£299 Apple Watch has manufacturing cost of just £53

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IHS teardown claims that Apple Sport Watch has the lowest hardware cost of any product that Apple has ever shipped compared with its retail price

The Apple Watch Sport has a total component and manufacturing cost of just £53, according to a ‘teardown’ by analysts IHS Technology.

As prices for the product start at £299 in the UK, IHS claims this makes it the highest margin product that Apple has ever produced.

IHS, which worked its ratio out using US prices estimates that the $31.70, build cost and $349 retail price of the 38mm version of the Sport Watch means that hardware costs are just 24 per cent of the retail price of the handset. IHS says this compares with hardware-to-retail costs of 29-38 per cent on other Apple products.

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

“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, on an analyst call following Apple’s results last week chief executive officer Tim Cook disputed the accuracy of some ‘teardown’ claims.

“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,” said Cook.

 

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