Funny, I seem to be able to disagree with you without feeling the need to vote on it, but ok.
Ah, you're right-- you interjected into my response to someone else in a way that sounded like you agreed with them, but didn't raise it.
You implied that when Jobs was in charge it was all about innovation and moving forward while Cook is stingy and penny pinching. What I showed you is that Jobs drove margins through the roof and Cook brought them down from the Jobs peak and stabilized them (until high margin services took off in the pandemic era).
I actually have always felt that Apple should be a relatively high margin company to ensure they can maintain the business but also to give them enough capital to do cool things like buy Intrinsity and PASemi.
See, like you are here.
You act like differentiating products by storage capacity is a new thing for Apple:
The original iPod was differentiated by storage, the iPhone was differentiated by storage long before there were multiple form factors and camera configurations. Apple has a long history, even under Saint Stephen of segmenting a market by storage and often nothing else.
That's not what's happening. What's happening is that Apple is segmenting their market so that high end pro users and businesses are subsidizing entry level and casual users. I've explained this in other threads, but I'll try again here.
What you keep ignoring is that while Apple has always segmented products by storage they used to at least upgrade the base storage and memory every 2 years. I’m willing to say that things stagnated generally in the 2010s but they should still have been upgrading these things every 4 years at least given the way the prices have dropped over time. The iPod didn’t stay at 5GB for 7 years. The iPod Mini didn’t stay at 4 GB for 7 years, the baseline improved all while Apple continued to segment based on storage.
Apple was maintaining a 38% margin before the pandemic, so let's use that as a baseline. It was probably lower on Macs and higher on other things, but whatever, let's keep that.
Let's assume a Mac with 512GB of storage costs $800 to build. To maintain their margin, they need to sell it for $1100.
But that prices important customers out of the market. They want to make a product available to students and entry level users. Someone might say "then they should just drop their margins, they have more money that God", but that person is a socialist and doesn't understand that these margins also feed R&D and maintain the business through lean times. Even hippy dippy Steve was extracting higher margins than bean counter Tim.
So they focus on average selling price. They sell an array of products in the line and aim for a sales mix that averages $1100. If they sell a unit for $900, and another unit for $1300, then they're averaging $1100.
They offer a 256GB system for $900 which is a $200 discount for $20 in flash, or whatever it turns out to be. And they offer a 1TB system for $1300 which is a $200 upcharge for $20 in flash or whatever it turns out to be.
This is what I meant above by different people valuing things differently. If you're buying a machine for your grandmother, or you're racking up dozens of these into a cluster, or using them as point of sale terminals or for museum displays or reception desks or for finance people running web apps you value that machine and the $200 you safe more than you value the extra 256GB of storage. If you're a content creator or data scientist or an individual with a lot data you value the machine and that extra 512GB of storage more than the extra $200 it costs you.
So charging the price of sand for the RAM and SSDs would just make the lower end machines a lot more expensive.
Here is where you’re out to lunch, the base cost of the machine would not go to $1100 if you doubled storage and RAM. How do I know?
Let’s assume 38% margin on the Mac mini - at $599 that’s a $371 BOM.
Let’s assume retail prices for flash (
Samsung 512 GB M2) - $199 when I checked - so then apple needs to pay about $100 for an additional 256 GB (Apple would actually pay less but hey lets be conservative).
Let’s take a 32 GB stick of DDR5 (
Crucial 32 GB Memory) - $122 when I checked - so lets say Apple uses super super expensive memory and we’ll say that for apple to add an additional 8 GB costs as much as this 32GB stick.
So we have $371 + $220 = $591 + 38% margin = $870
And that is being extremely conservative on the prices and giving a huge buffer to Apple.
To get that from Apple today charges you $999 over $100 more.
Again, I was being conservative by giving Apple the benefit of the margins that Samsung and Crucial are getting, I chose 32GB DDR5 instead of 8 GB to give them even more of a benefit of the doubt.
There is just no way the machine you suggest is $1100.
If we take $599 in 2010 money multiply by 1.34 % for inflation we get $820… interesting that it almost matches up to my suggestion.
I prefer Apple differentiate with storage and memory but they shouldn’t be waiting 7+ years to raise the baselines.
I also would prefer a higher starting price with better features if Apple actually kept moving forward.
Apple could try to hide this segmentation by creating a bunch of physically different machines with more differentiation in the internal components-- clock the M series chips slower on the lower end machines, make a line of Macbooks with plastic housings and lower quality displays, etc, etc. But they don't. For one thing, it would increase their engineering costs which in turn would increase the product costs just to obfuscate their segmentation strategy and for another this gives really high quality hardware to even the entry level buyers.
Apple has found that storage needs closely align with market segments and rely on that.
So I generally buy higher storage products-- max storage so far on the iPads, I used to do that for the iPhones but no longer need to as they're gotten bigger than I need, and higher than base storage on the Macs. The machine plus the extra storage is worth it to me, so I pay the money for it. Because of me, a grandmother has a Mac. 😇😉
I buy the higher storage products too, but I resent the fact that they don’t change the baseline any more. I think that they should raise the baseline and increase the price a small amount to account for inflation rather than trying to keep everything the same price for decades even if it means selling hardware that I don’t think many people should buy.
