No, the Apple Watch does not cost $84 to make

“The Apple Watch is out, and we’re seeing the first analyst estimates of some of its key costs,” Hristo Daniel Ushev writes for Mobile Forward. “The variation in these early estimate is huge. It’s so big that, even if some estimates aren’t perfect, others are, to use a Tim Cook phrase, ‘in another universe.'”

“Here are two examples. These firms looked at the (1) hardware and (2) manufacturing costs of the Apple Watch. IHS’ estimate for the 38mm Sport version: $83.70.
TechInsights’ estimate for the 42mm Sport version: $138.50. Can both be correct?” Ushev writes. “No. ‘But they looked at different-sized models’ one might say. Nah; that’s almost irrelevant.”

“From my experience working with product and cost experts at a well-known mobile device company, I can tell you: Apple Watch does not cost $84 in hardware and manufacturing. It costs meaningfully more. Probably more than 2X that,” Ushev writes. “And I’ll tell you why. Maybe I’ll even give you my estimate.”

Read more in the full article – recommended – here.

MacDailyNews Take: Ushev’s estimate is likely much closer to the truth than $84.

[Thanks to MacDailyNews Reader “Jax44” for the heads up.]

Related article:
IHS estimates Apple Watch Sport costs just $83.70 to make – April 30, 2015

14 Comments

    1. often these type of estimates ignore R&D and software, let alone advertising, TOST and BCN expenses, so it’s not a stretch to say that his is a much more reasonable estimate of true costs.

      1. Best example is automobile industry: cost of parts of Mercedes or Audi is four-to-five times less that the price buyers pay to auto dealers — and no one is “outraged” by that.

      2. They are supposed to ignore all other cost; first, such cost is impossible to determine, and second, it is really not all that relevant in determining the baseline for comparison.

        These tear-down bill-of-materials estimates provide very useful information for analysts who need to determine relative margins in comparison with competition.

  1. Let’s put it this way: If Apple maintains its traditional 37%-40% profit margin on the Watch, that means it must manufacture the Watch Sport 42mm for about $241-$251. That’s watch, band, packaging, charger, cable,  stickers, i.e., everything you get in the box.

    There. Analysis done.

  2. Why on earth IHS iSuppli gets quoted by the brain-dead media as the oracle of accuracy when it comes to cost breakdowns will forever remain a mystery. It’s amazing that you can build a business based on making up facts through anatomic extraction.

    May God have mercy on us all.

  3. We’ve thrashed over this topic enough times. I find these ‘cost estimates’ to be blind to everything but an attitude that all the bits and pieces should be off-the-shelf. To hell with R&D, manufacturing investment, real employee costs, blahblahblah. I guess someone finds this minimalist silliness amusing. But it’s NOT useful.

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