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back to article Researchers rip iPad apart to reveal Apple's profits

Apple stands to make a profit of up to $483 per unit on its iPad according to a very literal breakdown by industry analysts iSuppli. The research firm said the total cost of materials and manufacture for Apple's big iPhone ranged from $229.35 for the 3G-less, 16GB version, which sells for $499 to $346.5 for the top of the range …

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Pint

User experience is the primary consideration.

Until you've actually used an iPhone/ iPod Touch, you can't fully understand the user experience. I think that once people start getting hands-on demos of the iPad, they might decide that it is in fact exactly the kind of thing they'd find useful / enjoyable to have around the house.

Logical criticisms can sometimes evaporate once you try a device in real life. The lack of app multitasking for example, becomes a non-issue for most people, especially when each app occupies the entire screen area when it has focus.

Pint, because you have to drink it to appreciate it fully.

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Jobs Horns

It's all about the 'experience'

Yes you have to drink the pint to appreciate it fully, however do you drink pint A at your local boozer at a max price of £2.50 or do you drink pint B made by the same brewer and may even be from the same batch, it tastes the same and has the same effect but costs £5 at the 'trendy' bar because it's all about 'the experience'?

I'll be at the boozer spending half as much and wilI have cash left over for a kebab and taxi home. Plus the boozer keeps me away from those irritating twats who think 'image' is everything and throwing money away on a product that is inferior to other offerings but costs twice as much is a sensible thing to do.

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Nah, my mind is made up

If it's expensive and you can touch it without being at least 4 foot tall I don't want one.

I have a toddler.

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Tried it. Hated it.

In this office, the multi-tasking is a major issue.

We're all HTC or Nokia users, and (to a man) we hate our office iPhone. It's very, very shiny and swish and it it makes everyone go 'ooooo...' But then when people use it, they have all hated it.

It's the keyboard. And the layouts. And the lack of multi-tasking (hell, my WinMob 6.1 had that). And the control. And iTunes. It even refuses to let you turn it on unless it thinks it has enough battery - ignoring the fact that it's on charge.

The only saving grace is the multi-touch, and non-US androids do that...

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Anonymous Coward

Horses for courses

You were doing so well before that last clause.

I know lots of people who are more productive on Apple kit than they are on other systems. The UI fits some people better than it fits other people. Personally I hated the OS 9 UI - yuk. On the other hand, I like the OS X UI. So what...

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FAIL

Okay...

"Sorry, but fuck loads of us have tried Apple's various UIs through the years and found no real benefits, we have tried it, we do get it, we still don't like it."

Fair enough, just stop trolling Apple news stories all the time. Don't like it? Don't use it, and stop reading the bloody articles about it.

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Megaphone

He's got one ...

So I assume you have tried it and decided it has a function in your life alongside your iPhone, iPod Touch, Macbook and Big mac?

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... sounds interesting?

How did they measure it? ... let's see .. a single thread is more productive than multiple threads in a PC? Don't get it ...

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Anonymous Coward

OK..

Actually, you are wrong when you say that the UI is only a minor part of the equation. Regardless of what hardware you have under the bonnet, if you have a bad UI, it will feel slow and inefficient.

When designing proper computing systems (and I am not talking games here, games use their own UIs instead of whatever the system provides), user interface design is a MAJOR consideration.

If it were not, Apple and Microsoft would not spend £millions each year running user interface design teams

You are right when you say User interface design is subjective. However, I will say that although I have done no real scientific testing, I have found that amongst my friends, those who use Macs have had a much easier time learning the OS than those who use Windows..

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Pint

"Pint, because you have to drink it to appreciate it fully."

One might easily misread that to infer you'd have to be drunk to decide that buying an iPad is a good idea.

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Flame

Simple= easy to use

"but it's a myth that they're any better for actual usability and they certainly don't make you any more productive."

Depends on what is the reference point. Definetely easier to use and more usable than anything MS has produced. That spells productivity in long term. Simple=easy to use, it's that simple.

Apple also has done good job of making many maintenance jobs automatic, while MS has "wizards", which are extremely dumb.

You could easily "adjust" everything a couple days just to "get it right" in Windows, while there's not so many configurations available in Mac, thus making you to do more work and less play.

If that's a good thing or not, depends of the point of view.

