Why Didn’t Apple’s Margins Improve?

Horace Dediu:

My guess is that the largest contribution to the “reduction of margin” is the increased cost of components.

But why did component costs increase?

The primary method of driving down costs is to make more of the same thing. Apple is failing to make more of the same thing. Take displays for example: Both the iPhone 4 and the 4S made use of the same 3.5-inch LCD. When Apple introduced the iPhone 4S the company procured more 3.5-inch LCDs and drove down the cost of the display for both the iPhone 4S and the iPhone 4. This didn’t happen with the iPhone 5. Apple was not able to make more of the same thing and so the company was not able to drive down the cost of the display as much as it did in the past.