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40% of Silicon Valley's Profits (But Not Sales) Came from Apple (siliconvalley.com)
An anonymous reader writes:The San Jose Mercury News reports that last year 40% of Silicon Valley's profits came from one company -- Apple. "The iPhone maker accounted for 28 percent of the Bay Area tech industry's $833 billion in 2015 sales," while "Its profits were a jaw-dropping 40 percent of the region's $133 billion total." Meanwhile, Google's parent company Alphabet racked up $75 billion in sales, representing nearly 57% of the total for all Silicon Valley internet companies, followed by eBay and PayPal.
But while sales grew, internet-company profits fell by 29% as more companies focused on growth. "Profits are nice, sure, but becoming profitable isn't the top priority around here, particularly for younger firms," wrote the newspaper, noting that investors are paying 18 times Facebook's annual sales for its stock. In fact, 29% of Silicon Valley's top companies didn't have sales growth in 2015 (an increase from 17% the previous year), and five of the top 10 companies saw a drop in sales in 2015 (including Intel). "The numbers are telling the story," one analyst tells the newspaper. "There is growth, but it is slowing."
The Mercury News adds that "The question for those with the biggest sales drops is how much time do they have left if the trend continues..."
But while sales grew, internet-company profits fell by 29% as more companies focused on growth. "Profits are nice, sure, but becoming profitable isn't the top priority around here, particularly for younger firms," wrote the newspaper, noting that investors are paying 18 times Facebook's annual sales for its stock. In fact, 29% of Silicon Valley's top companies didn't have sales growth in 2015 (an increase from 17% the previous year), and five of the top 10 companies saw a drop in sales in 2015 (including Intel). "The numbers are telling the story," one analyst tells the newspaper. "There is growth, but it is slowing."
The Mercury News adds that "The question for those with the biggest sales drops is how much time do they have left if the trend continues..."
leaving the masses to make up the missing money the mega-corps, oligarchs and elites avoid paying.
Most of the profits are parked overseas, and the ones that are here aren't taxed very much.
Most of the work is done by Chinese slave labor and so has no contribution to the US economy.
I submit that the United States would be better off if Apple simply did not exist. (Or at least, not any worse.)
... where Apple has 92% of the all global smartphone profits.
Finally, we're hearing the start of the so-called "Web 2.0" bubble bursting. And you know what? This is probably the best thing that could happen to society at large.
What has the "Web 2.0" bubble brought us? Not much of value!
Computers today aren't that much different than computers of a decade ago, in terms of hardware and software. Even smart phones really aren't all that different from the PalmPilots we used in the late 1990s. We've seen little innovation, really. In fact, we've actually seen a lot of regression. So much software, from Linux distributions (thanks to systemd, PulseAudio and NetworkManager), desktop environments (GNOME 3, Windows 8 and 10), web browsers (Firefox, Chrome) are worse than what we had before this bubble started. We even saw regression when it comes to programming languages, with absolutely terrible languages like JavaScript and Ruby becoming widely used, and debacles like Rust created.
Where we have seen innovation, it has not been positive. For example, advertising has become so much more pervasive and invasive. Along with this has been far more pervasive and invasive data collection. This is culminating with the rise of the "Internet of Things", which is basically all about giving Internet access to every single device in one's home so that advertisers can collect far more personal and private information about consumers than the advertisers could hope to do before.
Social media has been awful to us. It's pretty much just an extension of advertising, except it isn't limited to commercial entities. We've seen it used for nefarious political means, including but not limited to forcing the flawed concept of "social justice" (which in reality involves bias, racism, intolerance, injustice and bullying) upon our societies.
Luckily, we're now coming to the end of this bubble. We are beginning to hear it pop. Let's hope that the bursting is swift, because that's exactly what our society needs at this point.
The internet is advertising. At least, as far as profits go, unless you're selling physical products like Apple and Amazon. The real products (physical) seem to be doing OK, but the non-product of advertising -- which is weakened because very few people are doing more than wasting time at work on social media and other internet sites -- shows all the signs of an industry in implosion. At that point, the USA is going to have a recession as the market adjust the value of those assets to match reality.
