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Apple Watch Sport Component Costs Estimated at $83.70, Which Won't Sit Well With Tim Cook

BMcCoy said:
I wonder if that changes how people feel about handing over hundreds, even thousands of dollars for this thing...

You've got to hand it to Apple though... what an incredible company.. to make products with such an insane profit margin, but thanks to perhaps the best marketing and sales strategy of any company in the world, they will sell millions of them.
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Uh, do you know how much anything costs? Furniture generally is sold at a 300-500% markup. Your TV has a huge markup. The pots, pans, and silverware in your house are around 120% of cost. That nintendo game costs like 0 to distribute, which means it has an infinite markup.

How do you feel about paying for things?
 
dmylrea said:
Yes, I can see how Chinese labor slave-wages can constitute the other 76%, compared to American housing construction / Union labor jobs. Good comparison. :rolleyes:
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I hope your not an American. From a country where you need nearly 3 minimum wage jobs to get by on a daily basis to be critiquing the work ethics of another country is a little strange.

I apologise if you aren't. While Chinese labour regulation leave VERY much to be desired, the cost of living there is also far lower than in the west so often the issue of low wages is highly misunderstood. I'd be more concerned about other government violations of human rights in china before that.
 
Adobe and Microsoft charge many hundreds of dollars.

Adobe and Microsoft charge many hundreds of dollars and it costs about $1 for the disc and package. There is advanced software and probably millions of dollars in development in the watch. You are not just paying for the parts.
 
The cost breakdowns are not worthless. It is simply a Bill of Material and Manufacturing Estimate. Every company that makes things has to do it. Apple has their own and it is probably pretty close.

But it is just a small piece in a very large puzzle. Just because it isn't the whole puzzle picture put together for you, doesn't make the piece worthless.
 
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I do understand that R&D has to be paid for, but come on .. $50 MSRP for the sports band. That's insane.
 
youradhere4222 said:
I understand what you're saying but it's not really an apt comparison. You can't have a machine build a house, and building a house typically requires weeks or months of skilled labor from experienced construction workers.

Yeah, a lot of research went into figuring out how best to assemble the Apple Watch. But once that work was done, they utilize machines and cheap labor to pop one out every 20 seconds. Surely that cost needs to be incorporated somewhere but I doubt that, allocated, it's enough to even bring the final cost over ~$120.
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The cost would scale downward in a linear fashion as more devices are sold. Either way your ~$120 guess is simply that and is in no way based on reality. We have no way of knowing how much R&D, support, training, software development, and marketing dollars have been spent on the Watch to this point. I'm certain that it's more than $120 though. Assuming they've sold 5 million watches, you are putting that total budget at less than $200 million dollars when it likely numbers over a billion.
 
Purely going off unconfirmed component costs alone would make a great many things appear to be ripoffs. iSuppli would probably call a Rolex mechanical watch a ripoff as it costs significantly more than raw stainless steel and a pane of sapphire glass.
 
Even if this is real, you need to add in R&D costs otherwise some of you would have your mind blown if you saw the cost to produce medication that sells for MUCH more than the watch.

Look up Soliris - a medication that costs approximately $500,000 - $700,000 per year for people who need it. I bet it only costs them a few dollars to produce it though.

Apple isn't forcing people to buy the Apple Watch. If you think it's worth the money you paid for it why does it matter how much Apple paid to manufacture it anyways? It's called VALUE people.
 
If people think the markup is bad for an Apple Watch, which for those that are narrow minded does not factor in half of the costs associated with getting it to market, imagine the markup on a Rolex!
 
BMcCoy said:
I wonder if that changes how people feel about handing over hundreds, even thousands of dollars for this thing...
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I doubt it - it won't change my assessment. Most people will look at the Apple Watch and compare it to other competing devices on the market. If people appreciate the Apple Watch's features, utility, design, materials, superb craftsmanship, feel, size, iPhone integration, wow factor (or whatever), etc over competing devices, they'll purchase the watch.

Base on the above, if the Apple Watch somehow cost the company 99 cents to manufacture, I'd still want one and gladly pay the price.
 
If you broke down the cost of a Seiko or Rolex you'd find them to be tiny too.
The cost isn't in the materials, it's in what you do with them.
 
HurtinMinorKey said:
Big margins makes total sense. This is a product for Apple loyalists, who represent relatively inelastic demand curves, and there isn't a lot of competition.

And for the people saying they need to recoup R&D costs...that has absolutely nothing to do with pricing. Profit maximization occurs when marginal cost equals marginal revenue. This has nothing to do with fixed costs.
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R&D did not simply cease when the Watch went to production. You are ignoring marketing costs, training costs for the sales staff, costs for further refinement of engineering practices, software development, ongoing research and development towards future iterations, and so on and so on. R&D is in no way a fixed cost that has no bearing on a product's profit margin...
 
youradhere4222 said:
I understand what you're saying but it's not really an apt comparison. You can't have a machine build a house, and building a house typically requires weeks or months of skilled labor from experienced construction workers.

Yeah, a lot of research went into figuring out how best to assemble the Apple Watch. But once that work was done, they utilize machines and cheap labor to pop one out every 20 seconds. Surely that cost needs to be incorporated somewhere but I doubt that, allocated, it's enough to even bring the final cost over ~$120.
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You do realize that "figuring out how best to assemble" isn't nearly the only money Apple spent developing the Watch, right? Software development. (Do you know how much software engineers make? The answer is a lot.) Marketing. Research and development. Sales training.

Apple spent and is spending a lot of money on the Watch—a sum almost certainly in the hundreds of millions of dollars, perhaps even billions. I don't think they'll ever say it, but I wouldn't be surprised at all if it's their lowest-margin introductory price for a new product line ever.

We already know the Watch is the cheapest first-generation product line for Apple:

Macintosh (1984): $2,495
iPod (2001): $399
iPhone (2007): $599
iPad (2010): $499
Apple Watch (2015): $349
 
WordMasterRice said:
It is the cost of a watch. It isn't the cost of the entire investment.
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Except it's not. Assembly and manufacturing costs aren't accounted for.

When you buy a house, it costs a hell of a lot more than the price of the wood and cement. When you buy a car, it costs a hell of a lot more than the price of the steel.

The videos Apple posted on their site for each material process should give an idea that the costs of making the enclosures far exceeds the price of the aluminum/SS/gold. The processes and techniques they are using are unprecedented for mass market price points. Very expensive and time consuming processes. And when it comes to metal fabrication, you pay for RUNTIME. Running all those machines is incredibly expensive.
 
"smart watches" seem to provide nice margins...

http://forums.getpebble.com/discussion/6914/manufacturing-cost-of-1-pebble

http://www.cnbc.com/id/101751543
 
Mike Reed said:
Purely going off unconfirmed component costs alone would make a great many things appear to be ripoffs. iSuppli would probably call a Rolex mechanical watch a ripoff as it costs significantly more than raw stainless steel and a pane of sapphire glass.
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Seems that Rolex is a bad example, it is a rip-off isn't it? Isn't the point of buying one basically to show off that you could afford one? If if wasn't identifiable as a Rolex, would you still buy one?
 
MacrumoursUser said:
Okay, but second year when all that is recouped the price doesn't magically go down.
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That's because there is a newer version which also includes R&D etc. And in some respects that's not true because products do come down in price, I remember my first PowerBook costing me £4.5k.
 
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