“Apple is a $700 billion company, but Jeff Williams still thinks of it as the nearly bankrupt underdog it was when he came on board 20 years ago,” Jessica Williams reports for The Times-News. “The chief operating officer and Elon University parent spoke about Apple’s humble beginnings and rise to success Friday, Feb. 22, in the Global Neighborhood’s Great Hall.”
“A graduate of both N.C. State and Duke universities, Williams got his start in the tech world working for IBM from 1985 to 1998. When the time came for a career change, the obvious choice was Dell, which, he said, was ‘on fire’ at the time. But former IBM coworker Tim Cook urged him to join Apple,” Williams reports. “Williams was charmed by the ‘contagious, palpable enthusiasm’ at Apple, so he listened to his gut and came on board as head of Worldwide Procurement.”
“‘The No. 1 thing I worry about is us, as a company,’ he said. ‘And the challenge is: We’ve grown so much,'” Williams reports. “During a question-and-answer session after Williams’ brief speech, one student asked whether Apple had any plans to reduce its prices, and cited a report claiming the iPhone X costs as little as $370 to make but retails for just under $1,000. ‘The stories that come out about the cost of our products [have been] the bane of my existence from the beginning of time, including our early days,’ Williams said. ‘Analysts don’t really understand the cost of what we do and how much care we put into making our products.'”
Read more in the full article here.
MacDailyNews Take: Bills of material stories are usually tripe, that’s a fact. They’re ostensibly for analysts, but the anti-Apple continent use them to make Apple look like they’re overcharging, never once calculating into the final price the cost of packaging, marketing, design, shipping, R&D, etc.
People complain about Apple prices because they covet Apple’s products. Apple doesn’t make junk. Apple makes premium products at premium pricing for premium customers.
Congrats, once again, Jeff on your journey late last century out of the dark side and into the light!
So what’s the gross margin on that iMac Pro? 50%? 60%? More? Sure, Apple sells a few items with gross margins in the 20% range, but extremely few. Just look at the average gross margin posted in their financials. Many of Apple’s products ARE overpriced.
Overpricing goes back to Sculley’s hayday — remember all those Mac IILC’s Apple had to unload at less than 50% of the MSRP? It is repeating today with Cook. I have not seen so much discount pricing on Apple products by third party sellers since the Sculley days. Why? Because the vast majority of third party sellers recognize that all too many of Apple’s products are overpriced for the market. Will the gray market come back like back then because of over priced MSRP’s? Maybe.
They’re only over priced if people are an buying them as fast as Apple can make them.
I’ll gladly pay $2000 for a computer that lasts 5 years and lets me earn a living. I’ll gladly pay $1000 for a phone I got 3 years from and I spend 3-4 hours a day using.
I’m sure all those users who’ve paid ridiculous prices for their 2016 – 2018 Mac Book Pros are glad they did so for the crappy keyboard, thermal throttling and back light failures. That really paid off for them.
If you want to see over priced wait ’til the new modular Mac Pro prices are released, they’ll take eye-watering to a new level.
Exactly! If the products were well ahead of everyone else’s it wouldn’t be a problem–but they’re very often not.
“…don’t really understand the cost of what we do and how much care we put into making our products”? He didn’t get hit by lightning after saying that with what I presume was a straight face? Maybe more than a decade ago that was true—sure doesn’t seem to be lately.
They are overpriced if the market share gets so small that no software developers bother to prioritize Mac app development. Compared to Windows, the Mac app store is a desert of cheesy amateur hour gimmick apps.
This should be plain as day to anyone who uses a Mac.
Depends on what area. I do image work and HTML5 animations for web. The 3rd party developer apps in that area are the best available on the market, and the primary reason I am still on Mac.
Notice that I did say 3rd party. Apple produced apps are just……..well, most of them are on my 3 Macs because they can’t be removed. As if they are really designed for the very limited UI possibilities on the phone and tablet platforms.
Bring back the full featured UI for Mac that I have used since 1988. Keyboard and mouse STILL by far the best if you do any kind of detailed work. Touch? thats beyond silly.
The problem is that Apple is charging foldable phone prices on dated tech with minor speed bumps. It will be a sluggish progression but Apple will continue to fall further and further behind the competition, as long as Tim Cook is willing to sit idly by on his laurels.
What? Apple is charging foldable phone prices? Hmm.. the new Mate X costs USD2,600. Which “dated” iPhone costs HALF that much? Please tell me. So, Apple doesn’t (currently) offer a folding phone, so they are “continuing to fall FURTHER and FURTHER behind the competition.” Really, Reality? “Minor speed bumps” on top of the previous year’s blistering fast chips. Reality, do you often find your iPhone sluggish? Do you often max out your phone’s capabilities. Really, Reality?
