Apple's secret weakness: its margins aren't as high as you think

55 per cent profit margins sounds like a lot, but someone's got to pay for iOS.

Working my way through AnandTech's mighty iPhone 5 review (and I mean mighty: this thing weighs in at just over 20,000 words), a paragraph jumped out at me. Anand Shimpi writes:

Ironically enough, if Apple’s competitors would significantly undercut Apple (it doesn’t cost $599 - $799 to build a modern smartphone) I don’t know that the formula would be able to work for Apple in the long run (Apple needs high margins to pay for OS, software and silicon development, all of which are internalized by Apple and none of which burden most of its competitors).

This is the flip-side of Apple's much-vaunted vertical integration. The company notoriously earns margins of 55 per cent on the iPhone 5, and that's often taken to mean that its profitability is entirely a result of its ability to charge far above its competitors (even though that's not entirely true any more either).

But while the company charges 55 per cent more than it costs to build each iPhone, it has a lot of fixed costs. It develops its own OS from scratch (while its competitors piggy-back off Google), and is increasingly moving to its own processor development and fabrication as well. That money has to come from somewhere.

Of course, the company remains astonishingly profitable even after the costs of development are accounted for, so starving it out will take a while. But it isn't quite as invulnerable to cost pressures as many think, and that could be something which competitors — particularly Samsung, which is the only other smartphone manufacturer to have nearly enough profit to fight that battle — could use to their advantage.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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YOU’RE FIRED at last! Katie Hopkins is sacked by LBC after “final solution” tweet

She may have avoided a firing on The Apprentice, but she couldn't get out of this one.

Remember when Katie Hopkins wasn't a notorious radical hate preacher and was just that mean lady on The Apprentice who resigned from the show?

Well, let's cast our minds back to that time, in the heady days of 2006, when the nation sighed in frustration as the grand high angry bear Alan Sugar was denied his chance to point at her and growl "You're Fired!"

For we have at last been given what we have been waiting for over a decade.

Katie Hopkins has, finally, been fired.

OK, apparently it was mutual. She and the radio station that employs her for realtime weekly bile spews a live show, LBC, have parted ways:

According to the BBC's media editor, there were "cheers and applause" in the LBC newsroom when the decision was announced.

This follows Hopkins tweeting (and then deleting) that there needed to be a "final solution" following the Manchester terrorist attack. It seems LBC has found its own solution to the backlash against Hopkins.

I'm a mole, innit.

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