IHS estimates the bill of material in the Apple Watch Sport to be only $81.20. The retail price of the 38mm Apple Watch Sport is $349, making the Apple Watch the highest margin Apple product.
We already suspected that Apple managed to have a very high profit margin on the Apple Watch. Now IHS analyzed the component cost of the 38mm Apple Watch Sport and estimates that the actual hardware costs are only about 24% of the manufacturer’s suggested retail price (MSRP). Estimated hardware cost to MSRP ratios for other Apple products reviewed by IHS are in the range of 29 to 98%.
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The teardown of the Apple Watch Sport 38 mm by IHS Technology shows a bill of materials of $81.20 with the cost of production rising to $83.70 when the $2.50 manufacturing expense is added. The retail price of the Apple Watch Sport 38 mm is $349.00. There are of course other costs with making the watch, but it shows that in the long run Apple will make a ton of profit selling Apple Watches.
“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.”
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With $20 the OLED Screen is the most expensive component of the Apple Watch. The S1 CPU is estimated to have a cost of $10. It is very likely that the profit margin is at least the same or even higher on the more expensive models. The electronics are the same. Only the case, band and glass are different.