Revenue and profits of electronics manufacturers, or who has a higher margin

On the Internet, you can often hear / read that the retail price of Apple products is greatly overestimated compared to its cost, while the confirmation is usually the sum of the cost of individual components of the iPhone (why not plastic and silicon sand then?) at the same time - it reaches hundreds of percent. At the same time, the pricing policy of well-known Chinese manufacturers, such as Xiaomi, is considered by many to be more democratic due to the low prices for their products. But is this really the case and how much do corporate incomes in this industry relate to spending in reality?

Some financial indicators

As you know, all companies whose shares are traded on exchanges should not only report their income to tax, but also publish these reports in the public domain. The following indicators of interest usually appear in these reports:

  • revenue ( revenue ) - the money received from the sale of goods and services
  • gross profit ( gross margin ) - the difference between revenue and cost of goods and services sold, usually expressed as a percentage of revenue
  • net income ( net income's ) - what remains of the gross profit after tax
  • net profit margin ( net profit margin ) - a percentage which is net income from sales.

Gross profit shows the trade "cheat" with taxes, that is, the amount of money that the company receives in excess of its production costs, and profitability - how much profit the company receives, taking into account the tax burden.

What happens

Let's look at the gross profit and profitability of several well-known corporations, taking two figures: the average gross profit and profitability for 12 months - to estimate revenues in general, regardless of events such as the presentation of new products, and profitability for the last reporting period of 2018 - to evaluate recent achievements:

  • Apple Inc. : gross profit - 38.3%; profitability - 23.0%, for the last reporting period - 21.6%
  • Xiaomi Corp. : gross profit - 12.6%; profitability - minus 11.1%, for the last reporting period - 32.4%
  • Samsung Electronics Co Ltd : gross margin - 46.6%; profitability - 18.7%, for the last reporting period - 18.8%
  • Dell Technologies Inc : gross margin - 26.7%; profitability - minus 3.3%, for the last reporting period - minus 2.2%
  • Sony Corp : gross margin - 27.5%; profitability - 8.0%, for the last reporting period - 11.8%.

Summary Gross Profit Analysis Results
Average gross profit and company profitability for 12 months

Conclusions and observations

The leader in average profitability over the past 12 months, as you might have guessed, was Apple with its 23%, followed by Samsung with 18.7% and Sony with 8.0%. On the other hand, Xiaomi, whose profitability was negative in the first half of 2018, reached a positive profitability of 32.4% over the last reporting period and even overtook Apple from its 21.6%. In general, the difference in gross profit and profitability between manufacturers is not as significant as it may seem when a superficial analysis of the prices of their products, and the profit certainly does not reach half of the total expenses of the company. In addition, these figures are subject to significant market fluctuations, as we can see from the example of the "popular" manufacturer Xiaomi, who initially promised to limit profitability to 5%, and now cumulatively overtaken by this indicator Apple.

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