But there’s another major factor at play, which I believe is more important than volume pricing. It’s about design and build quality. Apple’s competitors in the consumer electronics space are, at least for now, all trying to compete at a high level with regard to design. HTC, Motorola, Samsung — their Android products are nicely designed and well-built. One can argue that they’re not as good as Apple’s products, but they’re in the same ballpark.

Whereas with PCs, the mass market PC makers have always been content to build products way below Apple’s standards for design and quality, and consumers were (and largely remain, today) content to buy them.

PCs, especially historically, were compared based on technical specs. An awful lot of PCs have been sold to people who never even looked at the enclosure — only the specs. That’s not how the game is played in consumer electronics. Nobody knows what kind of CPU they have in their phones. (Where by “nobody”, I mean “no regular people”.) Apple doesn’t even publish CPU specs for iOS devices, nor publish how much RAM they contain.

With computers, again, it’s fair to say that the typical Mac costs more than the typical Windows PC. That’s not true for mobile devices, which means Apple gets to compete mostly on factors like design, user experience, and branding. In short, the nascent mobile computing market has much more in common with the traditional consumer electronics market than it does with the PC industry,¹ and that works very much in Apple’s favor.

I've been a Mac user for 18 years now. And for 18 years I've been trying to convince people to buy a Mac over a cheap Dell. "Don't worry about the specs, a Mac is worth the extra money." It was a hard sell when a Mac cost double.

But with iPods, iPads and iPhones, things have changed. Apple is still making the best hardware on the planet, and competitors cannot even beat Apple's prices. Apple is able to sell better hardware at a lower cost than their rivals.

This is partly because Apple gets volume discounts on parts, and has efficient manufacturing. But more importantly, Apple has driven an entire industry to produce better quality products. Motorola, HTC, and others are working harder to try and make phones as good as the iPhone. They aren't all optimizing for cheap.

Apple has changed the game. It's no longer about specs and pricing. When buying a computer, don't worry about the megahertz. When buying a camera, ignore megapixel counts. When buying a car, horsepower does not matter.

The real differentiators are design and user experience.

A great read at Daring Fireball.