IHS estimates Apple Watch Sport costs just $83.70 to make

“That shiny new Apple Watch Sport may have set you back $350, but from a hardware and manufacturing standpoint it only cost Apple $83.70,” Adrian Kingsley-Hughes reports for ZDNet.

“The most expensive component is the LG display, which is estimated to cost $20.50, while the processor adds $10.20 and the memory a further $7.20,” Kingsley-Hughes reports. “That tiny battery is estimated to cost a mere $0.80, with the contents of the box – which includes a charger and spare wristband – adding $9.00 to the cost.”

Kingsley-Hughes reports, “Note that the analysis does not include logistics, amortized capital expenses, overhead, R&D, software, IP licensing and other costs.”

Read more in the full article here.

MacDailyNews Take: Nor does it contain significant marketing costs or, quite likely and rather importantly, accuracy:

Generally, there are cost breakdowns that come out around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate.Apple CEO Tim Cook, April 27, 2015

29 Comments

  1. Android faux wannabe watch makers will certainly be able to compete price-wise but ecosystem and Continuity wise they will be a distant 2nd or 3rd rate choice. It seems to me this is where Android-tainted devices will not succeed and just falter, much as their premium phones have begun to. Continued scraping the bottom too of the profit barrel can’t be good for Android manufacturers to sustain.

  2. What is the point of these analyses if you don’t include the billions of dollars in R&D? Do they think Apple was able to construct this amazing feat of engineering for free? Have they forgotten the long and expensive road that Apple traveled to design the S1 chip in-house? What about the money they spent on changing every single Apple Store to showcase Watch? You think this shit happened overnight?

    1. I think this, like other such analyses, is to show cost of materials used and retained in the final product. This gives a ‘common ground’ on which to compare. Adding costs like logistics, R&D, etc. that is spread across multiple such devices muddies up the comparison. For all we know due to Apple’s large unit purchases the price could actually be lower yielding even more margin.

  3. ““Note that the analysis does not include logistics, amortized capital expenses, overhead, R&D, software, IP licensing and other costs.”

    And is, therefore – even if accurate – a completely stupid and worthless piece of information. Thanks, Adrian.

    1. It is worthless to you. There are many people out there that pay for precisely this information — net value of components built into a device. Which is why there are several companies that provide tear-down pricing information for every new piece of hardware.

  4. You beat me to it… my thoughts exactly. R&D extended some 5 years, at least, manufacturing set-up costs, Apple’s commitment to GREEN, err… ecologically speaking, advertisement and marketing, and what about the development of the new materials for aluminum, and the new processes for the stainless steel, as well as the new concept for the way the bands can be changed, the brand new, 1st time ever for Apple using the OLED display, we could go on and on, and then there’s the expected and well deserved profit for this forward thinking company…. PULEEZE!

    1. Tear-downs never include R&D, marketing, or anything else.

      Let’s repeat this again: Tear-down provides exact sum of prices of each component built into a device. NOTHING more than that. I thought this was clear to everyone, after all these years of tear-down reports on computing and mobile devices.

  5. Are we discussing this again???

    Tear-downs are a standard practice for every piece of new hardware that comes out. Their purpose is not to annoy people with presumably massive markups that manufacturers slap on these devices. It is to establish a baseline which allows relatively reliable comparison among different devices. They are not supposed to include impossible-to-measure R&D costs, marketing, support or anything else. Their sole purpose is to determine cost of parts inside a device. Nothing more. And such information has value to many people (investors, competitors, component manufacturers, analysts, etc). That some people don’t find value in them is of no surprise, but hardly means anything.

    1. Over the years, the only comments I have even seen ANYWHERE have all been related to, “The components only cost $x, therefore a reasonable price should be $y.” Absolute stupidity.

      And I am also ready to believe Tim that no such breakdowns have even been anywhere close to reality.

      Any real company not staffed by complete imbeciles is going to think about their business model based on ALL costs. If components don’t cost much, but a completely new kind of manufacturing machine has to be developed and built, maybe that needs to be taken into consideration? It seems of very little value to investors or anyone to talk about the factor that is a completely unknown, and possibly very small, percentage of the actual cost of a device.

      1. Plus his article heading is simple wrong, wrong, wrong…
        “Apple Watch costs under $85 to make”

        Even if his component cost is accurate, the heading can only truthfully say, “Apple Watch components cost under $85”.

        On “value to many people (… analysts)”
        Ahhhhh. THAT’S how analysts give us such profound insights.

  6. There is a disingenuous outraged sense of cheap geektard entitlement to buying devices near to cost with minimal profit to makers. And they love to bust Apple on their margins while touting their inferior cheap knockoff wares someone will provide somewhere and suffer the low profit consequences.

  7. And yet Apple’s guidance for next quarter suggests that their margins on the Watch are lower than for their other products and this will affect their earnings.

    Granted, this includes Watches that are defective, but I suspect I trust Apple’s guidance over some internet “analysis”.

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