Welcome to Eureka Street

back to site

The iPhone 5 and Apple's profit fetish


iPhone 5

Ahead of his Australian visit earlier this year, Apple co-founder Steve Wozniak criticised the company for subjecting local consumers to 'horrible' price-gouging. Last week's release of the iPhone 5 has reinforced perceptions of Apple as an odious corporation that exploits consumers, alongside the likes of tobacco companies, big banks, McDonald's, and Coles and Woolworths.

Commenting in Technology Spectator on Friday, Professor David Glance of the University of Western Australia said Apple is about maintaining a very high margin of profitability, usually 30 per cent. 

They know everything about manufacturing, supply and corporate consistency. They can deliver a consistent, scalable and profitable service on a global scale. What they aren't are reckless innovators, experimenting with radical ideas.

The iPhone 5 announcement appeared to be a demonstration of Apple's greed and contempt for the consumer. Apple explained the need for the new 'Lightning' connector to allow for a thinner phone and a larger, longer-lasting battery. Unfortunately it will prove costly for many consumers because most existing iPhone accessories will be rendered obsolete without the purchase of a $35 adapter. 

Apple's strategy of profit maximisation compounds the inconvenience and cost for consumers. A 'fair go' approach would have the company include the adapter in the box with the iPhone 5, or at least selling it at cost, which could be as low as $1. Other companies would seize the opportunity to create good will, but that is not necessary for Apple because it is still widely regarded as the arbiter of style and innovation, which Glance argues is unwarranted.

In his commentary on the new iPhone, Glance also points out what he believes is the reason for Apple's decision not to include the NFC wireless payments technology, which could become the standard for purchases in physical retail stores. He says Apple failed to convince banks to pass on charges when phones are used to make payments. It appears Apple is not interested unless it is able to replicate the 30 per cent commission it charges publishers and other vendors for 'in app' purchases of magazines and other products.

The Australian Government has shown itself capable of asserting the rights of Australian consumers against the disdain of Apple. Following the release of the most recent iPad, the Australian Competition and Consumer Commission took successful court action against Apple for misleading consumers about the capacity of Apple's '4G' iPad to connect to any 4G network in Australia. Its chair Rod Sims last week portrayed Apple's 4G claim as a misleading attempt to beat the competitor Samsung, whose product was compatible with 4G in Australia. 

This would only have been a minor irritant for Apple, but it shows that there is scope for governments to act against greedy corporations that take consumer law for granted. This year, we have also seen the House of Representatives Inquiry into IT Pricing, which essentially sought voluntary undertakings from Apple and other price gougers. While it did not manage to bring them to heel, continuing representation from consumer groups such as Choice shows Australian consumers could be ready to fight on.

Michael MullinsMichael Mullins is editor of Eureka Street.


Topic tags: Michael Mullins, Apple, Steve Wozniak, ACCC, David Glance, price-gouging, iPhone 5, Choice



submit a comment

Existing comments

Electronics use rare minerals from war-torn parts of our world <http://blogs.rj.org/rac/files/2012/09/iphone-5-release-date1.png> <http://blogs.rj.org/rac/2012/09/14/are-you-reading-this-on-your-new-iphone-5/#respond> By Benny Witkovsky <http://blogs.rj.org/rac/author/bwitkovsky/> .<http://www.techradar.com/us/news/phone-and-communications/mobile-phones/new-iphone-5-release-date-news-and-features-721534> You can buy it for $200-$400! Unfortunately minerals such as tin, tantalum, tungsten and gold are vital elements to almost all electronics. Some of the largest deposits can be found in mines in eastern Congo. During Congo’s civil war (1996-2002), military groups took control and fight to maintain dominance today. According to the Center for American Progress’ Enough Project <http://www.enoughproject.org/conflict_areas/eastern_congo> over 5.5 million people have died in the conflict since 1996. Nearly every major electronics company depends, to varying extents, on minerals from eastern Congo. Apple is predicted to sell 33 million new iPhones this quarter, netting some four or five billion dollars by the end of the month <http://www.chicagotribune.com/business/technology/chi-sales-of-new-iphone-expected-double-other-models-in-1st-week-20120913,0,1501038.story> – is not the worst culprit. According to the Enough Project, <http://www.enoughproject.org/publications/taking-conflict-out-consumer-gadgets-company-rankings-conflict-minerals-2012> , Apple rates 9th out of 24 major companies. Their record has improved in the past two years and now are 38% of the way to eliminating conflict minerals from their products. The electronic devices that we get such personal, professional and emotional support from are dependent on civil war and violence.

