Cupertino giant’s latest offering the Apple Watch costs consumers anywhere between $349 to $17,000, and just like the iPhone, its seems like a money minting piece of hardware. Tearing down the 38mm Apple Watch Sport reveals its estimated production cost at $83.70, according to research firm IHS. Now that amounts to only about 24 percent of the watch’s actual retail value. IHS also says that the Apple Watch costs the company lowest in terms of hardware compared to the retail price of any other Apple product. The cost of production of the device versus its retail price range between 29% to 38% for other Apple products, according to the research firm’s past teardowns.
The most expensive part of the Apple Watch is apparently its OLED display with Ion-X cover glass, made by LG Electronics, at $20.5. Next comes Apple’s A1 processor, costing an estimated $10.2.
“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.”
However, these estimates and teardowns don’t really give an accurate picture and eventually might not signify anything substantial.
During its earnings call, Apple CEO Tim Cook took note of these kind of teardowns and said, “I’ve never seen one that is anywhere close to being accurate.”
IHS analyst Keller further added that a few important parameters are also not taken into consideration, important variables such R&D, intellectual property rights and logistics that play a pivotal role in determining the overall cost of the product.
Meanwhile, many of you might be already aware of the staggering response to the Apple Watch, with global orders expected to reach the 2.3 million mark. Some believe that this overwhelming response has been the cause of the delay, though recently the WSJ reported that the taptic engine is where Apple seems to be having manufacturing issues with one of its suppliers, and hence coping up with the excess supply. The Journal reports that the engine starts breaking down over time.