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I have often heard people talk about to an Apple tax in reference to Apple products (especially their Mac products). This is one of many references to Apple having overly high prices compared with competitors, and is particularly popular on-line.

Regardless of how this is worded, the following graphic illustrates one example of such belief - that Apple charges considerably more than the cost to manufacture

http://www.bhatnaturally.com/wp-content/uploads/2008/11/apple-tax.jpg


However, for every proponent of Apple tax existing, there seems to be just as many who are ready to offer a "Apple products are higher quality and use higher quality components" or similar answer.

Whether or not Apple products are higher quality or not is not what I care about. I am interested in the multitude of claims which essentially state Apple has prices ridiculously higher than other products, resulting in a "tax" or premium requirement to purchase Apple products in addition to normal cost, etc.

Does such a premium exist when purchasing Apple products - ie does Apple have abnormally high prices on their products relative to functionally equivalent products from competitors?

  • That image is clearly meant to be a joke. So, what type of answer are you looking for? "Yes, Apple sets a price for their products that maximizes their profit margin?" – ESultanik Nov 2 '12 at 17:13
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    @ESultanik regardless of whether the graphic is a joke, there are a lot of people who believe Apple has considerably higher profit margins than other manufacturers. There are also a lot of people who counter saying "Apple products are higher quality and cost more to make!" or other variants. I want to know whether this "tax" (call it a premium if you don't like the word) actually exists, or, if this idea has been falsely created. – enderland Nov 2 '12 at 17:25
  • The issue, I think, is the idea that Apple products which are functionally equivalent to some competitor product cost significantly more. The core issue is whether this is true; there are secondary issues if it is true as to why (after all BMW cars and Prada branded handbags sell for more than the functionally equivalent GM cars or unbranded handbags but not many complaints are heard). – matt_black Nov 2 '12 at 22:02
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    "Are Apple products sold at a premium price because of the brand?" and "Does Apple have abnormally high profit margins on their products relative to competitors?" are not even close to the same question. – user792 Nov 3 '12 at 12:51
  • Abnormally high profit margins is the wrong point of debate: the issue is abnormally high prices. – matt_black Nov 3 '12 at 17:15
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The product often mentioned as having "high Apple tax" is iPad. But in fact Samsung has higher margin on Galaxy Note 10.1, than Apple on iPad. On the other hand however, Samsung also makes Nexus 10 for Google, which sells at much, much lower margin.

Apple gets hefty margin from iPhone 5, however Samsung gets similarly high margin from Galaxy S3. Again, there is Nexus 4 from Google (this time it's made by LG, not Samsung), which will sell at much, much lower margin.

So generally speaking, the margin on Apple products is similar to margin of other brand name premium products. However, there are exceptions, where equally capable premium products are sold with significantly lower margins (eg. Google's Nexus products).

BTW. Overall tendency is for Apple's margin to go down due higher production costs and tighter competition. Hence investors' reaction on NASDAQ.

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    Do you have a source for the Galaxy S3 margin? I can't find anything on that. – Mad Scientist Nov 3 '12 at 18:15
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    Margins are not the issue. Prices are the issue. It is perfectly possible for two very similar products to sell at the same price but have very different margins because one manufacturer has inefficient supply or manufacturing. – matt_black Nov 3 '12 at 19:43
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    @matt_black The question is asking about price differences not based on the manufacturing cost, so the margin would seem to be exactly what they're asking about. – Reinstate Monica Nov 5 '12 at 3:33
  • @Fabian: can't find exact tear-down, only estimates which land BOM of S3 at $160-$200; Thing is, that unlike Apple-Foxconn, which only assembles the phone from externally supplied components, Samsung actually makes the components, so it has no external suppliers. It makes it more difficult to estimate the cost. – vartec Nov 5 '12 at 9:58
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    @BrendanLong My point is that the price differences have nothing to do with the manufacturing costs. Competition in the retail market determines the relationship between price and volume. Firms who can't make a margin at that price/volume can't stay in the market long term. That is the only link between price and manufacturing cost. Besides, price is easy to observe but cost is not (teardowns give an indication but ignore learning curves and setup). – matt_black Nov 5 '12 at 10:05

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