People thrive when government does little, as Thomas Jefferson and George Washington told us. When government handles roads and military defense, society thrives; when government bleeds people by taxation and regulation, life becomes frustrating and boring like in the Soviet Union, although not quite as bad yet. With our technology, we should be working four hours a day and spending the rest on meaningful activities (inb4 the usual bragging about "meaningful jobs": you're just tools). Instead, we work more than ever. As an antiwork conservative, I cannot expect much support from the rest on the Right side, but a few are starting to wake up. Real life is not your career, your car, your house or your shopping list. Real life is out there, and it is not what humans expect at first.
We typically see negative knee-jerk reactions here when the idea of President Trump is brought up, but it turns out that President Trump has exactly what the United States of America needs in a leader today.
Instead of just blindly regurgitating the mindless and baseless hatred for President Trump that the mainstream media and leftists have tried to instill in people, we should take a look at what he has actually proposed to do.
It turns out that his proposals would actually go a long way to dealing with the very real problems you have identified! In fact, he's the only candidate actually putting forth proposals that would have a real impact.
He holds the correct stance on issues like immigration, foreign trade, and bringing jobs back to the United States. That's the first step in resolving these issues: having somebody in power who understands where the problems are and how to fix them.
President Trump represents a superb opportunity for America. America has been in a serious slump since the end of the 1960s. If anyone can revive America to its former post-WWII glory, that person is President Trump.
Dictionary.com gives "retrogression" as a synonym for "regression": " Biology. degeneration; retrograde metamorphosis; passing from a more complex to a simpler structure." I think that is part of what the OP means. The other part is that we are not innovating, merely improving existing inventions and coming up with more clever ways to sell them. Our actual ability peaked in the 1970s; now, we are simply adapting that to consumer demands. Much as hackers opposed The Establishment back in the 1980s, our hackers today oppose the establishment comprised of consumers, which pull us in the opposite direction from actual useful invention. Our most exciting contributions seem to be collision avoidance systems and Eliza (Siri/Cortana).
Insightful. Why would someone do that? One reason is that with blame comes guilt, which justifies taking more from those who produce and giving it to those who consume.
In the land of Equestria, the one horned horse is King.
No practical society thrived without its members contributing. By being drafted, dying in wars, by building defensive buildings, by giving away some of the crops, or fruits of their labor. That is beside the point, because some contribution to common good and to others is a long tradition. Discussed in Bible, discussed in koran, I assume other religions have it too.
The problem is when dual intercrossing taxation kicks in:
- For a professional, marginal income tax rate in united states is approx 50%. (let's say that you are in federal income tax bracket of 33%, in california let's pick a bracket of 10%. Add Medicaid, Medicare, Social security taxes, tapered of tax credits available to others, and you are easily well above 50% effective tax rate).
- If you are 50 years old individual and at birth you were given $10,000 gift, the value of it would be approximately $1,500 in current dollars.
The problem is not contribution.
The problem is how much taxation is being imposed on productive, middle class, members of the society.
Apple is an Irish company and registers profits there, not USA. The US merely has a small branch office that at a loss.
Oh, thanks for that! I was getting quite worked up and needed some amusement. Your comment is the funniest thing I have seen today.
I am sure that there are many other solipsists out there.
All they do (well almost all) is legal. Should I want to hire someone at a PO box in some lax country to assign my income around - it'd be legal for me too. It's just that what isn't even pocket change for these guys is more than my total income (and I'm not poor).
Anatole France: "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread."
.
It's hard to devise a system that doesn't favor entities with money - which is power, given human nature. Fix the latter and the former works itself out.
As we say here, GoodLuckWithThat.
Why guess when you can know? Measure!
That should fizzle out as their bug-infested products make consumers look elsewhere.
Never before has the quality of their software been so poor, and their products so mediocre.
Tim Cook should have stepped down a year ago, it might be too late now.
Most pathetic troll I have seen today...
Should I want to hire someone at a PO box in some lax country to assign my income around - it'd be legal for me too.
Actually, Apple's PO box is in Nevada to avoid paying corporate taxes in California and 20 states.
Yet, with a handful of employees in a small office here in Reno, Apple has done something central to its corporate strategy: it has avoided millions of dollars in taxes in California and 20 other states. Apple's headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company's profits, Apple sidesteps state income taxes on some of those gains. California's corporate tax rate is 8.84 percent. Nevada's? Zero.
http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html
Given that they sell goods that would fit best in the "affordable luxury" category?
