In business, margins are the differences between revenue and costs. A monopoly maximizes margins because they have little or no competition and can charge what the market will bear. iSuppli has dissected an iPad2 and estimates that on a sale of $729 worth of iPad2 (32gB) the cost of manufacture and materials was $336, leaving nearly $400 as margin. Some of that gets eaten by shipping/sales costs but it is still huge. M$ gets away with even more. For the cost of copying or accounting for licences it takes in $50 or more. The cost of a licensing transaction must be of the order of $10 or less with automation per PC.

Folks who actually work for a living and compete have margins as low as 2% in some areas of hardware. Some of the new gadgets like smartphones do permit larger margins because as fast as they can be produced the demand still exceeds supply. As markets mature, competition tends to lower prices so that consumers do not have to support huge margins. That is why we should buy Android/Linux or GNU/Linux on our PCs and even choose generic equipment instead of hot brands.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
This entry was posted in technology. Bookmark the permalink.

Leave a Reply