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New Apple Watch Has Lowest Ratio of Hardware Costs to Retail Price
- grecy 11y agoAnd yet, on the earnings call Tim Cook specifically said the Watch doesn't have a profit margin as high as other products.. yet.
- shawn-furyan 11y agoThat's not inconsistent with this analysis. As the article states, there are several factors, many of which would tend to be higher for a first generation product than a latter generation product (i.e. setup costs), that the bill of parts doesn't take into account.
- amputect 11y agoThe setup / R&D costs for manufacturing alone must have been enormous. Greg Koenig wrote a great piece about the manufacturing process[1]. It's a really interesting read, even if you're not a big fan of Apple products. 1: http://atomicdelights.com/blog/a-glimpse-at-how-the-apple-watch-is-made http://atomicdelights.com/blog/a-glimpse-at-how-the-apple-wa...
- astrodust 11y agoThere could also be a very high internal defect rate which would significantly impact the net cost per unit.
- hinkley 11y agoThey could also be expecting a high external defect rate, and be factoring, say, 10% into the sale price to defray warranty costs. It's also the first of a new product line, so it likely also has to cover some of the costs of creating and entirely new division inside of Apple, from line support up to executives. NOT just the R & D costs.
- mikeash 11y agoDidn't he also say that he had never seen a third-party cost estimate that came even remotely close to being accurate?
- skywhopper 11y agoNote that this data is all just made up. The components listed are probably close to right (though I don't see anything about the haptic device--could be I overlooked it) but the cost for each is just a random guess. I'm guessing they also well undershoot the assembly cost, given the extreme care Apple puts into its manufacturing process. And even if all the per-unit costs are correct, the fact that they leave out R&D and logistics costs is very misleading, especially given that this is not just a new revision of a well-understood product like a new Mac or iPhone. This is a new product altogether, and that overhead is significantly higher. So in the end the number is misleading and ultimately pointless, except to Apple's cost accountants.
- bravo22 11y agoThe article is only concerned with unit costs, not overall cost with various amortizations built in.
- genericuser 11y agoI wouldn't call them 'random' guesses as they seem to be based on actual information to some degree. I also wouldn't call the end number pointless, it just doesn't mean what people who only read the headline might assume it means. I believe the article does a pretty good job explaining the caveats about other costs which are not taken into account. And the numbers are still useful for comparing against other product launches by apple. R&D for products is generally left out of the production cost, as it is a fixed price regardless of the number of units they produce, and therefore has no unit price, and is simply recouped over time (hopefully). Over all its an interesting article I think, and while reading it I felt they were doing adequate cautioning of the reader to not go 'OMG Apple is gauging us even more' which the number really has no relevance to as you point out, however it does not mean the number is misleading or pointless.
- jafingi 11y agoR&D also costs a few pennies...
- forgotpasswd3x 11y agoNobody is suggesting that.
- youdell 11y agoErrrr... the person you wrote a reply to suggested it...
- forgotpasswd3x 11y agoI misread his post and thought he was being sarcastic.
- swamp40 11y ago$2.50 to assemble and test?
- genericuser 11y agoThat works out to it taking about an hour to assemble and test, sounds reasonable to me. At least based off the wage from 2012, allowing for an over 10% increase. "At that salary, the wage ranges between $1.50 and $2.20 an hour, based on the exchange rate of 6.3 renminbi to the dollar." http://economix.blogs.nytimes.com/2012/02/24/the-ieconomy-how-much-do-foxconn-workers-make/?_r=0 http://economix.blogs.nytimes.com/2012/02/24/the-ieconomy-ho...
- gohrt 11y agoThat's a sad reminder of the level of labor exploitation that goes into luxury products and profit margins.
- bdcravens 11y agoIs it exploitation though? If that's a prevailing wage in the area, it's not exploitation. It's just lower than they'd pay elsewhere. (if they are making them work for less or in unreasonable conditions, then yes, it's exploitation, but not because it's cheaper than US labor)
- Vadoff 11y agoHighest* ratio
- TallGuyShort 11y agoNo I think they mean lowest. They're saying the actual cost of the hardware (numerator) is low relative to the purchase price (denominator).
- Vadoff 11y agoHighest* ratio
- rebootthesystem 11y ago<sarcasm>Greedy bastards!</sarcasm> I always find it interesting to note that nobody ever acuses Apple of being greedy. The typical punching bag on the "greedy bastards" bandwagon are the oil companies. Interestingly enough they operate at gross profit in the order of 7% while Apple is running somewhere around 40%. Just google "apple profit margin" for that data. Here's a Forbes article on oil companies, including the revelation that the government makes far more money per gallon than the oil companies themselves. Data is a bitch. http://www.forbes.com/2011/05/10/oil-company-earnings.html http://www.forbes.com/2011/05/10/oil-company-earnings.html
- skj 11y agoGasoline for your car is a life necessity for many people. Apple hardware is not.
- jessaustin 11y agoThis is a non sequitur. Food is also a life necessity for many people. Should farmers give away their produce?
- skj 11y agoIf farmers were billionaires and had a cartel to artificially manipulate prices (and it were widely known, just in case they already do that), I imagine we'd hear similar complaints.
- fragmede 11y agoNo only are there billionaire farmers, but their 'price-fixing cartel' goes so far as to pay farmers to not farm!
- spinchange 11y agoThere are billion dollar agricultural corporations. I do not think there is a statistically significant population of billionaire family farms. Probably not even in the hundreds or tens of millions $ level, for that matter.
- johansch 11y agoThis is typical of fashion items.
- smegel 11y agoHardly surprising for what is essentially a piece of jewelry. The cost inflation for the gold piece especially has nothing to do with the cost of the most expensive material (the gold itself).
- velodrome 11y agoApple usually has a 1:3 cost to retail price ratio (based on mobile devices). Maybe they need the headroom for additional sensors (to maintain the current price).