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Flame

UI design teams are just a tax reduction

"If it were not, Apple and Microsoft would not spend £millions each year running user interface design teams"

Yepp. MS obviously uses that team as a tax evasive action and throws the results away, while Apple isn't much better. Both exist because you have to have "research" unit.

See-through windows on a screen? Who is the idiot who thought that would be a good idea? Or "3D"-windows?

Bunch of crack-addicts which don't have a clue about ergonomy, all of them.

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FAIL

Buy in to the life style

Every one knows, that when you buy an apple product its not just a product, it's a way of life. So why not make 50% profit on it? The iPas is 'magical', so that probably accounts for half the cost. It can't be cheap to install magic.

Still, its nothing new. Every thing apple sells costs more for less. Just look at the archos 9, it's more or less the same price but does so much more. I don't get it, why do people actually want apple to tell them what they can do with their machine? I like the choice, weather its MY choice of media player, or browser... it's still my choice and thats what you get with windows, the choice.

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Silver badge
Stop

They don't make a 50% profit on it though

It's 100% profit; they buy the components for $400, inject the magic cult juice into them, or whatever it is they do, and sell them for $800. I seriously doubt the manufacturing costs approach anything like the $400 markup.

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Anonymous Coward

Still, its nothing new. Every thing apple sells costs more for less

Take a look at the imac pro, £450 for a 2TB Hard drive and £287 for a ATI Radeon HD 4870 (512mb). I am sure they have bets on how high they can over price things and still get away with it

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Are you sure about the Archos 9?

Windows 7 on an ATOM Z510 at 1.1GHz with a very limited Poulsbo U515W graphics chip and only 1GB of RAM is not that fast, even with all the bells and whistles turned off. In my experience, even XP Home is very slow on this combination.

I have a nano ITX Board with this CPU and chipset but 2GB RAM and tried it with XP.

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Boffin

@ Ed Blackshaw

You can never have 100% profit unless you magic stuff out of thin air and sell it on the spot.

Selling something for £2 that cost you £1 including your overheads means you generated 50% profit off a 100% markup.

Also, according to the article, iSuppli include manufacturing costs in their calculations.

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Grenade

Simple.

If you had a gorgeous girlfriend you would expect her to be a bit more expensive than your average plain one.

And thus it is for gadgets.

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Jobs Halo

@AC 14:10

How dare you!

You have sullied His Jobsness' good name by seeking to compare the iPad with mere objects.

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FAIL

Not from me........

They will not be making any profit from me. Having experienced one apple product (iPhone) thats enough to put me off for life. Its not the device - it's the level of control over it's usage etc that grates. With apple that will only get worse.

It's win or linux slates for me and an android based phone..........

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Linux

Have you tried ...

wearing a tinfoil hat?

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FAIL

@laffer

"Having experienced one apple product (iPhone) thats enough to put me off for life. Its not the device - it's the level of control over it's usage etc that grates"

What didn't you like about it? Couldn't make phone calls? Couldn't send texts? Couldn't browse the internet? Apple don't have any control over any of these things, once it's in your hands, you control how it's used...

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Silver badge
Stop

really?

I can tell you havent used a windows slate. Awful things with dire battery life. And android phones? Dont make me laugh, try using it in a modern car (ours wont sync properly in the BMW 530 or the mondeo convers+) . Have you been able to use an authenticated proxy over wifi yet - which sort of makes it useless in any normal business environment?

Its horses for courses, if the ipad works then great, but simply saying "its apple, trash it" is silly. No-one seems to have the perfect solution yet.

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Jobs Horns

Apple haven't lost the art of ripping people off

In other news, bear given ASBO for defecating in woods, and Pope confesses to Catholic tendancies

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Gates Horns

Gah!

I don't know where to begin with the pointlessness of this story.

iSupply did not rip apart an iPad. They've speculated on the parts involved, and the typical price for these to come up with a Bill of Materials (BoM).

Now, unless Apple can get all their R&D done for free, marketing for free, everyone works for free. Free electricity, water and rent. Indeed, free everything else; the margin between the BoM and selling price is not profit.

As for Bill Gates? Why can't he just let it rest? His concept of touch, pen and keyboard tablets have been around for nearly 10 years now. And hardly anyone wants one. Bill, you concept failed. Get over it. Let's see what happens to Apple's take on the tablet...

