Because next generation is next generation, not the entirely different product. So r&d is not that hi, but the price will not go down even 1 buck. Ah the irony.
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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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Because next generation is next generation, not the entirely different product. So r&d is not that hi, but the price will not go down even 1 buck. Ah the irony.
I work in Cost and while R&D is rarely part of a cost calculation and is written off in other areas of finance, but there are some misconceptions about the material cost.
In my experience Material cost is about half the cost of a product.
You have to factor in actual design engineering and engineering support (5-10%) through the life of the manufacturing, construction labor directs and indirects (supervision) (30-35%), equipment usage (15%), handling, storage preservation and warehousing, safety, quality control and inspection (all 10% or so) and often there are small components that are contracted out which contain their own profit and overhead.
Typically the raw and bulk materials are 25-40% of the cost of manufacturing. The other 60-75% is the items mentioned above. So $85 in materials is more like $180 to actually manufacture. The rest to get to retail price is advertising, life of service (warranty), defects, legal, insurance, employee training, etc the list goes on and on. So the true bottom line profit margin on these products is not quite what you would think. Typically less than 20% of msrp and more like 5-10% of msrp. I would imagine Apple is closer to the 20% of true profit margin back to the investment community and driving company growth...
Any product on the market where the cost of materials is higher than 60-75% and that tells me they are basically taking a loss on that particular product in order to support other higher margin products.
In my experience Material cost is about half the cost of a product.
You have to factor in actual design engineering and engineering support (5-10%) through the life of the manufacturing, construction labor directs and indirects (supervision) (30-35%), equipment usage (15%), handling, storage preservation and warehousing, safety, quality control and inspection (all 10% or so) and often there are small components that are contracted out which contain their own profit and overhead.
Typically the raw and bulk materials are 25-40% of the cost of manufacturing. The other 60-75% is the items mentioned above. So $85 in materials is more like $180 to actually manufacture. The rest to get to retail price is advertising, life of service (warranty), defects, legal, insurance, employee training, etc the list goes on and on. So the true bottom line profit margin on these products is not quite what you would think. Typically less than 20% of msrp and more like 5-10% of msrp. I would imagine Apple is closer to the 20% of true profit margin back to the investment community and driving company growth...
Any product on the market where the cost of materials is higher than 60-75% and that tells me they are basically taking a loss on that particular product in order to support other higher margin products.
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Calculating the total cost assuming a 40% margin and you would probably be very close to the total cost.
These cost breakdowns are always interesting. I've always thought technology is such a bargain. I mean think about it... to be able to buy a 50" television for $500 nowadays, that is amazing. If I had $500, what am I going to do, somehow build myself a 50" TV? It would cost me so much more money and not to mention time (if I was even smart enough and had the tools to do it), that suddenly $500 seems dirt cheap. Yet they're making profit so the parts breakdown cost is even lower.
So different from, say, going to Olive Garden and paying $12 for a bowl of pasta that probably has $1.50 worth of materials. (I love Olive Garden sometimes too lol). But somehow the food comparison doesn't hold up like it does with tech comparison. Unless you are clueless on how to cook spaghetti.
So different from, say, going to Olive Garden and paying $12 for a bowl of pasta that probably has $1.50 worth of materials. (I love Olive Garden sometimes too lol). But somehow the food comparison doesn't hold up like it does with tech comparison. Unless you are clueless on how to cook spaghetti.
That's why it's called a Smart Watch then!
Customer: "You told me this £400 Apple Watch thing was going to boost my knowledge. I've just found out it only costs £50 to make!"
Sales Bloke "Aye. That's correct. Ysee? Yer learnin' already!"
Customer: "You told me this £400 Apple Watch thing was going to boost my knowledge. I've just found out it only costs £50 to make!"
Sales Bloke "Aye. That's correct. Ysee? Yer learnin' already!"
This right here. The amount that this is true is staggering and somewhat sad. What's worse is that in this Information Age the volume of tragically stupid is actually increasing at alarming rates. Probably partly because of misinformation and also largely a consequence of a devolving societal construct as mass regression lays the foundation for an eventual and inevitable feudal wasteland.
I you have to "think" in your wallet it is very evident that you are not an Apple user.
That not only includes the R&D for the components, but also for the software.
Obviously they are selling millions of them so some of us think it's worth it and that's what I don't like about the component cost breakdown.
Half the people on here see that it cost them $83.70 in parts and think the watch should be priced no higher than $99.
$16.50 for the case, switches, PCB, etc. seems awfully low. Did they watch that video on how the case is made?