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Apple Watch Sport has the best profit margin of any Apple product

By Shawn Knight · 21 replies
May 1, 2015
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  1. apple watch sport component costs estimated apple bill of materials ihs watch profit margin smartwatch wristwatch apple watch ihs technology apple watch sport margin

    Apple is known in the business world for its enviable profit margin – the amount of money the company makes off each device sold – and the Apple Watch is no different. According to research firm IHS Technology, it costs Apple an estimated $81.20 to build a single Apple Watch Sport which commands at minimum $349.

    With manufacturing costs of $2.50 factored in, the total cost of production rises to just $83.70. Of all the products that IHS has examined over the years, the Apple Watch has the lowest cost to build versus its retail price of any Apple product.

    While clearly the Watch will be another slam dunk for Apple if it meets its high sales expectations, the "bill of materials" calculation doesn't take under consideration any costs involving distribution, software, R&D, marketing, support, and the list goes on. Nonetheless it makes us wonder what the gross margin might be in that gold Watch or even the stainless steel version -- or the bands! -- considering the internals are shared with the more affordable Watch Sport. 

    In its analysis, IHS Technology said it believes the most expensive component of Apple’s new wearable is the OLED display with Ion-X cover glass manufactured by LG at an estimated cost of $20.50. The second most expensive component is the application processor at just $10.20 per unit.

    Kevin Keller, senior principal analyst-materials and cost benchmarking services for IHS Technology, said it is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost. Keller added that 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.

    We won’t know until next quarter just how many smartwatches Apple has sold.

    Permalink to story.

  2. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,286

    Apple is only allowed to get away with it because iSheep are stupid, they're oblivious to the fact they're being robbed.
    trgz likes this.
  3. OneSpeed

    OneSpeed TS Evangelist Posts: 311   +124

    Isn't capitalism great? :0
    trgz and Skidmarksdeluxe like this.
  4. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,286

    I cant deny that. :D
  5. No kidding! If im going to pay $1000 for a watch it better be swiss and made from titanium
    trgz likes this.
  6. Lionvibez

    Lionvibez TS Evangelist Posts: 1,438   +601

    Don't want to rain on the apple hate we got going here but there is more to it than just the hardware cost.

    I like the rest of you believe all these watches are overpriced.

    However cost to assemble, test, package, ship, and distribute, R&D is also included in the price of the product.

    And articles like this is only telling half the story and people just read it and run with it.
  7. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,286

    Yes we know that but even with all the costs taken into account it's still a highly overpriced gadget.
    Lionvibez likes this.
  8. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,286

    If I'm gonna pay $1000 for ANY watch I'll get my head read first. Unless of course it's the genuine article valued at $50000 and I was under quoted, I could make a neat little profit there. ;)
  9. Lionvibez,

    And I supposed Apple charging people hundreds of dollars just for a simple wristband is also fair price? How
    much R&D does it take to design a leather wristband?


    And to charge $17000 for the high end watch that will be obsolete by next year is also ok for the iSheep I guess

    This is highway robbery
  10. Lionvibez

    Lionvibez TS Evangelist Posts: 1,438   +601

    Agreed that's why I said its still overpriced.
  11. Lionvibez

    Lionvibez TS Evangelist Posts: 1,438   +601

    I never said the price was fair I said this story is missing other critical info that goes into the price.

    My response above applies to you also.
  12. Evernessince

    Evernessince TS Evangelist Posts: 3,796   +3,181

    People are already well aware of the other costs aside for the watch itself, as evidenced by the comments.

    You start your first comment....

    "Don't want to rain on the apple hate we got going here but there is more to it than just the hardware cost."

    There's no point in the first half of this sentence because, in the end, other smart watch's are cheaper and provide the same features. In order to "rain on the apple hate" one would have to prove that Apple isn't overpriced instead of providing a dramatic opening sentence and then following up with a small critic that is unrelated to said parade you were supposed to be raining on.

    Anyone buying an Apple iWatch has allot of extra cash, as the device does nothing you can't already do with other Apple devices or the competition.
  13. Lionvibez

    Lionvibez TS Evangelist Posts: 1,438   +601

    The view you guys have are the same as others on other sites so I felt it necessary to point out there is more to the cost than what is posted there.

    My house is an apple free zone I don't own any of their products and I don't intend on buying this product. You guys are free to think what you want.

    I'm out!
  14. Call it overpriced just because you can't afford it.

    It is only technically overpriced if no one buys it. Otherwise, it is priced correctly or underpriced.
  15. Skewed Input

    Skewed Input TS Rookie Posts: 31   +9

    So how come the sony ericsson smart watch first came out years ago, with a price of $35? Mine still works.
  16. Skewed Input

    Skewed Input TS Rookie Posts: 31   +9

    It's technically overpriced because they charge so much more than they need to. Otherwise, they would actually care about saving their customers some money...instead of charging it "Just because people will buy it".

    I call it overpriced because it's overpriced. Not because your ignorant and assume people can't afford it.
  17. Yeah, nope. Affording it isn't the problem. Refusing to buy into a locked ecosystem, & pay atrociously exorbitant markups on a device that has little to no shelf life is (or should be) common sense. Especially true when contrasted with similar devices of far greater intrinsic value per $.

    Not that I care a whit for smart phones/tablets/watches/anything, to be frank. I find the overall computing experience of such devices to be substandard, and my lowest threshold for tolerance lies with ultrabook's.
    trgz likes this.
  18. captaincranky

    captaincranky TechSpot Addict Posts: 14,685   +3,843

    I have an idea.How about if we do consider the shipping cost?

    Which do you think is worth more, a cargo ship full of wheat, or a cargo ship full of Apple watches?

    As of yesterday US farmers were getting ab out $208.00 per metric ton for wheat..

    So, what do you think you can get more for on the world market,a ton of wheat, or a ton of Apple watches.

    Arguably they could both be transported across the ocean for the same cost. Perhaps even less, if the watches are brought over by a ship under a Chinese flag.
  19. Gleowine

    Gleowine TS Rookie

    I don't mind the price but share some of the profit margin with the workers that made it. I would like to see a chart of where things are made and the wages of frontline workers and the amount of conflict materials.
    tektel likes this.
  20. captaincranky

    captaincranky TechSpot Addict Posts: 14,685   +3,843

    Right. And as the song goes, "the white knight is talking backwards"..... If they shared any of the "profits" with the workers, they wouldn't have the same profit margin, now would they?
  21. yRaz

    yRaz Nigerian Prince Posts: 2,820   +2,071

    I can see that the alchemists over at Apple are getting better at their job
  22. yukka

    yukka TechSpot Paladin Posts: 866   +73

    I went to the local apple shop and tried out one on the watches. Honestly I forgot to tell anyone at work for a couple of days. That's how amazing the experience was. £299 for a watch sport and £129 for a brown leather strap to go with it. Utterly insane. I'll stick with my normal watch.

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