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Silver badge
Stop

Bill G - no comment?

"As for Bill Gates? Why can't he just let it rest? "

Do you really think he called a journalist to bitch about the iPad? Or do you think he was asked in passing what he thought by the blog writer? He gave a response of general indifference, but also said "It’s a nice reader". What more do you want? Not to mention he was a fan of the iPhone.

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Jobs Horns

Ahhh... but.....

They cannot comment on R&D etc. as they would need direct access to the company details etc.

Besides, it's just a big iPhone, how much R&D do you need? Seriously! how about "Let's make a big one".

Apple make more money because iCustomers will pay it, I could be cruel and say iSuckers, but to be fair, it's their money and if they think they are getting value then it's worth what they are willing to pay, Apple have a higher proffit margin because people are willing to pay it, my girlfriend bought a Balenciaga handbag for some obscene amount of money, used if for a year and sold it for more than she paid, cost is absolute, value is not.

Apple's business model depends on charging a premium for their products, simple as that, to some people an Aston Martin DB9 will be worth the extra £50k over a Jaguar XKR, most of us wouldn't have to struggle with that particular choice, but people will often find an extra £150 to have the Apple logo on their gizmo of choice, me? I don't need it, I don't consider it worth the extra cash but some people do, I bought a Creative Zen for the same price an iPod Video because it had better features, I'll probably never own an iPhone as I prefer a small phone in my pocket and a large archos 705 in my rucksack, but that's just me.

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Bill of meterials != cost

Not all the gap between the cost of materials to the sales price is profit. First of all, assembly does cost something. Even of it is automated, the machines that do the assembly and the buildings that house these machines must be paid for. Secondly, development costs must be paid over the price of the sold units. Apple designed their own SoC for the iPad, which is not cheap. And there are lots of other such costs that need to be recovered through the sales price.

That said, the incremental cost of producing one more iPad is fairly low, so when Apple have recouped the fixed expenses, the price of the iPad is likely to fall.

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Gates Halo

No chance

"so when Apple have recouped the fixed expenses, the price of the iPad is likely to fall."... no chance of that, look at the mac book. The price hasn't really come down, yet apples profits jumped up 50% in the last quater. Given the global enconomy you have to wonder why?

Answer? They are selling the same old c**p for the same price, even though as every one knows the price of the PC parts inside is falling like a lead brick.

That glowing apple on the front is what your paying for, and its got nothing at all to do with the costs of making the damn thing.

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Silver badge
Stop

Okay, lets do a little maths here, shall we?

Lets say that these ar assmebled by hand, and that a worker is paid $20 an hour to assemble them. Lets say it takes a whole hour to assemble one device. That gives you an assembly cost of $20. In reality, they will be made on a construction line in an existing factory, so the cost will be a tiny fraction of that.

In terms of R&D costs, the software is essentially the same as that on the iPhone, the R&D for which has already been done, and presumably paid for several times over in profits. I calculate the cost of this to be approximately zero.

I don't know how much the magic pixie juice they fill them up with costs though.

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Thumb Up

This is usually where the PC arguement pops up...

It's all a trade off, and you hit the nail right on the head. LABOUR and ASSESMBLY does cost money, and for the people constantly harping about how much cheaper it is to maintain a PC = better product, they obviously equate their time to a fairly low dollar figure.

It's not like apple is the only company to mark up a product after all, I don't see why this is surprising when just about every retail product you purchase is upped about 300%.

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Go

exactly

parts cost + manufacturing cost certainly is not equal to actual cost. This is something the press keeps running with that no one gets, and iSuppli doens't help the matter.

This cost doers not include R&D, which likely cost Apple over 200m, if not a lot more considering this thing's been in development for more than a decade in multiple revisions and iterations. It does not account for logistics and supply concerns, warehouse storage, nor any FACILITIES costs for assembly (only labor estimates and component costs from 3rd parties are considdered). How about what apple spent on that A4 processor as well?

Then there's the fact that Apple's retail price has to account for them still making a profit when they sell these through 3rd parties, like BestBuy, MacMall, and Authorized resellers, who themselves would like to clear a fairly standard 10-20%. When apple sells direct, they've got people to pay that make that sale too, and that washes most of the difference between retail and wholesale prices.