Too bad I commented here or I'd use mod points to mod you up. There are a lot of tricks, and the one you mention is one of them (I believe Apple and others also use Ireland and the Netherlands among others, as havens). The point is, the normal taxpayer can't afford them - it's not gain at the margin for the taxes a little guy saves, but is for the big guys. In a rather long life, it seems nearly every law or regulation passed has favored the big over the small and perhaps disruptive. That's the real problem in my mind.
Why guess when you can know? Measure!
They stash their money in tax havens for what purpose I have no idea. Seriously the amount of cash on hand they have is obscene. If I were a shareholder I'd be pissed and demanding they paid out dividends. Yes, repatriating the money to pay it out would incur tax, but I'd rather have some of it than none of it.
As it stands Apple just hoards cash so they don't have to pay taxes on it and sits on it.
Tax the corps and they pass it through as price increases
I agree with you, but I also don't think that tax decreases will be passed through to the consumer.
If Slashdot were chemistry it would look like this:Cadaverine
The point is, the normal taxpayer can't afford them - it's not gain at the margin for the taxes a little guy saves, but is for the big guys.
The little guy can do a variation of this. For example, start a Nevada corporation and open a corporate brokerage account (day trade or load up dividend-paying stocks) or own rental properties. Once the corporation makes a significant amount of money each year, you can draw a salary and open a qualified retirement to put away $54,000 each year (a combination of salary contributions plus corporate matching). Do that for a few decades, you will have a retirement account that will greatly exceed whatever you can put into an IRA/401K.
That's the real problem in my mind.
You need to change your thinking. The tax laws will never change to favor the small guy, so why not use them to your own advantage? The trick comes from converting earned income (taxed at highest rate) to portfolio (stocks) and/or passive (real estate) income (taxed at a lower rate). When portfolio/passive income exceeds earned income, you can stop working for someone else and work for yourself.
The natural tax rate is 0%.
"And we screwed up again in Iraq."
stabiesoft, respectfully, there is no "we". The people who started the Iraq war did it for money, and because they deal with life by being aggressive. They kill, or try to destroy the life of, anyone who tries to limit their aggression. Two of hundreds of sources:
House of Bush, House of Saud: The Secret Relationship Between the World's Two Most Powerful Dynasties
9 Ridiculous Passages From Former Vice President Dick Cheneyâ(TM)s New Book
It also helped that the price of an iPhone was hidden by payment contracts. It's $200 down, but another $450 over the live of the contract. A lot of other phones did something similar, so Apple was taking advantage of the system. It also didn't help that CDMA networks block third-party phones, so the true price of a phone can't be seen.
Oh, I did all that back when I had taxable income. I'm now retired and fairly well off. I just feel for those who aren't doing as well, and never will under the current regulatory regime. FWIW, I 5x'd my retirement account trading from March 2009 to 2014, then got out and am still out. I'd sold after about 20% loss off the previous peak to the protestations of my then broker (who now thinks I'm a genius). That game is now so rigged itself it's better to wait awhile for after the tide next goes out and the naked swimmers have to dump at pennies on the dollar. Being responsible puts one in a position of being able to wait for things like that, and just take the easy winnings. I'll do ok on the mountain (well, a buncha hills in Appalachia) I now own outright, and am off-grid mostly. I changed a buncha cash into things that are unpleasant or difficult to confiscate, but which benefit me just fine. .gov doesn't want to be in the real estate business or try to make money selling my solar system, farm, and so on. They like to just cntrl-x cntrl-v cash (eg bits in the bank - fiat), so it's wise to not make it too easy for them to do that.
Oh, made the money in the first place as a systems engineer and coder. I still do that, but now it's only for fun.
Why guess when you can know? Measure!
the small guy doesn't own rental property and stocks. Not really enough to matter anyway. You underestimate just how screwed most of America is. 40 years now of declining wages, a labor market that favors employers and an entire society where job quality and quality of life are the same thing sorta do that to most.
Our tax laws were fairly progressive for a long time. That 90% rate was marginal and prevented capital and resources from gathering at the top where they sat and did nothing. Then Regan happened, followed by Clinton and no matter how many times it doesn't work we still fall back to voodoo economics. At least in the 90s we had earned income to offset rising state taxes for the poor.