You have to have margins, if you don’t, innovation suffers, customer support suffers, employee benefits suffer, it’s a bad thing in the long run to lower your prices to the point where your margins are minimal. As much as I would like to pay less for my phone, I think Apple is doing the right thing and I will continue to buy Apple products
It is nice to read some calm, cool and collected comments here, for a change (especially when it comes to Apple and pricing). Thanks guys for sharing your thoughts!
“You have to have margins” If you don’t, they shut off the lights, lock the doors, don’t pay employees and suppliers, etc.
Amazing that that has to be pointed out, but thats the times we live in.
After all, AOC is a congressperson, who would have thought a 15 year old could get elected in a district she apparently does not live in, according to the postman who delivers mail, picked up every few months.
True, one does need to have margins to allow for reinvestment. However, it is a question of just how much of a markup is fair & reasonable.
For example, is the upgrade for a 2TB SSD on a mini which currently retails for +$1600? Granted, its higher performance than a $300 SATA 2.5″ SSD, but it isn’t much different than the Mercury Accelsior Pro Q, which OWC paid to develop and is selling for $998 (and recouping their R&D costs).
When the markups become oversized, one eventually wonders just where those funds are really being reinvested?
They sure haven’t been poured into iMac or MacPro development—that’s for sure.
…and at a current Dividend rate of 1.6% (up from 1.4%, but only because the AAPL stock price fell), it hasn’t gone back to Stockholders either.
Maybe people can give Huawei’s new USD2,600 Mate X a try. Then they can really complain about pricing (and privacy). I’m happy with my 2017 iPhone X.
I’m wondering what the problem would be if Apple did give customers a bit of a break. Too much demand (even more than they have now, which at times it appears they clearly can’t handle), errosion of brand cache? For years I’ve carped about their niggling consumers with things like dongles, etc. How about starting there. Give people all the “tools” they need up front for the “full Apple experience” then prices might not seem so bad. But as it stands now, most if not all major Apple product purchases come with a pretty considerable set of “add-on” costs. It’s like getting the greatest xmas gift ever, only to fnd out batteries are not included (and you didn’t know to pick up a set at the time of purchase). The biggest of these is a toss up, either “free” iCloud services for a year (with way way more than their measly current offering) and/or including the necessary dongle(s). I believe the wealthist company in the world CAN and SHOULD do that for their customers, AND they should have already learned that by now.
With due respect, these old brasses are still playing the same tune.
Yes, there are costs element beyond the bill of materials, but over 80% of the profit in the entire smartphone industry with some 20% of the market share, and hundreds of billions of dollars amassed in a relatively short period with essentially the iPhone alone? What about their memory retailing business with unspeakable markups? These speak volumes of what is actually happening no matter what Apple may attempt to explain.
As long as they still try to defend and justify their pricing strategy (failure), there would be no hope for Apple. I thought they’ve got a message. It was so obvious. Consumers are not stupid, not as stupid as Apple might have thought we were.
Apple iPhone prices are completely competitive.
iPad prices are also very good.
AppleTV needs serious update/price reduction.
Mac prices are terrible except for the iMac (which also needs a serious update.)
By completely abandoning standard/Fusion HDs in everything but the iMac, and insanely overcharging for the latest bleeding-edge SSDs, Apple has completely chopped off the medium to low-end spectrum of the Mac market.
People buying an $800 Mac mini with an integrated GPU DO NOT NEED SSDs to have a well-balanced machine. Neither do people buying an entry level laptop for their 8th grader or for use as a general family computer.
Think about, if Apple is forcing people into buying a low-end, integrated GPU, why would they also force them to buy a high-end (ridiculously overpriced) SSD? It makes no sense. The low-end customer doesn’t want the stiff upgrade to reasonable storage capacity, and the power-user customer doesn’t want the under-powered GPU.
iPad price is great
iPad Pro price is beyond absurd.
If Williams is concerned about growth, then he needs to step aside and let a capable manager take his place.
Apple hasn’t maintained any legacy product line and Foxconn does all the heavy lifting for its high volume consumer stuff. The idiots of Cupertino are too busy counting their bonus checks to bother keeping their product lines fresh and, yes, affordable. The hubris is palpable.
Size isn’t a problem for Apple. Any other company with such resources would maintain the ecosystem that brought them to prosperity. Apple is instead chasing the untrustworthy squirrels of the industry, blowing billions on me-too products and services that make no sense.
The rudderless ship appears not to listen whatsoever to user input. Apple isn’t delivering the quality and performance at the prices they charge. They don’t offer truly good support or training. Their walled gardens are one crack away from being exposed for the joke they are – facebook and google still track all iOS users with impunity.
