For those who keep saying these estimates do not account for R&D, why don't we just look at those numbers. Apple publishes them every quarter. They spent $1.9B this quarter. (http://appleinsider.com/articles/15...ch-and-development-swells-again-to-19-billion). Now, they sold (61.17m [iPhone] +4.5m [Mac] +12.6m [iPad]) = 78.27m devices. So that's $1900m [R&D] / 78.27m [devices] = $24.27 R&D per device.
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Apple Watch Sport Component Costs Estimated at $83.70, Which Won't Sit Well With Tim Cook
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the watch cost is fine. its the bands that are INSANE prices
Not at all, they are cheap to average in the watch world. Go price some.
Plus all those development costs have to be recovered from the sales of the Apple Watch AND the accessories, chargers, bands etc.
Why would they cheapen the product by offering rubber bands for $9.99?
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I'm sure they have these people called accountants, who keep track of money and numbers and stuff.
I'm only guessing, but I doubt its that simple. All of those products are established, hence ongoing R&D costs will not be as much as starting a product from scratch. The link you posted states that R&D costs went up by $500 million compared with last year. A variety of reasons are given but I suspect that a large proportion of the increase was down to the watch, so its unlikely to be a simple mathematical correlation - you can't simply divide the total spent by the total number of devices - proportionately it is likely that they have spent more on developing the watch in the last year than they have on refining the iphone (which obviously accounts for a huge proportion of the total number of devices). I also suspect that the new Macbook will likely be more highly represented in the overall figure too...
I hope someone at Apple was clever enough to scan the websites with advice for small businesses
However, if you start a small business and pay for R&D, be aware that while the cost is tax deductible, you still have to pay for it.
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Claiming that Tim Cook has any insecurities is quite ridiculous.
His comments on estimated BOM being inaccurate are made because he _knows_ the BOM, looks at the estimates, and sees that they are rubbish.
Agreed - correct costing takes into account the entire life-cycle of the watch.
If we step back and look at the big picture, whatever the true cost is, it's completely irrelevant.
Fact: The Apple Watch is here, for sale
Fact: Apple builds premium products at a price, a price point they choose carefully.
Fact: You either want one or you don't.
It's as simple as that...
Fact: The Apple Watch is here, for sale
Fact: Apple builds premium products at a price, a price point they choose carefully.
Fact: You either want one or you don't.
It's as simple as that...
It's the internet though, so most people feel like they have to b***h and complain about anything and everything. I don't even know why most people are even on this site posting to being with.
Component estimates released, response -> "estimates are wrong... must factor in R&D... Apple might even be temporarily losing money"
Apple's Annual Report reports huge net profits on same device, response -> "Go Apple!"
And so it goes.
Assembly, shipping, support, training, loss prevention.
These numbers are worthless for anyone not working for apple who have more accurate numbers. Given apple's negotiation prowess the cost of goods is probably even lower. But that is not relevant to margins on the actually product.
I'll bet the cost breakdown looks something like this:
R&D - 10% (90% of which went into figuring out how to make it as cheap as possible)
Marketing & Advertising - 90%
What about the 5 plus years of development cost? What about administrative overhead? What about software development? What about all those associated salaries that are an ongoing expense? What about support costs and those people being paid? What about shipping costs? What about storage costs? What about repair costs.
Trust me if you have run a business you cab brainstorm 100 relevant costs in an hour. The cost of components even if you add in assembly is a small part of it. How about apples massive investment into the infrastructure of the companies assembling the products. We are talking billions of dollars.
Business is hard. Adding up raw material costs is easy.
I don't mind high profit margins if the product is excellent (which the Apple Watch is not) and if people are willing to pay. It's when you sacrifice function, performance, and customer satisfaction in favor of increasing profit margin (ie. bean-counting) is where the problems is, and this is what Tim Cook does (e.g., soldered memory, crippled products, shell-game pricing schemes, etc.).
You sound like my economics teacher in college. The problem is that under their systems Apple should be out of business and all of their competitors should be the richest companies in the land. I would sit in class and marvel at how upside down it all sounded and how in most chapters Apple was doing the opposite. This brought me to a realization. My business classes were being taught by people who never made it in business. This could explain the high percentage of business failures. When you learn the policies of those who couldn't make it work themselves, you doom yourself to failure. That's why the founders of the largest tech companies in the world all dropped out of school.
To anyone who believes it costs under $90 to make an Apple Watch:
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And this is also why Wall Street has historically been so wrong about Apple. Any strategy that isn't taught in business school, can't be predicted by analysts' financial models, or easily reproduced by other companies is immediately disregarded as hogwash.
- Order the parts
- Assemble watch yourself
- Sell on eBay for $299 (232% markup)
- Profit!
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And this is also why Wall Street has historically been so wrong about Apple. Any strategy that isn't taught in business school, can't be predicted by analysts' financial models, or easily reproduced by other companies is immediately disregarded as hogwash.
So you claim that Tim Cook was explicitly lying during a conference call after the release of the latest financial results when he said that the margins on the watch were lower than the usual Apple margins? The gross margin (ie, income after variable costs like parts, labour, shipping etc.) of Apple has been close to 40% for a while. Thus the gross margin on the watch might be 30% (or even lower), meaning for a guessed average price of $400 for the sport watch, the variable costs would be $280.
I thought the marketing was $38 Million...
https://www.macrumors.com/2015/04/09/apple-watch-tv-advertising-38-million/
You must have a hard time buying anything if you're a social justice warrior.Yes, I can see how Chinese labor slave-wages can constitute the other 76%, compared to American housing construction / Union labor jobs. Good comparison.
What brand shoes do you wear?
(Hint: Quickly Google shoes made in USA)