valerie yule | 17 September 2012  

Well put,Michael. And this doesn't even touch on the appalling treatment of its Chinese assemblers. For example SumofUs.org has just last week claimed Apple is ending forced illegal overtime. How? Requiring workers to meet the same quotas but in their regular shift! The profit motive is of paramount importance, not ethical treatment of workers. Pressure needs to continue for Apple to turn some of its huge profits into ethical clout to improve the lot of its Chinese manufacturing partner's ill-treated workers. There's no doubt if Apple demanded it and was prepared to reduce its margin, it would happen. Will we still buy their product? Unfortunately yes. Can we add our voice in protest? Hopefully.

David | 17 September 2012  

Michael Mullins, don't you think there is another more central issue for Christians related to the iPhone 5? Why should we even be considering using what God has entrusted to us to buy unnecessary gadgets that we lust after as if it's okay? There are countless ways God would have us spend money, and I find it hard to believe that indulging in this kind of shiny toy would be in line with his will for our lives.

John | 17 September 2012  

I'm sorry, but complaining about a $35 adapter is frankly silly. Why don't you go complain about car manufacturers charging an atrocious $400 for a replacement key remote instead - a far more nefarious example of corporate greed than Apple's little adapter.

NFC has been termed "Not For Commerce" because it has been dead in the water as it requires huge changes by retailers. Apple only supports these sorts of standards once they become widespread enough to be useful - witness the time Apple took introducing 3G and 4G in their devices - they waited until there was enough 3G and 4G coverage to be useful for consumers saving them the terrible battery life impact inherent with jumping in too soon on early chipsets.

Likewise, the ACCC's crusade against Apple re 4G was ridiculous as the International Telecommunications Union classes Telstra's HSPA+ dual carrier NextG network as 4G even if Telstra doesn't advertise it as such locally.

It gives up to 42mbps speeds which is far faster than Vivid Wireless's 4G WiMax network here in Australia which tops out at a pathetic 5mbps. In contrast, Apple's iPad 4G has demonstrated real-world speeds of 20mbps on NextG in Australia. Now you tell me who is putting one over the consumer in that context?

@David, this continued witch-hunt against Apple over Chinese working conditions is unfortunately based on a lot of untruth exacerbated by the infamous Mike Daisy. For example the topic that started the media frenzy originally was the supposed suicide cluster at Foxconn, Apple's major Chinese assembler. The reality which still very few media outlets mention is that only 17 suicides were verified over a 5 year period.

This may sound like a lot until you realise that if Foxconn had the same suicide rate as the rest of China, they would have had 1,320 suicides over that same timeframe out of their 1.2 million workers.

Make no mistake about it, these sorts of complaints are nothing but tall-poppy syndrome and sour grapes

Tall Poppy Syndrome | 17 September 2012  

I think we should be careful with gross generalizations in our value judgements. What you call a toy, is for many other people a vital communication and computing tool wrapped in the friendliest, most reliable user interface running on the most personal of personal computers

Many of us use our iPhones as theological libraries, research tools, sheet music screens, GPS navigators, worship music players, sermon note prompt, church contact source, organizer, etc etc etc.

I think we all need to look at everything we buy - including cars, houses, personal computers, food, etc in the light of want versus need, but also be balanced in our critique of other people's varied motivations.

Toy? | 17 September 2012  

Similar Articles

Thoughts on democracy from a martial law baby

  • Fatima Measham
  • 21 September 2012

Today marks 40 years since martial law took effect in the Philippines. I was born during this time, part of a generation who grew up not knowing any other president. Given the numerous regressions that have occurred since, it is not surprising many Filipinos look back on the Marcos era with nostalgia.


George Orwell's example for Australian journalists

  • Sarah Burnside
  • 20 September 2012

BBC director general Mark Thompson turned down a proposal to erect a statue of Orwell on the broadcaster's premises because the writer was 'too left-wing'. But political animals of all stripes have long sought to claim Orwell. His political writing transcends both time and ideology.