Undeterred by Tim Cook's browbeating, supply chain 'guesstimators' soldier on with Apple Watch appra
Apple CEO Tim Cook took supply chain "guesstimators" to task on the company's second-quarter earnings call earlier this week, but that did not stop one firm from moving ahead with its own analysis of Apple's new wearable device.
IHS Technology tore down the 38-millimeter Apple Watch Sport, estimating that its total component cost comes out to just $83.70, as noted by ZDNet. The aluminum model retails for $349.
The LG-manufactured OLED display assembly and Analog Devices touchscreen controller combined for the highest part cost at $20.50 per device. The internal application controller is thought to come in at $10.20, while $7.20 is allocated to memory and $5.50 to power management.
Wireless interfaces add a further $3 to total, with audio and NFC devices accounting for $5.50 and sensors at $3.
The Watch's battery is estimated at an almost laughably low $0.80, while "other mechanical / electro-mechanicals," like wristbands and switches, add $16.50. IHS estimates the cost of packing and the new inductive charger to be $9.
Not included in the bill of materials estimate was outlay for research and development, marketing, or other expenses.
On Monday, Apple's chief executive said he had never seen such an analysis that was "even close to accurate." His testy response was prompted by questions about perceived weakness in the Apple Watch's launch margins.
IHS Technology tore down the 38-millimeter Apple Watch Sport, estimating that its total component cost comes out to just $83.70, as noted by ZDNet. The aluminum model retails for $349.
The LG-manufactured OLED display assembly and Analog Devices touchscreen controller combined for the highest part cost at $20.50 per device. The internal application controller is thought to come in at $10.20, while $7.20 is allocated to memory and $5.50 to power management.
Wireless interfaces add a further $3 to total, with audio and NFC devices accounting for $5.50 and sensors at $3.
The Watch's battery is estimated at an almost laughably low $0.80, while "other mechanical / electro-mechanicals," like wristbands and switches, add $16.50. IHS estimates the cost of packing and the new inductive charger to be $9.
Not included in the bill of materials estimate was outlay for research and development, marketing, or other expenses.
On Monday, Apple's chief executive said he had never seen such an analysis that was "even close to accurate." His testy response was prompted by questions about perceived weakness in the Apple Watch's launch margins.
Comments
80¢ for the battery? Do they just make the numbers up? What evidence is that based on?
A 1000 cycle battery is not .80.
...
And vice-versa.
Fandroids are worth more. All those heavy metals leeching out of their phones.
Does anyone really care what these "guessers" come up with? The profitability of the company will always ultimately be based on their earnings reports. Not what these Wall Street and other financial clowns think/guess. They need to go back to the carnival they came from and continue guessing your weight.
These company reach out and try and get a price and some supplier will through them a bone and give them a number which most time have no meaning and these guy run with it.
This is pure stupidity.
Apple already stated that the Watch gross margins are lower than 40% (at least for the first few quarters)
Using this estimate the gross margin is 76%.
idiots.
Do we really expect anything better from some of the dumbest people on the planet? The only people who are likely paid more to be always wrong are the weatherman!
And the average adult human being is probably worth $63.57 in raw atomic elements. /s
Awesome analogy.
I have it on good authority that IHS's website is designed by 17-year-old interns that cost them nothing. Here's where they talk about their mission to find out how much stuff costs:
https://technology.ihs.com/Solutions
They are the owners of iSupply, by the way. I guess they're going for an image upgrade.p
80¢ for the battery? Do they just make the numbers up? What evidence is that based on?
I guess you haven't seen how little a vastly larger iPhone battery costs in single quantities at retail from third parties. Let's say the IHS estimate is off by 50%. That still means the low-end Watch components cost less than $42. Oh, did Cook say the estimates were much too low? I thought he meant too high.
IMHO Tim Cook's statement was made to avoid outside estimates undermining Apple Watch sales at a critical moment in the device's history when more sales (and shipments) are needed to spur app and accessory innovation and development. These estimates could also undermine Apple's efforts to position the Apple Watch as a luxury item.
Aspects that aren't included in IHS incremental product price estimates include R&D, fixed costs of production, advertising and support. These are all major costs for the Apple Watch--particularly advertising.
I will be more than happy to write IHS Technology a $83.70 check if they could put together an Apple Watch for me. In fact, on a second thought, I would not mind writing a $183.70 check.
IHS only does tear-downs. They don't know how to put anything together.
I will be more than happy to write IHS Technology a $83.70 check if they could put together an Apple Watch for me. In fact, on a second thought, I would not mind writing a $183.70 check.
If everyone cancels their pending Watch orders at once, you might be able to write Apple a check for $200, with free shipping included.
The total margin includes more than the cost of the parts and I believe cost analysis is high so Apple BOM costs are probably less, But you have to factor in all the other costs to get the real margins. The reason I believe that watch margin are going to be low is due to yield issue they probable incurring significant costs to convert parts into a final working watch. The think you have to keep in mind is the fact that watch costs are going to high enough to drag down Apple margin across many products. This mean that watch margins are well below 40%. This back up the statements we have been seeing that Apple is having issue making the watch.
You could probably multiply their estimates by 200% and easily be pretty close to total cost - including R/D.
Once the automated manufacturing starts and Apple squeezes its suppliers mercilessly like other big corporations, the money will be flying in the door.
The total margin includes more than the cost of the parts and I believe cost analysis is high so Apple BOM costs are probably less, But you have to factor in all the other costs to get the real margins. The reason I believe that watch margin are going to be low is due to yield issue they probable incurring significant costs to convert parts into a final working watch. The think you have to keep in mind is the fact that watch costs are going to high enough to drag down Apple margin across many products. This mean that watch margins are well below 40%. This back up the statements we have been seeing that Apple is having issue making the watch.
In the initial rollout period, the company will incur costs against smaller initial batches of watches for testing of various aspects of production, and it will create a number of watches to populate its stores with demo watches that will not be sold. My local apple store has four demo tables, each with four drawers, each with 18 try-on watches, plus a couple watches in demo stands. Plus the 38 watches, including 8 solid gold models, in its main display table. This comes to a total of 334 Watches out on the store floor, and undoubtedly an inventory of additional demo watches to swap out should there be an issue with any of the floor models. And given that there are 12 different Watch bodies, they would need maybe 60 additional demo watches behind the scenes to cover any swap outs needed to keep the floor stocked with watches. So call it 400 in an average store, multiply by 450 stores, and that's an eye-opening 180,000 watches to be produced and not sold. Yeah, margins are naturally going to be squeezed in the initial product launch period.
Here are a few pics I took while visiting my local Apple store for a try-on (I'd already pre-ordered and I've had my Watch since last Friday).