Analyst says it's Samsung's fault the iPhone 8 will be so expensive

By midian182 · 34 replies
Sep 7, 2017
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  1. With the iPhone 8 (or whatever it ends up being called) set to be unveiled at Apple’s product event next week, more attention is being given to its $1000+ price tag. But according to a new report from KGI securities, the wallet-crushing cost isn’t Apple’s fault; blame Samsung.

    Apple Insider reported on analyst Ming-Chi Kuo’s note to investors, which claims that as Samsung is the only firm able to produce OLED parts on the scale required by Apple, it has put the Korean company in a position where it can charge a premium rate.

    As the new iPhone makes the switch from LCD to OLED panels, KGI suspects Apple is paying more than double what it did for screens in previous models. Specifically, the cost is said to have gone up from $45 - $55 per unit to $120 - $130, with the increase being passed on to the consumer.

    Kuo said this means “Apple is in urgent need of finding a second source of OLED." It will take time to find a supplier who can match the quality and quantity of the OLEDs produced by Samsung, but LG seems like the obvious choice, especially as Apple reportedly invested $2 billion into LG Display as an advanced payment for future smartphone OLED screens.

    Earlier this year, it was reported that Apple ordered another 60 million OLED panels from Samsung, bringing the total quantity to 160 million.

    In addition to the OLED screens, Kuo mentioned another element of the upcoming iPhone. As previously rumored, he suggested that Touch ID may be abandoned in the new handset, as embedding it under an OLED screen creates unfavorable scan-through performance. Facial recognition technology is expected to take its place.

    Permalink to story.

  2. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    No, it's still Apple's fault for wanting to keep their ridiculous profit margins. Samsung's high end phones are between $2-300 cheaper and they still make boatloads of money.
    Greg S and Reehahs like this.
  3. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    They also aren't paying anything over cost for their own panels.
  4. BrianMontanye

    BrianMontanye TS Booster Posts: 67   +37

    So Apple isn't gouging the price up even more for the consumer? I wonder what the actual cost the consumer pays for that screen? It certainly isn't the 120-130$ it is costing Apple. Still their issue, not Samsungs.
  5. Alex Voinica

    Alex Voinica TS Booster Posts: 87   +74

    They have the costs of research & development for the panels.
    Being the only supplier and selling them to a direct competitor at a high price is a good strategy.
    Apple were the ones that brought in the premium phones and now that most of the manufacturers switched to premium build materials and have increased their prices made Apple increase their price even further for what ? The removal of headphone jack ? Blaming others because you're too greedy is not the solution.
    nrstha and BSim500 like this.
  6. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    yeah, go ahead and try to justify it. Other manufactures use Samsung's OLED panels and they still make cheaper phones. This is nothing more than a convenient scapegoat. In fact, I'd hazard a guess that this is Apple trying to Smear Samsung's name to create bad press around them.
    OneSpeed likes this.
  7. Neojt

    Neojt TS Addict Posts: 232   +59

    I dont know im not a mathc expert put that look more like a 10$ hike than double I.e 45$*2=90$
  8. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    Well the OLEDs significantly more expensive. A replacement S8 screen is ~$220 where as a replacement iPhone screen is ~$130. however, it was Apple's choice to add an OLED to their phone before they had a cheaper option. I will also assume that once they see people are willing to pay $1000 for a phone they wont reduce the price in later iterations.
  9. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    Exactly. They make cheaper phones that people don't line up for days in advance to purchase on launch.

    Apple's pricing works like this, as does every other company's:

    1. R&D cost.
    2. Materials cost
    3. Manufacturing cost.
    4. Marketing cost.
    5. Warehousing (storage) and shipping (distribution) costs.
    6. Consumer demand at price point X.

    It seems that in all of these threads where people complain about the price of X, they ignore 4 or 5 different pricing factors and default to "da margins" without actually demonstrating what the actual profit margin is on the item. All you guys seem to have is, "it's really high."

    As for justifying the price... I wouldn't use anything other than pricing factor #6 to justify a $1,000 cell phone. Apple charges so much because they can.
    antiproduct likes this.
  10. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    I would like to point out that a $100 increase in the cost of the screen does not justify a $200 price hike in the cost of the phone. That is in addition to the Apple tax. Samsung's hardware is objectively better and more expensive than Apple's. I'm coming at this as someone who hates Samsung because of their violations of privacy. I use ZTE or LG phones. As far as consumer demand goes, there is a sucker born every minute. As far as software is concerned, that is personal preference if you like iOS over android, fine. I wont argue there. My problems lays in the hardware which IS overprice.

    Normally your posts are fairly objective and insightful, but this is an argument you can't win.
  11. BabyFaceLee

    BabyFaceLee TS Booster Posts: 121   +41

    Apple charge whatever they feel they can get away do all established and successful companies.
  12. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    I am being completely objective. Considering the fact that I think a $1,000 phone is a joke, I don't see why you think I would be in any way biased in favor of Apple here. My point is very simple:

    More goes into the price hike than the OLED panel, but all anyone in this thread (and the article) is talking about is...the OLED panel.
  13. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    Well the article is about how Apple is blaming the price hike solely on the cost of the panel and your first post was about justifying the cost of the OLED panel so........
  14. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    Except Apple hasn't justified the cost. It never does. Rather, an analyst is suggesting that the price is because of the panel:

    But according to a new report from KGI securities, the wallet-crushing cost isn’t Apple’s fault; blame Samsung.

