Apple Watch Sport disassembly: Component cost is 500 RMB

Market research firm IHS iSuppli released a disassembly report on the Apple Watch on Thursday, which showed that the hardware cost of the Apple Watch was the lowest compared to other Apple products that IHS had previously disassembled .

IHS estimates that the component cost of the 38mm Apple Watch Sport is $81.20. The display, which uses an OLED panel and Ion-X glass, has the highest cost, estimated at $20.50. The S1 processor costs an estimated $10.20. In addition to the component cost, IHS estimates that the manufacturing cost is $2.50, so the total original cost is $83.70. IHS did not tear down the stainless steel and gold versions of the Apple Watch. Both models use sapphire glass and different metal casings.

IHS pointed out that the original cost of $83.70 is only about 24% of the suggested retail price of $349 for Apple Watch Sport. Previously, this ratio of other Apple products disassembled by IHS was usually 29% to 38%. This means that Apple Watch should have a higher profit margin. However, in the earnings conference call this week, Apple said that the profit margin of Apple Watch is lower than the company average, at least in the first quarter of sales.

"It's normal for the first generation of a product to have a retail price that's significantly higher than the hardware cost when it's first introduced," said Kevin Keller, senior analyst at IHS. "While retail prices tend to decline over time, the percentage for the Apple Watch is lower than for the iPhone 6 Plus and other products, so if Apple Watch sales keep pace with interest in the product, it will be very beneficial to Apple's bottom line."

Three days ago, Apple CEO Tim Cook said that estimating the cost of Apple products through disassembly is not accurate. "The cost of products estimated through disassembly is very different from the actual situation. I have never seen such estimates be accurate."

Such a breakdown focuses only on component costs, but does not take into account other large expenses associated with the product, such as R&D, advertising, software, and channel distribution costs. Therefore, it is not feasible to study profit margins using component costs.

The IHS report shows that the Apple Watch Sport uses 8GB of flash memory from Toshiba, 512MB of RAM from Micron, and other components made by Broadcom, STMicroelectronics, Maxim, NXP Semiconductors, and Analog Devices. In addition, the product uses accelerometers and gyroscopes from STMicroelectronics instead of Invensys.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.