These days the only thing left for tax benefits are the child credits used to subsidize raising kids. Those haven't been chipped away too much because the 1%ers still want employees and because they benefit just about everyone. There's a little bit of it left, but if you're just a working slob you're still pretty boned.
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How much of that money is not from selling technology competitively but from avoiding taxes by using unethical accounting methods?
I doubt they'll be able to pass it on. Otherwise why would they be bitching about it? If they could charge more they would be doing it already.
What's your point?
All these big companies are playing by the same rules. You'll have to find another reason to rationalize why some of them are way more successful than others.
The point is, the normal taxpayer can't afford them - it's not gain at the margin for the taxes a little guy saves, but is for the big guys.
The little guy can do a variation of this. For example, start a Nevada corporation and open a corporate brokerage account (day trade or load up dividend-paying stocks) or own rental properties. Once the corporation makes a significant amount of money each year, you can draw a salary and open a qualified retirement to put away $54,000 each year (a combination of salary contributions plus corporate matching). Do that for a few decades, you will have a retirement account that will greatly exceed whatever you can put into an IRA/401K.
That's the real problem in my mind.
You need to change your thinking. The tax laws will never change to favor the small guy, so why not use them to your own advantage? The trick comes from converting earned income (taxed at highest rate) to portfolio (stocks) and/or passive (real estate) income (taxed at a lower rate). When portfolio/passive income exceeds earned income, you can stop working for someone else and work for yourself.
The problem is this "trick" actually requires a ton of work and a bunch of risk, you've basically designed your life around working the tax laws and it requires enough wealth to invest in things like rental properties. Personally I'd be better off just doing my own business on the side and actually contributing to the economy.
That's the problem with all these corporate subsidies and complex tax laws. Because they're so complex they're only really feasible to exploit once you're a massive organization. A small or medium sized business can't afford to open a separate office in Reno just to reduce their tax bill. They're stuck paying California tax and paying extra because they also have to cover the portion Apple skips out on!!
I stole this Sig
The problem is this "trick" actually requires a ton of work and a bunch of risk, you've basically designed your life around working the tax laws and it requires enough wealth to invest in things like rental properties.
It's called being entrepreneur.
A small or medium sized business can't afford to open a separate office in Reno just to reduce their tax bill.
A small business don't need to run a physical office in Nevada. A PO box and a mail forwarding service can do the job for a few hundred bucks per year. Most states won't have a problem with it. California, of course, is always problematic because they're trying to collect revenue from everyone and anything that moves.
The problem is this "trick" actually requires a ton of work and a bunch of risk, you've basically designed your life around working the tax laws and it requires enough wealth to invest in things like rental properties.
It's called being entrepreneur.
Which is the point I was trying to make. You're not actually talking about a normal taxpayer, you're talking about someone who has focused their life into becoming an investor and avoiding taxes.
Even then I want real entrepreneurs focusing on building businesses, not structuring their wealth to avoid taxes.
A small or medium sized business can't afford to open a separate office in Reno just to reduce their tax bill.
A small business don't need to run a physical office in Nevada. A PO box and a mail forwarding service can do the job for a few hundred bucks per year. Most states won't have a problem with it. California, of course, is always problematic because they're trying to collect revenue from everyone and anything that moves.
Apple doesn't have an office, they have some sort of subsidy. If nothing else this needs lawyers and accountants to make sure you're following the rules and extra bookkeeping to keep everything straight. If you don't know what you're doing you'll end up in legal trouble, and making sure you know what you're doing takes money.
And that's just for one trick, there's also deductions, grants, and all sorts of bookkeeping that's only feasible when you reach a certain size.
I stole this Sig
You're not actually talking about a normal taxpayer, you're talking about someone who has focused their life into becoming an investor and avoiding taxes.
The normal taxpayer goes to work for earn income and pays the highest tax rate. It's going to to get worst in the next 20 years as retirees outnumber the workforce, the two-thirds of the federal budget will got to Social Security and Medicare, and taxes will go way up to pay for everything else. I don't plan to be a normal taxpayer in the next 20 years, especially when the tax code allows other options that are perfectly legal.
I want real entrepreneurs focusing on building businesses, not structuring their wealth to avoid taxes.