    My first post wasn't about justifying the price. My first post specifically addressed this statement:

    I'm not a fan of Apple. I think their products have gone from being very good to becoming self-parodies over the past 7 years, with the exception of their tablets.

    What I was addressing in my response was the fact that more goes into these decisions than simply "how much margin can we make?" Moreover, that nobody is posting the real profit margin of the iPhone. They're only referencing hardware costs and using it to justify their Apple outrage.
  15. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    my mistake

    Adding $100 to that and some how Apple arrives at $1000? They're price gouging. And what are you talking about that more goes into these decisions than how much margin they can make? It's a business and their purpose is to make money, that's WHAT THEY DO. At the end of the day every decision they make is based on whether or not it will make them money.
  16. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    From that article:

    Although Apple is paying more than the $220 baseline, even after all of the additional costs, it is still likely raking in profits of about $250 per unit.

    Pricing has to account for all of this plus the optimal price point for margin vs sales (known as equilibrium), which is the highest price point they can sell the maximum number of phones at. The reason the iPhone 8 will run $1,000 is because that's the highest point they can charge before diminishing returns eat into total sales (which hurts revenue).

    Price gouging is what Martin Shkreli does with medicine. Optimal product pricing (price/demand equilibrium) is what profitable businesses do. See item 6 in my earlier list.
  17. yRaz

    yRaz Nigerian Prince Posts: 2,565   +1,706

    They know their ***** fan base will pay it so they charge it. When their base model goes from $650 to $1000 due to a $100 increase in cost, it's price gouging. How anyone can say otherwise is simply ridiculous.
  18. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,279

    Samsung's fault? Yeah, I believe it like I believe that pigs can fly and the moon is a big block of cheese. Apple is just charging more for their already overpriced rubbish is because a lot of people are prepared to pay more. If somebody is trying to shower you with money, you don't look a gift horse in the mouth but sooner or later the good times end, it always does.
  19. OneSpeed

    OneSpeed TS Evangelist Posts: 303   +106

    You forgot to mention :
    1. R&D cost - Samsung's R&D for the OLED's and faster memory.
    2. Materials cost - not really a factor, cuz its basically the same as last model (except, see above).
    3. Manufacturing cost - Yep, slave labor wages have gone up recently.
    4. Marketing cost - Yep, need to spend dollars on telling everyone it's Samsung's fault for everything...
    5. Warehousing (storage) and shipping (distribution) costs. - I think it leaves the Foxconn line and into a box, then a plane.
    6. Consumer demand at price point X - Well, we all know how Apple consumers are blind to this.
    7. User Addiction to Cell Phones - People can't get enough of them, and will spend any price to feed their addiction.
  20. OneSpeed

    OneSpeed TS Evangelist Posts: 303   +106

    Did you mean Demand-Pull and Cost-Push forces of the consumers' stupidity?
  21. GameLogic

    GameLogic TS Rookie

    $45 to $55 is the old unit price and the $120 to $130 is the new unit price. So that's more than double.
  22. Capaill

    Capaill TS Evangelist Posts: 581   +271

    That's karma, baby. Maybe Apple should avoid trying to sue their suppliers out of existence.
    OneSpeed likes this.
  23. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    Further responses from you will be ignored. Reason: Your rhetoric is boring and uninspired.

    Everybody prices their products like that. That's literally the point of figuring out the demand curve of a product.

    As for how anyone could say it's not price gouging...For it to be price gouging it has to be sudden, significant, and be uncorrelated to changes in demand. None of those conditions are met for the following three reasons:

    1. The pricing isn't sudden (the iPhone 8's price has literally never been priced before and it was announced at a scheduled date).
    2. There has been no significant price increase to the iPhone 8 (costing more than another model isn't an increase in a previous price for the model in question).
    3. Real demand for the iPhone 8 hasn't been determined yet, as it isn't yet available for purchase.

    Definitions matter.

    What you mean to say, and what I agree with, is that the iPhone 8 is overpriced for what it brings to the table. But you and I are clearly not the market they are targeting. If people have a different value equation than I do, that's no more reason to judge them ("***** fan base") for their heresy than judging someone for being fat because I think people should look attractive. Your body, your choice, as it were. Same with money.

    There is a whole market out there who has different values. All this means is that Apple won't get my money.

    For the people in that market... I hope you enjoy your phone/fashion accessory.
  24. captaincranky

    captaincranky TechSpot Addict Posts: 13,658   +3,115

    Am I the only one who thinks the analyst is on Apple's payroll, but in a roundabout sort of way?
  25. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,119   +4,178

    Far from it.

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