So as Jony continues to design more expensive less user friendly gear with blatantly obvious features missing, Cook will continue to drive them to be a niche fashion brand. It may take another decade before the iPhone cash cow falls apart, but it’s very clear that the leadership team hasn’t a clue that it is happening. There is nothing else in Pipelines vision that will replace all the things Apple lost.
They let iTunes rot on the vine without meaningful software and quality improvements. They let iPods die. “Pro” gear is outperformed by the competition handily. In the age of Cloud, Apple doesn’t make its own servers. What about Airports, Displays, iLife suite…. Quality keyboards, small phones, …. all dead. Apple is letting dumbass designers drive the company into overpriced irrelevance.
Apple is no longer a company you go to for the best quality hardware and software to be a creative or a professional. If you want consumer gimmicks in the latest colors, however, Apple has one or two things to buy. But no more. Apple is too big of a company to do more than a couple things per year. This year is selling video. To all those Mac Pro owners who actually make their own videos, sorry, you just have to keep hoping somebody wakes up in Cupertino.
Since everything is such shit, what kind of mental disorder do you have to still be posting here?
Send this to Apple. Well said.
Williams should have explained right then and there about the enormous R&D investment costs involved in bringing an iPhone to market, which (if factored in correctly) drives that BOM cost way up.
Williams attempts to justify outrageous prices by claiming high development costs. That is a bald faced lie. Total hardware & software development costs are perhaps 5-10% of the total costs of a digital product. Mostly software which is amortized across many generations of hardware. Over and over Apple highlights feature choices that are a waste of time and money. Ive was so proud of his polished black iPhone 7. How many sold? Ive got custom spaceship door handles. How much did that cost? Cue is 2-3 hardware generations behind in capabilities with his streaming media junk. Why are other companies able to sell at 30-50% lower costs with new fresh hardware? Shiller needs to eat is fat ass words and admit that Apple leaders DO NOT innovate anymore. By choice.
The sad reality is that Apple is fat and lazy. They have no self control for costs — look how much Cook wasted on Ahrendts. Stupid cars. Gimmick bars. Needlessly cheap ass keyboards. All the dead wood needs to go. Fire the timid and lazy and misguided execs and hire real engineers.
One legacy hardware engineer from 2009 and a dozen interns could have released a great Mac per year while Apple forces its few remaining loyalists to suffer Trashcan and Macbook “Pro” limitations. They’d allow user repairs and would include stuff like SD card reader options and reasonably priced RAM and SSDs. Why? Because raping the user for commodity zero effort stuff is an abuse of trust.
Read this aloud in your next group meeting, Williams. Then do something about it besides offering a decadenof lame excuses.
Speaking of enormous R&D investment costs …
Looking at Apple’s 10-K form from last quarter, one sees that the YoY increase in internal R&D spending went up by $487M (yes, just short of a half Billion dollars).
With a half billion ADDITIONAL R&D dollar spent, where’s the ROI such as a new Mac Pro?
FYI to put this into perspective, that single year increase is more than what the US Army is spending this year on the biggest of their “Big 5” top modernization priorities.
The article quoted someone stating that, “Apple is a $700 billion company Apple is a $700 billion company.”
She’s off juts a little: Apple is actually an $820 billion company currently.
“Apple makes premium products at premium pricing for premium customers.”
This is just not true, Apple has many manufacture problems and assorted market place problems due to using cheap materials or cheap assembly. They spend too much money on attempting to make their products unrepairable by the owner. Money better spent on improving the product.
Over charging for a memory upgrade is not a premium product, it’s just bad design that makes it difficult to either add more ram or requiring it to be manufactured with the additional ram.
How much did they spend developing their own screws to prevent owners from being able to repair their own laptops or upgrading them? When the screw issue failed they resorted to soldering everything on the board.
Apple products are no better then the competitors in the way of build quality in fact in many cases they are inferior. Using an i5 on one of your flagship products while your competitors are using that in their entry level products is not premium. It’s just a rip off.
Is Williams aware of how underwhelming Apple hardware and software is in terms of usability, user-friendly features, repairability, and performance per $ ? It seems not. Nobody who types extensively would have approved the horrid butterfly keyboard Apple now installs on its laptops. Nobody with a sizeable music collection would find iTunes to be a reliable software that just works. Nobody with growing needs would find a Mac a good bargain for long term ownership, knowing it cannot be repaired or upgraded, and it won’t be superseded by a superior performing model for at least 6 years and counting.
But Williams must be proud of Apple’s watch bands and emoji. That’s what Apple does now.