$349 Apple Watch components cost only $83.70 – IHS Technology

Will Green is news editor of Supply Management
10 May 2015

An analysis of the components in the new Apple Watch Sport shows the cost of materials to be around 24 per cent of the recommended retail price.

A “teardown” of the product by IHS Technology found the components cost $83.70, compared with the retail price of $349, giving it the lowest hardware costs relative to consumer price of any Apple phone researched by IHS.

IHS said estimated component cost to retail price ratios for other Apple products it had reviewed ranged from 29 per cent to 38 per cent.

The company said its analysis included manufacturing costs of $2.50 but did not include costs such as logistics, capital expenses, research and development, software and licensing.

Kevin Keller, senior principal analyst for materials and cost benchmarking services at IHS, said: “It’s fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost.

“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.”

According to IHS the display in the watch costs $20.50, the processor $10.20, the memory $7.20, sensors $3 and the battery 80 cents.

Apple CEO Tim Cook, announcing the company’s latest results at the end of April, said such cost analyses were not correct.

“Generally there are cost breakdowns around our products that are much different than the reality. I've never seen one that is anywhere close to being accurate," he said.

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