The total cost of the components in the Apple Watch is less than $US84, according to a preliminary estimate by research firm IHS after a teardown study.
If accurate, this gives the Apple’s Watch has the lowest ratio of hardware costs to retail price across any Apple product.
The hardware cost of an Apple Watch Sport model was about 24 per cent of the suggested retail price compared with 29-38 per cent for the iPhone maker’s other products, IHS said on Thursday.
The Apple Watch Sport 38 mm costs $US349 and the teardown shows a bill of materials of $US81.20 with the cost of production rising to $US83.70 when $US2.50 in manufacturing expense is added, IHS said.
It’s worth noting, however, that Tim Cook has recently slammed “guesstimaters” who try and estimate supply chain costs. In this week’s quarterly earnings call, the CEO said he has “never seen one that’s even close to being accurate.”
And even if the figures are accurate, then it doesn’t necessarily follow that customers are being ripped off. They don’t account for staff costs, marketing, patent royalties, or research and development — which for the Apple Watch, as a new product category, are likely to be even higher than usual. In fact, Cook has said that gross margins on the device are going to be “lower than the company average” for precisely this reason.
For what it’s worth, here at Business Insider we previously crunched the numbers on the high-end 18K gold Apple Watch Edition. We estimated that Apple stands to make at least $US7,800 in gross profit on each device sold. (Due to the special type of gold Apple invented to use in the smartwatch, that figure may be even higher.)
IHS believes the smartwatch’s display and touchscreen module will cost Apple $US20.50. (Here’s a GIF of it being scratched with a key.)