Estimated Apple Watch production costs hint at crazy-high profit margins

Estimated Apple Watch production costs hint at crazy-high profit margins
A new Apple Watch teardown performed by IHS reveals that the smartwatch costs significantly less to manufacture than the price that Apple asks for its first wrist piece. While this is nothing new for Apple, a company that is well known for releasing products that rack in high profits, IHS claims that Apple is breaking all previous records with the Apple Watch.

IHS estimates that the 38mm Apple Watch Sport carries a bill of materials of $81.20. With $2.50 added for manufacturing costs, the estimated cost of production raises to $83.70. At a retail price of $349.00, Apple is estimated to make about $266 for each 38mm Apple Watch Sport unit that it sells, with the cost of production though to represent just 24 percent out of the retail price. In other words, the smartwatch is though to have a profit margin of 76%. For comparison, IHS says that, at launch, the iPhone 6 had a profit margin of about 69%, while the larger iPhone 6 Plus had a profit margin of about 71%. 

One thing to bear in mind is that the estimated cost of production provided by IHS does not take into account several other costs, including here money spent on research and development, shipping, marketing, software, and licensing. For a complete teardown of the estimated bill of materials, check out the image attached below.

At the moment, it's unknown if the same profit margin applies to the more expensive versions of the Apple Watch, but it's safe to say that the profit margin should be in roughly the same ballpark, if not even higher.


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92 Comments

1. SamsungEU

Posts: 147; Member since: Dec 29, 2014

feel bad for their customers

2. AlikMalix unregistered

Why? They don't have to buy if they don't think it's worth the tag.

4. arch_angel

Posts: 1651; Member since: Feb 20, 2015

its not worth it

10. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

It's not about "worth it", it's about people having the choice to buy what they want. If it's what you want, buy it, at least you know what you're getting if you look into your purchase. If you don't want it, simply don't buy it. SamsungEU you don't feel bad for Apples customers, that's a blatant lie. How could, and why would you feel bad for people who spend their money as they see fit, and enjoy their purchase? That's smart buying, nothing to feel bad about. Keep it 100 bruh.

12. Mxyzptlk unregistered

Say it again. Feel bad? Apple doesn't have a gun to my head telling me to buy it. Only thing Apple has to do is make great products so they can just shut up and take my monies.

18. SamsungEU

Posts: 147; Member since: Dec 29, 2014

yep i agree with all the freedom and such but i don't see anything ground breaking to claim such a price. But in my country we have a saying: The fool is not the one that asks but the one that gives :) Cheers!

30. dallas90733

Posts: 36; Member since: Mar 06, 2011

We have a similar saying, "A fool and his money will soon depart". and if anyone things it's okay for any company to fleece them like this..hope they are not in charge of a household or business.

55. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

Doesn't matter what YOU see, obviously you're not buying an AppleWatch. It matters what the buyer sees. "The fool is not the one that asks but the one that gives :)". No, the fool is the one that is bothered about things that he/she should never be bothered by. The fool sits on PA, and rambles on about satisfied customers spending their money on what they want :)

67. Topcat488

Posts: 1416; Member since: Sep 29, 2012

And the "Nut" defends the "Over Priced Gadgets" or what! Wishing they had Apple Stock i bet... I'm stuck with Apple, because of my iMac and iPhone since 2009... Upgrading both and now running iPhone 6, and "I Hate Apple" because of their greediness! I use my Note 4 for everything except calling... For that i use the ip6. Money is not a problem for me, but saving my hard earned, is still #1. It's Apple that has caused smartphones to "sky rocket" with its mediocre increment on upgrades and standard parts. I love my iMac, so i guess i "love Apple" too. But I hate their "Pricing! And I'm certainly not going to post 14,000 replies, to defend them. O.o

88. AlbertAribe

Posts: 168; Member since: Jun 21, 2014

So, why are you complaining than if you don't have this Apple Watch? Just keep your mouth shut up and let other enjoy what they buy? You have freedom of speak but you have no right to tell to anyone which smart watch should they buy.

19. rd_nest

Posts: 1656; Member since: Jun 06, 2010

I feel same way for people who consume drugs. It't their money for sure, and nobody is forcing them to buy it. But there are much better things in life they anyone can do than wasting it on Apple products.

21. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

That's one of the dumbest analogies I've ever heard. End of comment.

23. bambamboogy02

Posts: 840; Member since: Jun 23, 2012

Makes sense though. All of these stats and figures prove that Apple is selling an over priced unit. But people still pay for a cheaply made device. You can spend your money on what ever you want, just like people who enjoy drugs, spend their money. What ever makes that person happy purchasing what ever 'junk' they choose. You might think marijuana is junk to buy because of what ever reasons, and people think Apple products are junk for what ever reasons. To each their own. If you wish to purchase a $84 item for over $350, go for it. It will be out dated in less than 365 days, have battery issues, and sooner or later, battery will go completely out. If the watch holds ups.

24. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

That was the second dumbest.

26. SamDH1

Posts: 419; Member since: Apr 21, 2015

How are these comments more dumb compared to yours? They are basically backing you up and saying the same thing. Stop being such a giant fanboy, and realize that these huge profits are ridiculous, no one needs this much money, only to go ahead and make more cheap products but get the CEO's and chairs loaded with cash instead

40. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

Dude your comment was plain dumb, I mean just re read it. I can't believe you posted it.

44. AntiFanBoyz unregistered

I normally like your posts, but it's obvious you got nothin'. Probably because they're speaking truth.

56. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

In this case, truth is subjective. Validate how someone is wrong for buying what they want to buy, with their money. Please no drug analogies either.

99. bambamboogy02

Posts: 840; Member since: Jun 23, 2012

@ darkkjedii, I don't know how you can sit there and be hypocritical. You say "Validate how someone is wrong for buying what they want to buy, with their money." Just because you don't like drug analogies doesn't invalidate my logic. Your a grown man, you seem to be an intelligent person, replace the word mariuana/drugs with what ever you want. The logic still holds. But don't sit there and spew out this hypocrisy about poeple wanting to purchase what they want with there money and be offended by people who enjoy their hard earned money on drugs/gadgets/girls/boys/life. Who are you to say they can't. You can think its a waste, but you have to respect your own words at least. "Buying what they want". You can disagree like many have hear, and feel sorry for those purchasing "gadgets/drugs/whatever" and voice that opinion. You might feel people who purchase drugs are stupid or what ever, people feel the same way about apple customers buying what apple is peddling. No where do I ever say I support the drug dealor, just like I never say I support apple. Keep it 100 bro...

45. maherk

Posts: 6928; Member since: Feb 10, 2012

Woof...woof no wonder why you're called barkkjeddi. Anyone still believe that this kid is 35, and has a 1 year old(or was it 17?) whome colleges are throwing scholarships at? Lol

61. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

I'm not 35, and never said I was. Post the links please, that show me saying these things.

48. arch_angel

Posts: 1651; Member since: Feb 20, 2015

well f**king said

95. ShaikhJGI

Posts: 361; Member since: Jan 10, 2014

One of the best examples for Apple addiction & Awesome response to Darkkjedii wowww :) Best comment lately i have seen +1 :)

20. realjjj

Posts: 375; Member since: Jan 28, 2014

It's about consumers that are not rational and/or informed wasting most of their money like that. Weather it's an iphone or any other grabage that iis at least 50% marketing, consumers are getting screwed. You pay 650 for iphone and you get harlf that value at best, you pay 400$ for this really sucky Apple watch and you get 3 times less. It's a major illness of our times, pople being really stupid on how they spend. The only one benefiting are corpoations and their investors, while the public gets screwed, the state screwed , the entire economy gets screwed in quite a few ways. It also slows innovation to a halt since device makers barely spend anything on R&D while investing twice as much in sales and marketing. It's a messed up system that has to end or the global economy will literally collapse in 1-2 decades.

33. tedkord

Posts: 17397; Member since: Jun 17, 2009

It's their money and their business. Why does it bother anyone what someone else buys?

43. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

Ted that's my point bro. In these comments, you can really see where these guys are outright bothered by people's choice. I don't give a damn what a person spends their money on, what it costs, or what it's worth. If you want it, and can afford it, buy it. SamsungEU said "I feel bad for their customers", no way on earth does he feel bad. If you want a flip phone, toaster, can opener, or a ball python, it's your money. How can you intelligently, and with validity have a problem with how I spend my money? It's not even possible lol. I love reading these type of comments, where they relentlessly blast Apple for its greed, but give everyone else a pass. Is the liquid diabetes that Coke, and Pepsi sell a problem for people to buy, or how about the delicious yet very unhealthy food from McDonald's? Makes me wonder, if SamsungEU feels bad for those companies customers.

47. maherk

Posts: 6928; Member since: Feb 10, 2012

Now he is your bro? Lmaoooo Man you're ALWAYS attacking him, and that you don't give a fu€k what he says or you don't have time to read his "boring long essays". But yeah, now you're struggling in this thread, and anyone who is there for the rescue will be welcomed. iHypocryte.

86. gaming64 unregistered

Stop stalking Daark, here have some pills and go back to rehab.

79. Taters

Posts: 6474; Member since: Jan 28, 2013

Everyone else gets a pass because they are obviously the lesser of evils compared to Apple. And you should care if you value society and humanity. I don't want to live in a screwed world where someone thinks it's okay to spend 1 million dollars on a rock you can find on the ground just because it makes them happy. I would question their sanity and hope they seek professional help for their sake. Lol

53. darkkjedii

Posts: 31269; Member since: Feb 05, 2011

Ted please post the link of me attacking you. You and I have never had anything bad to say to each other, and yes we disagree sometimes. Please and thank you.

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