Apple Core


About Apple's Evil Profit margin


So the past week has been full of talk about Apple's quarter results and the NYT article about worker conditions and I wanted to give an angle which might have been under looked. I hope this does not belittle the plight of workers in certain factories in China but I think its fair to give perspective where its due.

This brings me to the point about the convergence of Apple's massive finanical results and the article about worker conditions and what Apple is doing about it. A key metric which has come up in a lot of the coverage, including the Vergecast, is Apple's profit margin. I think the huge cash surplus coupled with their industry leading profit margins are what brings the spotlight on them so much. If Apple was loosing money and if they had a profit margin closer to Dells or HP's I doubt anyone would be writing articles in the Times about worker conditions.

That being said, in many of the discussions on the internets, it is implied all too easily that the reason for such large profit margins is because of Apple skimming on labour and worker conditions. I may be completely wrong about this but do we have any indication that Apple demands more out of Foxconn than Dell or HP does? Again I'm not trying to say that there isn't a problem with how electronics are manufactured, I just dont see how the analysis of Apple's profit margin so quickly goes to them putting pressure on Foxconn to reduce their labour costs.

The reason I think this is particularly relevant to Apple is because they are a company that puts so much effort into focusing their product line and there are many other explanations for their profit margin.

Of course Apple's profit margin is slimmer that say, Samsung. Apple releases one phone a year, how many does samsung release? or HTC? I think its not neccesary to explain how focusing on a few products reduces expenses as it is pretty evident. Apple also benefits from its strategy in buying components. Think about the different displays a company like HTC has to order for its phones, now think about the number of displays Apple uses for the iPhone. You can cut a lot of costs by buying 50 million of the same component as opposed to smaller amounts of different types of components. Think about all the engineers that Samsung and HTC have to hire to put adapt TouchWiz and Sense to many different models.

Again I hope this does not distract from the problems with working conditions but honestly think that it does not help when we don't understand what the problem is. Frankly, the idea that Apple should send manufacturing back to the US, charge a premium for products made in the USA then line up its phones alongside Samsung, HTC and the rest hoping that people will choose the more expensive phone because it's made in the USA is ridiculous.