Real entrepreneurs structure their businesses and their wealth within the framework of the law. A lower tax rate is part of the deal for taking risks that the normal taxpayer doesn't want to take.
I can assure you that Apple pays California corporate income tax on all Apple sales in California - indeed, Apple paid more than half a billion dollars in California taxes in 2010.
However Apple does not pay California income tax on investment profits of funds held by its Braeburn subsidiary in Reno.
The problem is this "trick" actually requires a ton of work and a bunch of risk
It's not so much that it requires risk, it's that it requires capital. It makes sense if you're a company making a reasonable profit to pay an accountant to work out how to make the most of their tax situation. If you're an individual, then the amount that an accountant can save you might be proportionally more, but is likely to be a similar magnitude to the accountant's fees.
That's the underlying problem with the system: the more money you have, the smaller the proportional costs of having someone optimise it become. Perhaps there's a technical solution here: if we had some software that can parse all of the various tax rules in different jurisdictions, register companies (this can typically be done online) in the relevant places, and set up income and asset ownership to be channeled to the correct places. I suspect that there'd be a big incentive for governments to fix their tax rules if suddenly everyone could find and exploit the loopholes, rather than just the friends of the legislators...
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The reason Apple can charge so much and reap such large profit margins is that they sell fashion, more than electronics. The consumer electronics market tends to be pretty price sensitive and competitive, so you need to keep price, and thus margins, down to compete. However fashion doesn't work like that. High prices can actually be seen as a good thing as they confer status, and people don't shop on price, they want the fashionable brand.
Well, Apple made their stuff stylish. It is fashionable to be seen with a shiny Mac laptop. It is fashionable to be seen with an iPod, with white visible earbuds and the cord hanging out in front of your shirt so everyone knows you have one. They are status symbols. As such, people tolerate and even embrace higher prices. That lets Apple make great margins where other companies can't.
Why is the parent modded as flamebait? Because it's correct?
Because the majority of Apple fans cannot admit to themselves that they bought something fashionable. They have convinced themselves that the reason they got it is technical superiority, not because it is cool. Particularly Mac faithful, geeks and hipsters which are three of Apple's major sales groups. All of them are the kind that believe they are not motivated by fashion, and hence any suggestion that the product they purchased is fashionable makes them angry.
English may not be your native language, so it's understandable you missed the question of degree. "Overtaxed" means too much taxation. The point of the post was that if government taxes for roads and military, we do OK, but anything more than that and things go bad.
Why do we need so many taxes? It's not roads and defense. I would rather see people have their own money to spend that to try to solve all of our problems through government. This is an unpopular view because most people repeat what they are told, but clearly individuals do better making spending choices than large impersonal bureaucracies.
That's a good point and historically accurate. For a long time, there was not even an income tax.
It seems to me that the more government gets involved in something, the lower quality the end results.
This cannot be achieved by force or threat of force, which is all that government can do. In fact, the more we rely on government, the less we are actually cooperating. We are complying.
These are what we might call the minimum functions of government. Given that government is a business, or at least acts like one, and expands its power, it is sensible to cut it to a minimum so that we do not have a single point of failure for most social functions (the importance of this was discovered to their chagrin by the Soviets in about 1991 or so). This keeps society resilient and lowers costs.
In addition to spending more time in English class, you may have benefited from putting in a bit more study of history and philosophy. Results take a long time to be seen. Remember that in the 1930s, most Western intellectuals thought the Soviet method was superior to capitalism. The roots of Scandinavian happiness can be found in many factors unrelated to government; they were "happy" societies long before their modern governments.
No, I think there's another reason for that, as I stated.
Two things I came across recently on this topic: 1) Walmart has recently been taking right around the full corporate tax rate (31% is what they paid in the last year on record, iirc); 2) the guys and some expert types at Freakonomics or PlanetMoney or SomeOtherMoneyNerdBlog recommended reducing the corporate income tax rate to something like 20-25% AND closing loopholes. The consensus was that this would get corporations paying their taxes here, because it would be close enough to what they're saving by cheating, factoring in costs for legal liability and the PR hit. BUT they all agreed this would never happen because one side would fight the loopholes and the other side would fight the tax decrease and, well, it's not always election year but IS always fundraising time.