Whenever Apple releases a new iPhone, it has become tradition for rabid Apple and Android fans to trade barbs in a childish display of fandom rivalry. Facebook and blogs will be replete with taunts and jeers on both sides. It was not good enough that they didn’t like the rival platform, they had to make sure the other side knew how much they hated their platform. Check out some of their work when Apple launched their new iPhone 6 and iPhone 6 Plus smartphones :

Now that Apple has officially announced the iPhone 7, there is a new comparison out :

Of course, the comparison is hardly accurate, since the Nexus 6 is not water-resistant, just splash-resistant. The iPhone 7, on the other hand, has IP67-rated water resistance. It is also a fact that Apple iPhones have always lagged Android smartphones in features and specifications. In fact, Apple iPhones will always cost more… often far more, than an equivalent Android smartphone.

Apple iPhones Will Always Cost More

Frankly, the differences between an Apple iPhone and an Android smartphone have diminished in recent years, with both platforms borrowing features and ideas from each other. Arguing about who came up with which feature first will become nothing more than a pissing contest.

Whatever features that are unique to a particular platform will eventually be introduced in the competing platform. That’s what we want because it gives us the freedom to choose between the two platform without worrying about losing some key features we cannot do without.

Even so, one thing will remain certain – Apple will always price their iPhone models at a premium. That brings us to arguably the most vitriolic opinion that Android fans have about the Apple users – that they are all rich idiots who are getting fleeced by Apple into paying a ridiculously high price for the iPhones especially since they are using “dated” hardware or “older technology”.

Well, we are not going to go into why Apple iPhones are not using “dated” hardware or “older technology” in this editorial, but we are going to address this perception that Apple users are stupid to pay so much money for a smartphone. Then we are going to show you why Apple iPhones are so expensive.

Why Pay So Much For An iPhone?

Let’s take a look at the top 3 reasons why Apple users are willing to pay top dollar for their Apple iPhones.

1. It’s More Than Just A Smartphone

First of all, the Apple iPhone is more than just a smartphone. When you purchase an Apple iPhone, you are purchasing the iPhone ecosystem as well – everything from access to the 2.0 million apps (as of June 2016) in the Apple App Store to the free iMessage, FaceTime and iCloud services. Android users may argue that they have similar features but what they have is sometimes a pale shadow of what the Apple iOS platform currently offers.

For example, the Apple iPhone can automatically and continuously back itself up to iCloud since October 2011 with iOS 5. If something bad happens, the user can restore the entire contents of the iPhone using nothing more than an Internet connection. You don’t even need to use iTunes on a computer to perform this backup and/or restore process.

When we first wrote this editorial 3 years later in 2014, no Android smartphone could do that. Of course, we had no doubt even then that they would eventually implement something similar.  True enough, Android 6.0 Marshmallow introduced such an ability in October 2015 (4 years after iOS), although it only works with Android apps that “target API version 23“.

2. It’s About Software Assurance

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You are also buying “software assurance” in the form of iOS upgrades and updates. The recently released iOS 10, for example, was made available for the following devices, immediately and simultaneously :

• iPhone 5 (4 years old) or newer
• iPad (4th Generation) (4 years old) or newer
• iPad mini 2 (3 years old) or newer
• iPod touch 6th Generation (1.5 years old)

Google also releases Android upgrades on a periodical basis. However, those upgrades are not made available for many Android smartphones (even if they are of the same generation), and often, they are made available long after Google releases them.

This is due to the fact that the Android platform is “highly fragmented” – there is a wide variation in hardware features and packaged software, as well as manufacturer preferences. This has resulted in significantly slower or shorter “software assurance”, especially for older or less popular models.

Google released Android 6.0 Marshmallow on October 5, 2015. It took Samsung 4 months to start releasing it for the Galaxy S6 and S6 edge smartphones. ASUS also took 4 months to start rolling out their Marshmallow update for the ZenFone 2 Laser and ZenFone Zoom smartphones. That’s actually fast, because in the past, they would take about twice as long to release a major operating system update.

Of course, many brands choose not to offer the upgrade at all. Some, like HTC, promise an Android 6.0 Marshmallow upgrade for several smartphones, but remain stuck in development hell. The Marshmallow upgrade for the HTC One M7 was even scrapped, after being announced. In the meantime, Android 7.0 Nougat was just released…

3. It’s The Apple Experience

When someone considers the cost of a platform, it should be done holistically because when you buy an Apple iPhone, you are really buying an experience.

