Apple Inc. Watch Teardown: More Profit Margin Than iPhone

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Apple Inc. Watch Teardown: More Profit Margin Than iPhone
<a href="https://pixabay.com/users/ElisaRiva/">ElisaRiva</a> / Pixabay

Apple could earn higher profit from its lowest-tier smartwatch compared to the high-priced ones and other recent products such as the iPhone 6, suggests research by IHS Technology. In a teardown of the Apple Watch Sport, the researcher tried to figure out what makes the watch run.

Apple Watch could bring more profits than iPhone

Based on the teardown, IHS concluded that the hardware in the 38mm Sport (plus manufacturing expenses) makes up 24% of the retail price of the gadget. The parts integrated in the 38mm Apple Watch sport are worth $81.20, and after adding the production cost for the gadget, it totals to $83.70. The Apple Watch Sport is priced at $349.

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For the other devices explored by the research firm, the parts and expenses on average contributed somewhere between 29% and 38% of the retail price. Everything else remaining the same, the Apple Watch Sport with a 38 mm screen could earn more revenue for Apple.

“It is fairly typical for a first-generation product roll-out to have a higher retail price versus hardware cost,” said IHS analyst Kevin Keller. The analyst noted that the “ratio” for the Apple Watch is lower than that of the iPhone 6 Plus and other new Apple products, which could serve as a great benefit to the company’s bottom line, provided the sales mix come as expected by the company. Keller is the company’s senior principal analyst for materials and cost bench-marking services.

Celebrities like Apple Watch

The Apple Watch has already garnered the attention of some high profile executives, and Facebook’s chief operating officer, Sheryl Sandberg, is one of them. Sandberg is the latest addition to the list of celebrities, which includes names like Beyonce, Katy Perry and Pharrell Williams.

Even though a key Facebook executive is seen wearing the Apple Watch, the gadget has yet to get a Facebook app even though its Instagram app is already there. As of now, the smartwatch comes packed with over 3,500 apps and was rolled out for sale only last week after a massive marketing campaign, in which celebrities sporting the Apple Watch were seen. The company is relying on third-party developers such as Facebook to design apps for the watch, making it even more compelling for users.

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