One thing I don't get though is that Android phones aren't very low margin. Their retail price is just as high as an iPhone (or at least close). Even feature phones aren't cheap.
So do non-iPhone phones not get subsidized at full retail pricing (or generally much more substantially than the iPhone)?
With the exception of my gadget geek friends ponying big money for the latest 4G-whatever, everyone I know who has an Android phone got it on a two-for-one special or nearly free discount. These huge Android growth numbers aren't being driven by the $300 mega phones.
Cost of the handset is fraction of the overall 2 yr contract price with data plans that are must for these devices. I know people are eager to label Android as "cheap" and "commodity" but the reality is that there are hugely popular Android handsets in both premium and low cost segments and it isn't clear at all that all of the sales are from low end handsets.
Similarly Apple sells $49 3GS - so does Apple now become a commodity/cheap brand?
iPhones get a much bigger subsidy from the carriers. This can be deduced from the ASP that Apple, HTC, RIM etc report. iPhone ASP has always been $600+, while HTC, RIM have ASPs around $300-400 (Samsung smartphone ASP is even lower). This can also be seen by looking at contract prices outside the US. For example, in the UK all phones can be had free on contract, but the monthly amount you pay for an iPhone is much larger than for a top of the line Android (see the O2 or Vodafone UK sites).
The reason this is not reflected in the contract-less prices is because US carriers have a very strong incentive to inflate them to force you to choose contracts.
Actually, in your link above, iPhone 4 prices start from $859. $719 is the price of the 3GS.
I don't know how it is in Australia, but the contract price discrepancy between Android phones and iPhones is well known in England. For example, O2 sells the Galaxy S2 for free with a 24 month £42 plan, while the 16GB iPhone 4 is free on a 24 month £67 plan.
The Galaxy S2 plan gives you a bit more data, and you do have more flexibility with Galaxy S2 plans - you can choose to pay more for the phone and less for the plan for example. (Of course, you also have a big choice of cheaper Android phones too).
$80 android phone right there. I assume that's lower margin than, say, the $200-300 iphones that Verizon sells with a 2 year contract.
Apple is culturally stuck to high margins. Google cares only about making sure Apple doesn't win and the other handset makers are used to pretty lean margins...
Androids will keep getting cheaper-- there'll be free/near-free ones out there soon.
But my point isn't the price the customer pays. But rather the price the carrier pays to HTC/Samsung. That's the money that the actual OEM makes. Those prices, if they're equal to the non-contract price, aren't that far off of the iPhone. Even feature phones are routinely $150 or so.
Nobody ever posts facts to back that up. They just assume it would be true. But HTC and Samsung are making a lot of profit on their Android phones, much more than they ever did with other mobile OS.
The issue is that Android can be used on any hardware product whatsoever, so inevitably there will be both premium and more commodity type products that cover all market segments. Virgin Mobile already has non contract Android smart phones that retail (no rebate) for $150, far cheaper than an iPhone.
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One thing I don't get though is that Android phones aren't very low margin. Their retail price is just as high as an iPhone (or at least close). Even feature phones aren't cheap.
So do non-iPhone phones not get subsidized at full retail pricing (or generally much more substantially than the iPhone)?
With the exception of my gadget geek friends ponying big money for the latest 4G-whatever, everyone I know who has an Android phone got it on a two-for-one special or nearly free discount. These huge Android growth numbers aren't being driven by the $300 mega phones.
Cost of the handset is fraction of the overall 2 yr contract price with data plans that are must for these devices. I know people are eager to label Android as "cheap" and "commodity" but the reality is that there are hugely popular Android handsets in both premium and low cost segments and it isn't clear at all that all of the sales are from low end handsets.
Similarly Apple sells $49 3GS - so does Apple now become a commodity/cheap brand?
My anecdotal experience would suggest otherwise...
iPhones get a much bigger subsidy from the carriers. This can be deduced from the ASP that Apple, HTC, RIM etc report. iPhone ASP has always been $600+, while HTC, RIM have ASPs around $300-400 (Samsung smartphone ASP is even lower). This can also be seen by looking at contract prices outside the US. For example, in the UK all phones can be had free on contract, but the monthly amount you pay for an iPhone is much larger than for a top of the line Android (see the O2 or Vodafone UK sites).
The reason this is not reflected in the contract-less prices is because US carriers have a very strong incentive to inflate them to force you to choose contracts.
This isn't the case.
The high-end Android phones start out roughly the same price as the iPhone, but drop quicker (because new high end models replace them quicker).
Here are the Australian unlocked prices (Android reseller chosen because it was the top result in Google):
iPhone4, prices $719-$999: http://store.apple.com/au/browse/home/shop_iphone/family/iph...
Samsung Galaxy S2, price $749: http://www.mobicity.com.au/samsung-galaxy-s2.html
Samsung Galaxy S (ie, old model similar age to iPhone4, which started out priced similar to iPhone 4), price $549: http://www.mobicity.com.au/samsung-i9000-galaxy-s-8gb-nextg....
Actually, in your link above, iPhone 4 prices start from $859. $719 is the price of the 3GS.
I don't know how it is in Australia, but the contract price discrepancy between Android phones and iPhones is well known in England. For example, O2 sells the Galaxy S2 for free with a 24 month £42 plan, while the 16GB iPhone 4 is free on a 24 month £67 plan.
http://shop.o2.co.uk/mobile_phone/pay_monthly/init/Samsung/G... http://shop.o2.co.uk/mobile_phone/pay_monthly/init/Apple/iPh...
Sorry, you are right about that price being for the 3GS. I missed that.
Here, plans are pretty comparable.
Galaxy S2, $5/month on $59 plan: http://www.optus.com.au/store/phone/galaxysii?sid=MobAFeat1:...
iPhone 4 16GB, $7/month on $59 plan: http://www.optus.com.au/store/iphone/plans
The Galaxy S2 plan gives you a bit more data, and you do have more flexibility with Galaxy S2 plans - you can choose to pay more for the phone and less for the plan for example. (Of course, you also have a big choice of cheaper Android phones too).
Perfect response. Thanks. That explains a lot of it.
"One thing I don't get though is that Android phones aren't very low margin."
http://www.verizonwireless.com/b2c/store/controller?item=pho...
$80 android phone right there. I assume that's lower margin than, say, the $200-300 iphones that Verizon sells with a 2 year contract.
Apple is culturally stuck to high margins. Google cares only about making sure Apple doesn't win and the other handset makers are used to pretty lean margins...
Androids will keep getting cheaper-- there'll be free/near-free ones out there soon.
For some reason that link doesn't work for me.
But my point isn't the price the customer pays. But rather the price the carrier pays to HTC/Samsung. That's the money that the actual OEM makes. Those prices, if they're equal to the non-contract price, aren't that far off of the iPhone. Even feature phones are routinely $150 or so.
Nobody ever posts facts to back that up. They just assume it would be true. But HTC and Samsung are making a lot of profit on their Android phones, much more than they ever did with other mobile OS.
The issue is that Android can be used on any hardware product whatsoever, so inevitably there will be both premium and more commodity type products that cover all market segments. Virgin Mobile already has non contract Android smart phones that retail (no rebate) for $150, far cheaper than an iPhone.