How Did Apple Become The World’s Most Profitable Company?

How could Apple become and remain the world’s most profitable company? Well, that’s an open secret, thanks to Apple’s quarterly earnings call and Asymco’s Horace Dediu, who posted a fresh analysis on his blog taking Apple product’s gross margins under his loop.

Apple gross margins
According to Dediu, Apple’s decision to move towards mobile devices has pushed its gross margins and operating margins upwards since 2006. While Mac computers had decent margins, they turned out to be not as profitable as other mobile devices such as the iPhone, iPad or iPod.

As Dediu’s previous reports already pointed out, the iPhone has produced the highest margin for Apple, a huge 50%. As this graph shows, it is the only product able to produce a consistent 50%, while the iPad produces only 35%. The rest of Apple’s products have been at or below 30% since 2009.

Apple gross margins

However, the iPhone has had its dips in gross margins, caused by new version launches. Horace Dediu explains the above chart.

The iPhone is a profit monster, but when it launches, there are many costs associated with it: components tend to be more expensive, there are more warranty returns, and there are higher shipping costs as units are shipped in smaller lots to more points of sale. Tim Cook explains: “In terms of costs, with each new product, we see learning curves associated with ramping production.”