Apple (AAPL) is one of the most popular companies in the world and produces one of the most ubiquitous smartphones. Apple has one of the most sought after products in the world, and as of the end of 2022, Apple was first in market share for smartphones, often trading places for the number one spot with Samsung.
Apple controls 22% of the global smartphone market share, while Samsung controls 19% and Xiaomi controls 12% as of the last quarter of 2021. In terms of profits from smartphones, Apple is also the leader. The company took 75% of the industry's profits and 40% of revenue in 2021.
Apple makes such large profits through a sizable markup on its phones.
- Apple's iPhone has the largest market share of any smartphone manufacturer, followed by Samsung.
- In addition to having the largest market share, Apple also captures the largest operating profits of any smartphone manufacturer.
- In order to capture such high profits, Apple has a sizable markup on its smartphone.
- The iPhone 14 Pro retails between $799 and $999 but costs only around $500 to make.
The iPhone 14 is Apple's latest phone and comes in various iterations as previous models have. The iPhone 14 Pro, depending on storage size, costs between $799 and $999. It's quite a hefty price tag, especially when it's estimated that the actual cost of all the components to make the phone amounts to approximately $500.
Apple does have a more pared-down version of the iPhone 14, the SE model, which costs just $429.
The iPhone is primarily assembled in China by Taiwanese companies, such as Foxconn. The average salary for an iPhone worker is $10 an hour. The top earners make approximately $27 an hour while the 25th percentile makes $12 an hour. Still, some have accused Apple and Foxconn of using temporary workers that make up as much as half of the work force in an attempt to keep labor costs down, more than the 10% limit mandated by Chinese labor law.
According to Tim Cook, the CEO of Apple, the reason to build in China is not because of the lower labor costs. If this were the case, Apple could make its phones in even cheaper locations. The main reason, according to Cook, is the skill required in tooling engineering. He claims that the specific skill set is no longer available in the U.S., but in China, the expertise is prevalent.
In addition, logistically, China makes the most sense to ship a product around the world as the country has seven of the world's largest 10 ports. If Apple were to build the iPhone in the U.S., it would only be able to build a small amount a year at a significantly higher cost.
Apple is the largest company in the world by market capitalization, with a March 2022 market cap of $2.8 trillion.
In the early days of iPhone production, there were reports that labor conditions for workers were awful; however, this seems to have improved somewhat over time. According to some employees at Foxconn, the conditions are no worse when compared to other factories in China, and sometimes better.
Reports have indicated that Apple's manufacturing partners in China, including Foxconn, have required workers to work long hours, including overtime, in order to meet production demands. There have also been allegations of inadequate safety measures and poor working conditions at some of Apple's manufacturing facilities in China, including workers being exposed to hazardous chemicals and other dangerous conditions. In addition, Apple's manufacturing practices in China have been criticized for their environmental impact, including the use of hazardous chemicals and the generation of waste.
Some critics have argued that Apple's manufacturing partners in China pay workers low wages, particularly compared to the cost of living in the urban parts of the country. There have also been allegations that Apple's manufacturing partners in China have violated workers' rights, including the right to form unions and engage in collective bargaining.
Apple has implemented various programs and initiatives to improve working conditions and labor practices at its manufacturing facilities in China, but some critics have argued that these efforts have not gone far enough. Also note that the issue of labor conditions in Chinese factories is not limited to Apple's production, but extends to many American and international corporations who employ Chinese labor.
How Much Does It Cost to Make an iPhone?
The cost of making an iPhone 13 Pro, Apple's latest iPhone, is $570. Components to make a phone include the screen, the phone casing, the camera, the battery, software, chips, and more. Apple charges a sizable markup on its phones.
How Much Revenue Does Apple Make in a Year?
In 2020, Apple's revenue was $274.3 billion. In 2021, its revenue was $365.8 billion, an increase of 33.3%.
How Much Does a Samsung Galaxy S Phone Cost to Make?
The Samsung Galaxy S21 costs approximately $508 to make. It retails for approximately $1,049.
In Which Country Are iPhones the Most Expensive, and Cheapest?
Turkey has the highest price for an iPhone 14, followed by Brazil and Sweden, according to industry reports. The least expensive place is the U.S., followed by Japan and South Korea.
The Bottom Line
Apple is a very successful company, and as consumers, we pay a premium price for the products the company makes. Some people purchase Apple products to become part of the 'trendy' Apple brand, and for Apple to maintain its high profits and low manufacturing costs, the company will continue to manufacture its phones in China and other low-cost locations. Because of this, however, concerns about worker rights and related issues will likely remain relevant.