Finally, there's warranty support costs. The people that answer apple's phones (or more regularly call you at a scheduled, convenient time so you don't have to wait on hold), also cost money.

If Apple clears, end over end, $50 per device, they'll be doing GREAT. Yes, the high end will reap a lot of profit, especially if that $130 3G connector price holds (I think that will drop to $79 real fast, and $50-100 come off the base model within 6 months).

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FAIL

@Haydies

The price of the Macbook maybe has not fallen... but the spec has got better. If you purchased one two years ago, the one you would buy today for the same price would be better specced...

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Stop

PCs

I can only comment on my own experience but when I had a PC, I seemed to spend a lot of time repairing things, reinstalling the OS and gernally fannying about instead of getting things done...

Say I was normally paid £10 an hour, the amount of time I spent "fixing" the PC would have been worth about £500 or more. Since my last PC cost £1500 and the last Mac I bought was £750, I feel like I've saved a LOT of money....

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WTF?

2 years ago?

I wasn't talking about 2 years ago, more like 6 months ago.

The MAC book is a cheap, low spec dell in a white plastic case, infact at one point they where made by asus. They are PCs, there is NOTHING in there other then basic, low end kit. Right down to the gpu, what is it? a Nvidia 9400? my £400 acer has a better spec...

Every one else in PC (and apple do make pc's) drops their prices all the time. Apple only did that to turn the old model in to a 'budget' model when the new one came out.

Trurth of the matter is apple sell a comodity, their brand and the image that goes with it. I'm clearly not a fan boi, I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do.

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Thumb Up

Design != looks

"I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do."

I want something to read books, papers, feeds and web pages on the sofa; and listen to music and watch videos when travelling. I want it to be an easy and enjoyable experience (i.e. not a big heavy, hot thing, not something that'll run out of batteries straight away, and take time to 'wake up'), and I want it at a price which I feel is good value for money. Show me an alternative to the iPad for what I want it for.

Functional design costs money, just as does aesthetic design. Making it a few grams lighter, a few mm thinner, last a few minutes longer etc: all of these things take design time, which costs money. Any fool can throw some components into the form factor flavour of the month; it takes a lot of time and effort to really design something.

I just don't get what's wrong with something that does most of what you need/want and not a lot more? I really don't care that I can't run an exchange server off it or use it for programming in C#...

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FAIL

We get it Haydies...

you don't like Apple! Well done! Do you want a fucking medal now?!

Right. First. Its Mac; a contraction of Macintosh. MAC would be Media Access Control when discussing computers, or if you have a girlfriend , you'll know it's also a popular brand of make-up. We are all aware that Macs are 'just PC's', they always have been 'just PC's', when discussing computers its quicker to type Mac vs PC then Macintosh vs Windows.

"...cheap low spec dell in a white plastic case." Really? A similar spec'd Dell (Studio XPS 13) is £36 cheaper. Not really a lot in it, is there? In fact if you choose Win 7 ultimate, it becomes £54 MORE expensive! Once the Inspiron 13z spec'd to match it is £200 cheaper, but then the GFX card isn't as good and the processor is shite (an Intel SU7300 1.3GHz). Similary, the Vostro 13 was significantly cheaper, but also had a significantly inferior spec. The Latitude E4300 is £143 more and that is after a £139 discount BEFORE VAT! I'll concede that this model is more inline with the MBP 13", which is £50 cheaper after VAT has been added! the point? To show you that you are talking BOLLOCKS! Apple just aren't overpriced. QED. So what if ASUS, who used to make Dell motherboards and other parts BTW, made Macs? It's irrelevant. The NVidia M9400 is an excellent mobile graphics card. Sure, there are more powerful ones out there, but so what?! Unless you are a gamer or 3D designer/modellor it doesn't matter! Even then the 9400 performs well enough.

"Trurth of the matter is apple sell a comodity, their brand and the image that goes with it." What is so bad about that? Many, in fact ALL businesses do that, it how you SELL!

"I'm clearly not a fan boi" No, you clearly are! Just not of Apple...