Apple iPhone users (generally) want a smartphone that “just works“. They do not care so much about specifications, as much as they do the experience of using the iPhone. They do not care so much about the number of features, as they do the experience of those features that are available. For that, they are willing to pay top dollar.

The less fragmented nature of the iOS platform also makes it very easy for them to transition from one model to another. The user interface and apps work exactly the same, whether you’re using the new iPhone 7, or the much older iPhone 5.

The Android platform allows for a customisable experience, but Apple fans don’t really want that. Or at least they are willing to sacrifice that for the familiarity of a consistent user interface.

Now, let us show you exactly what they are paying so much for. The real reasons why Apple iPhones are so expensive…

Next Page > Why Apple iPhones Are So Expensive, Does This Mean That Apple iPhones Are Better?

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Why Apple iPhones Are So Expensive

Many people consider Apple elitist for selling the iPhone at very high prices, and there’s no doubt that they have the highest profit margin in the industry. However, their profit margin isn’t an accurate reflection of their nett profit per unit.

What most people forget is that the price of each iPhone includes a lot of ancillary costs, so comparing the profit margin of Apple iPhones vs. Android smartphones is like comparing apples to oranges (pun intended).

1. Apple iOS And Services Are Not Free

Android manufacturers can get away with low margins and therefore, lower prices, because Google provides the Android OS free of charge. On top of that, Google finances the infrastructure for free services that they provide to the Android platform, like Google Hangout and Google Drive.

With the exception of any custom software or services provided by the Android smartphone manufacturer, everything on the Android platform is being financed and maintained by Google.

Apple, on the other hand, has development teams working on the iOS operating system, as well as supporting software and services like iTunes, the App Store, iMessage, FaceTime and iCloud. They also build and maintain their own infrastructure to support those services.

All that comes at significant cost. Apple’s massive 500,000 sf data center in Maiden, North Carolina, for example, costs a whooping US$ 1 billion to build.

2. Apple Uses Their Own Processors

Apple designs their own processors for the iPhone – a cost that no Android manufacturer has to bear. On top of that, their processors cost more to make because they have a lower production run than the Qualcomm or MediaTek processors that most Android devices use.

3. They Just Cost More To Produce

All-in-all, the costs of the parts used to make an iPhone are consistently much higher than that of an Android phone. Here’s what research firm HIS calculated as the cost of manufacturing the iPhone 6 :

Apple iPhone 6 with 16GB of built-in memory costs $200 to build in parts and labor, while a 128GB model requires $247 to put together. The iPhone 6 Plus production costs on the other hand, range between $216 for a 16GB model and $263 for the 128GB version.

The most expensive component in the iPhone 6 and iPhone 6 Plus is their display. Made by LG Display and Japan Display, the component costs $45 for the iPhone 6, and $52.50 for the iPhone 6 Plus. Corning Gorilla Glass 3 covers the screen of both models.

Apple’s 20nm A8 processor is made by TSMC and, combined with an attached co-processor, costs about $20. NXP Semiconductors provides the NFC chip for the iPhone 6 range. Combined with the rest of its built-in sensors, it costs $22 for both devices.

As you can see, the production cost of the Apple iPhone 6 is higher than what some Android smartphones are selling for, even if those Android smartphones have similar or even better specifications on paper. This is why the iPhone will always be more expensive than comparable Android smartphones, even if Apple somehow sees it fit to sell it at cost.

If you tack on their substantial ancillary costs, you can see why Apple has to sell their iPhones at a premium. The research firm HIS calculated the iPhone 6‘s profit margin as 69%, but that does not include ancillary costs. Apple’s nett profit is certainly much lower once you factor everything in, albeit still much higher than the industry norm.

Does This Mean That Apple iPhones Are Better?

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No. I’ve said it many times before, and I will say it again. Both platforms have their pros and cons, and they are getting closer in capability as they leapfrog each other in features. Whatever new idea or feature that’s introduced in one platform will eventually make it to the other platform, so it would be stupid to insist that one platform is significantly superior to the other.

It is this convergence of features and capability that will eventually limit Apple’s reach. If you can get a good Android smartphone with all of the key features you need at a much lower cost, it will be harder for many users to justify paying a premium for the Apple experience.

Ultimately, it all depends on the kind of user you are, and how much you are willing to pay. You won’t go wrong with either platform, and don’t let anyone tell you otherwise. Just because Apple iPhones are so expensive does not mean they are better than Android smartphones. But it doesn’t mean you are not getting your money’s worth either.

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