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Originally Posted by GlenBarrington
Don't confuse market share with profitability. They aren't the same thing, and they don't work in lock step with each other. In a choice between greater market share and higher profits, I'll take the profits every time.
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High margins are not sustainable. You can charge a premium if you are first to market or you have features that nobody else has, but competition catches up sooner or later and your margins are going to shrink. If you don't have market share, your revenue will go down.
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Interestingly, Dediu finds that the iPhone’s average selling price (ASP) has remained constant in the low-to-mid $600 range while the iPad’s ASP has fallen more dramatically over the past year from $531 to $449. The big difference, Dediu says, is that the cost of iPhone components has increased by around 29% over the past year, which has helped cut iPhone gross margins from 58% to 48%.
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