"I buy my hardware based on getting the best value for my money, and it being able to do the things I want to do." Funny, that is EXACTLY what everybody else does. Value for money != cheap. I use Windows, Mac and Linux based PC's 'cause I'm a geek and I like to play with computers. I'm a professional web designer and developer, my weapon of choice is the Mac, because IMHO it has the best apps available for that job and therefore as a platform it offers the best value for money TO ME!!!

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same old crap for same price?

Answer? They are selling the same old c**p for the same price, even though as every one knows the price of the PC parts inside is falling like a lead brick.

Let's have a look.

White Macbook September 2007, 2.1GHz C2D, Intel GMA 950, 160GB IDE Harddisk, double layer 6x DVD, 2GB DDR II RAM and VGA Adapter

Total 1308 Euro

White Macbook February 2010, 2.25GHz C2D, Nvidia 9400, 250GB S-ATA2 Harddisk. double layer 8x DVD, 2GB DDR III RAM and VGA Adapter

Total 928 Euro

Besides the faster CPU, faster GPU, faster RAM, faster and bigger Harddisk and faster DVD drive it's only 380 Euros cheaper than 2.5 years ago. What a rip off!

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Grenade

Apples, oranges

"Right down to the gpu, what is it? a Nvidia 9400? my £400 acer has a better spec..."

And how long your Acer will function? 3 years? If you are lucky, yes.

I bet that £400 don't include any OS, while Apple is selling it bundled.

Basically you are comparing apples and oranges and then whine because the others are so expensive.

I've been using Apple's products (family support, my parents have MacBook Pro) and I know that support calls to me have dropped to 1/10 since they changed to Apple (3 years ago) from earlier machine (generic XP laptop). You can bet your ass that I'd put a couple hundred more to that Apple machine,again, just to save my own trouble during the years.

You learn to think ahead when you get old enough.

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FAIL

My apologies for poor grammar...

and bad spelling. I have no excuses other than stupidity from birth...

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Anonymous Coward

Duh

my £400 acer has a better spec...

But doesn't run OSX

Next...

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Thumb Up

Yep

And the thing that interests me even further is this: People keep talking about the ipad only being for 'consumption' and never creation, but look at the apps for the iphone - despite the small screen with so-so resolution, there's all kinds of little painting and graphics apps etc. I'm not that impressed with the ipad so far, but the crucial thing isn't the device itself; it's what the app devs will do with that bigger screen. I reckon the naysayers have jumped too early.

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Silver badge
Badgers

Long lasting macs?

I've got a G4 Power Mac sitting upstairs. It has a blown PSU. My desktop machine has a 500w PSU in it that's about the same age and has been chugging away happily for years.

If my PC's PSU blows, I spend maybe £50 at most and get a new one.

A new G4 PSU? That'll be between £150 and £200 please. Same shape, same size, same basic construction, same cheap Chinese manufacturer, but it has a different pin-out for the motherboard plug and a 28v line. "Think Different" my arse.

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Silver badge

No surprise

I did wonder how much the costs could really vary when I saw the options. A 3G chip, GPS and a bit of extra flash memory could never have explained the price difference between the models. What is amazing is the folks that think Apple have done them a favour by introducing a "budget" option.

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What about...

the cost of licensing patents from other companies?

oh right...

move on

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What about the indirect costs?

Assuming iSupply have factored in the other direct costs, such as labour and machine hours, this still only gives you a gross profit margin.

I'm a management accountant. I used to work for an accoutnancy practice that specialised in the licenced trade. Your typical pub would make a gross profit of about 35% on drinks, and 65% on food. But look... pubs are shutting down at a ridiculous rate, because they can't make a profit. How can this be if they make an average gross profit of around 55%? Well... because they have to pay all their staff, their accountant, advertising, rent, rates, gas, electricity... etc.

Claiming that Apple is ripping everyone off because they sell their brand new consumer electronics at a high initial markup is just ridiculous. Everyone knows that consumer electronics are always pitched at a high price at first to soak up the early adopters money. This is a common marketing strategy. Anyone who doesnt understand this should look up the Product Life Cycle. It explains the way this works quite well.

In the real world, profits (actual profits) are as low in the early stages as they are when the product is out of date and the market is in decline. Profits peak before the market reaches maturity, and then start to fall again.

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warranties

Let's not forget about the cost of warranties. In the end, if a product fails, we all want a new/repaired product, which will add to the cost of the original

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yupp

They'll factor in a provision for that too.

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