The Apple Watch comes in three collections. The cheapest of these, the Apple Watch Sport sells for at least US$349 (CA$449). Even at that price, IHS Technology has found that it has “the lowest hardware costs compared to retail price of any Apple product.” In other words, it has, at 76%, the highest gross margin and Apple’s bottom line stands to benefit significantly in the coming quarters.
IHS Technology estimates that a 38mm Apple Watch Sport costs US$86.20 to manufacture with a bill of materials of US$81.20 and an additional US$2.50 manufacturing expense. Not included in this calculation are additional costs such as logistics, amortized capital expenses, overhead, SG&A, software and IP licensing. Also not factored are Apple’s R&D costs which are likely not negligible.
“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-materials and cost benchmarking services for IHS Technology. “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.”
Among the components identified during the teardown are Toshiba Flash 8GB NAND memory, a Micron SDRAM 512MB module, connectivity components from Broadcom, STMicro, Maxim, Analog Devices and NXP an STMicro accelerometer/gyroscope and an LG plastic OLED display with TPK Slim GG touchscreen overlay module.
Apple declined to comment on the IHS report.
Sources : IHS Technology // Re/code