done what they actually have done to make the iPhone a high end preferred product. Which means that all the moats that exist in our actual world because Apple did all those things to make the iPhone a high end preferred product, could not exist in that hypothetical world.
Does that mean the hypothetical is basically useless in understanding Apple's position in our actual world? Yes. That was part of my point.
No they can't. You're neglecting the various moats that an entity like Apple enjoys with the iPhone.
First you have to be able to actually build a similar or superior product. You can't do it. Elite of elite tech engineering companies like Samsung can just barely keep up generation after generation. The investment required to build your $999 competing phone is comically enormous. You won't even be able to get access to enough chips to do it, much less have the manufacturing capacity to deliver at any meaningful scale given the components.
Do you have tens of billions of USD in cash ready?
You need to build a brand that consumers desire, such that they'll even want to spend $899 or $999 instead of picking up the iPhone at $1000.
Do you have another block of tens of billions of USD in cash ready, for marketing, brand building, advertising?
You need an extraordinary logistics system globally.
Do you have another block of tens of billions of USD in cash ready to build, deploy, refine your global logistics network?
Apple has ~$114 billion in annual operating income, most of it (including its ecosystem) is riding on the back of the iPhone. If it could be done, somebody would take that giant pot of gold from them. Even if a competitor could take 1/4 or 1/2 of that pot of gold, they'd move on it in a heartbeat. They can't do it, not even remotely close.
And then time. It'll take you a decade to get there, absolute best case scenario.
What Apple is reaping, is decades in the making, and required hundreds of billions of dollars in capital to be deployed over that span of time. Good luck.