The Apple Watch may cost consumers anywhere from $349 to $17,000 depending on how much gold they want, and it looks like Apple will be making a nice margin off the new product.
In a teardown of a 38mm Apple Watch Sport, the research firm IHS said it costs an estimated $83.70 to build. That’s only about 24% of the watch’s retail cost. Based on other Apple devices IHS has looked at, this is the lowest hardware cost compared to retail price of any Apple product. The cost of building the device versus retail price range between 29% and 38% for other Apple products, according to past IHS teardowns.
IHS estimates that the most expensive part in the watch is the OLED display with Ion-X cover glass, made by Korean electronics company LG, at $20.50. The second priciest part is Apple’s A1 processor, coming in at an estimated $10.20.
“It is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost,” said Kevin Keller, senior principal analyst at IHS, in a statement. “While retail prices always tend to decrease over time, the ratio for the Apple Watch is lower than what we saw for the iPhone 6 Plus and other new Apple products, and could be of great benefit to Apple’s bottom line if sales match the interest the Apple Watch has generated.”
Still, these component and build costs estimates might not mean much. In Apple’s second quarter 2015 earnings call on Monday, Apple CEO Tim Cook took aim at these kinds of breakdowns, stating: “I’ve never seen one that is anywhere close to being accurate.”
IHS analyst Keller added in a phone call that the costs associated with software can be significant for new hardware, especially for a first generation product with entirely new features — like the Force Touch capability that’s able to distinguish between the user’s light tap and a long press on the touchscreen display. IHS also doesn’t take into account all of the other potential cost variables, including licensing of intellectual property, supply chain logistics or R&D.
In the teardown, IHS also found that the so-called taptic engine, which is a tiny motor in the watch that is supposed to mimic the feeling of being tapped, takes up the most space inside the watch at around 30%, said Keller. But Apple still may have room to miniaturize this function to make the watch even smaller.
Interestingly, the taptic engine is where Apple seems to be encountering manufacturing issues with one of its suppliers, Shenzhen, China-based AAC Technologies Holdings , according to the Wall Street Journal, which cites people familiar with the matter. The Journal reports that the engine starts breaking down over time. This may be the cause of the delays in Apple Watch shipments.
In a teardown of a 38mm Apple Watch Sport, the research firm IHS said it costs an estimated $83.70 to build. That’s only about 24% of the watch’s retail cost. Based on other Apple devices IHS has looked at, this is the lowest hardware cost compared to retail price of any Apple product. The cost of building the device versus retail price range between 29% and 38% for other Apple products, according to past IHS teardowns.
IHS estimates that the most expensive part in the watch is the OLED display with Ion-X cover glass, made by Korean electronics company LG, at $20.50. The second priciest part is Apple’s A1 processor, coming in at an estimated $10.20.
“It is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost,” said Kevin Keller, senior principal analyst at IHS, in a statement. “While retail prices always tend to decrease over time, the ratio for the Apple Watch is lower than what we saw for the iPhone 6 Plus and other new Apple products, and could be of great benefit to Apple’s bottom line if sales match the interest the Apple Watch has generated.”
Still, these component and build costs estimates might not mean much. In Apple’s second quarter 2015 earnings call on Monday, Apple CEO Tim Cook took aim at these kinds of breakdowns, stating: “I’ve never seen one that is anywhere close to being accurate.”
IHS analyst Keller added in a phone call that the costs associated with software can be significant for new hardware, especially for a first generation product with entirely new features — like the Force Touch capability that’s able to distinguish between the user’s light tap and a long press on the touchscreen display. IHS also doesn’t take into account all of the other potential cost variables, including licensing of intellectual property, supply chain logistics or R&D.
In the teardown, IHS also found that the so-called taptic engine, which is a tiny motor in the watch that is supposed to mimic the feeling of being tapped, takes up the most space inside the watch at around 30%, said Keller. But Apple still may have room to miniaturize this function to make the watch even smaller.
Interestingly, the taptic engine is where Apple seems to be encountering manufacturing issues with one of its suppliers, Shenzhen, China-based AAC Technologies Holdings , according to the Wall Street Journal, which cites people familiar with the matter. The Journal reports that the engine starts breaking down over time. This may be the cause of the delays in Apple Watch shipments.
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