How do we pay for our phones?

Before I answer that question, is probably better to start with a different one.

How much does it costs?

If we look at the material cost of each component of a iPhone 6, is estimated that the entry level costs around $200 and sells for $649.

That would mean a $449 of profit for each phone. Awesome but not correct. How many phones Apple had to build and test to make the final product? Research and Development costs money. Also the sales from this phone will have to support the R&D for the next phone and other products. A new AppleTV has to be funded by existing products before it sees the light of day.

Being responsible means that Apple wants to produce the best products and the lowest price possible without compromising the future of the company. We can assume that the cost per phone will actually be around $300-$320, which means 50% profit margin per phone.

This brings us to my initial question

How do we pay for our phones?

We are a privacy company.

What Tim Cook means with this statement is that Apple makes money on the products they sell, profit doesn't come from other sources. In other words, we the customers are not the product.

When you buy a Google phone for example, Google doesn't has to make a profit on it. They can even sell it at a loss.


Google makes money by selling you to advertisers. Every time you the a search, you used GMail, Google makes a profit. 

To put this values into perspective, Apple which has around only 18% of market share in the mobile space, has 80% of its profits. Samsung has the other 20% of the profits. Yes, these are the only companies that profit from mobile sales in the world. 

Now imagine what other companies have to do to stay in business.