Apple Watch hardware costs only 24 percent of retail price: IHS

Apple Watch hardware costs only 24 percent of retail price: IHS

While the Apple Watch is yet to reach the global markets, research firm IHS has just made a claim that reveals its hardware costs only 24 percent of the retail price.

IHS used its Teardown Mobile Handsets Intelligent Service to bring out the hardware costs of the Apple Watch. The teardown of the Apple Watch Sport estimates that the actual hardware costs, including bill of materials and manufacturing expenses, are only about 24 percent of the manufacturer’s suggested retail price (MSRP). However, estimated hardware costs to retail price (MSRP) for other Apple devices are said to be in the range of 29 to 38 percent.

Apple Watch

Apple Watch

“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.”

The research firm says that the teardown of the Apple Watch Sport 38mm variant shows a bill of materials of $81.20 with the cost of production rising to $83.70 when the $2.50 manufacturing expenses is added. This means that the total cost stands about $84, while Apple is retailing the Sport variant for a retail price of $349.

Apple Watch Sport top cost drivers

Apple Watch Sport top cost drivers (Source: IHS)

It is worth noting that the analysis done by the IHS team does not include logistics, amortised capital expenses, overhead, SG&A, research and development and IP licensing among other variables throughout the supply chain.

IHS claims that the preliminary results of the teardown “do not show any big surprises” in the IC content. There is an 8GB NAND memory chip by Toshiba, 512MB SDRAM by Micron and connectivity and interface by companies like Broadcom, STMicro, Maxim, Analog Devices and NXP. Furthermore, there is a TPK Slim GG module to offer Apple’s Force Touch technology.

A separate teardown review by iFixit shows that the Apple Watch is not an easy-to-repair device due to a complicated setup on its S1 SiP chip that has Apple’s Taptic Engine for haptic feedback and connectivity with the battery pack, Digital Crown and LG-made display panel.

That teardown also revealed that Apple has used a heart rate sensor on its Watch that actually appears as a plethysmograph, which acts as a pulse oximeter and can be used to measure blood oxygen level of the end users.

With a starting price of $349, the Apple Watch went on sale in nine countries last week. It comes in three different models – Apple Watch Sport, Apple Watch and Apple Watch Edition.

According to analysts, Apple will see one million shipments of the Apple Watch in the first stage and the shipments could reach to 20 million later this year. It is hard to forecast shipments of any particular models but the Apple Watch Sport is likely to be most selling Apple Watch.

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