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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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Let's be fair. This is no different than adding the cost of a BMW car for the cost of its parts to its manufacturer and comparing it to it's retail price.
Also it is the same for any finished product, be it Apple, Samsung or whatever.
This is no different than saying the cost of a cancer treating drug is pennies yet it is sold for thousands.
Any intelligent person knows that this is not a valid argument.
Also it is the same for any finished product, be it Apple, Samsung or whatever.
This is no different than saying the cost of a cancer treating drug is pennies yet it is sold for thousands.
Any intelligent person knows that this is not a valid argument.
You can't make these apple apologists understand a simple concept. Apple can't report these astronomical earnings every quarter if they can't make a huge margin on selling the devices.
Restaurants make margins by pricing high entrees and you can cook similar dish at home for a fraction of the retail price. You can't make your own cell phone, however. The case here is apple makes a ton of margin from the low costs of these devices produced in massive volumes.
How do you think grocery stores make money? They make at times less than a penny margin per item on the shelf but they sell millions and millions and millions. Do the math.
The people who are giving an excuse for apple are simply protecting their apple hence apple loyalists. It brings a sorta bad stigma to apple if we see how much each item costs and the margins apple makes on each.
Apple wants to come off as we help the world and we do no wrong so don't look at how much we make just look the other way.
I honestly think that can be closer to the truth. When you count all the middle men and value added costs-not just R&D but advertising, as well as transportation, while it may seem like a huge mark-up, it might be somewhat less.
For instance, if Apple was spending as much on logistics as cost of materials, that would mean the watch is $166. Which is roughly half the cost it is being sold for at retail. If one assumes the retail seller takes 10%, that's another $35, so you're looking at realistic costs of $200. Frankly, if you sell a million units at profits of $100-$150, that's a lot of money in the bag-$100-150M. But you know, considering iPhone sales, it really isn't that outrageous in the slightest. If it is a cheap model, it is pretty much impossible to earn that much money on it, no matter what percentage the margin is, without significant market penetration, and 2 million theoretical sales is not going to be a great revenue source.
I can make a pizza pie also for 25% of what it is sold for. I'm also not paying a business's rent, and my storage costs are pretty much fixed. That said, I still go out for pizza and don't demand they lower costs to a more "reasonable" margin.
If it costs $83 to make, no problem with that whatsoever. The question isn't how much it costs to make to me, it is, how much am I willing to spend on it. And I bought the Space Black model. So if that thing costs $250 to make (which I suspect) I'm not particularly upset about that because I paid the price I was willing to pay.
is in the business to bring amazing products, but to also make monies. "R&D written off" is a poor choice of words on my part.
Let's just say preliminary studies, research and development is kept in a separate cost bucket and is budgeted and funded entirely differently than the equations used to evaluate overhead and profit on a fully approved and funded detail design and executed product.
Let's just say preliminary studies, research and development is kept in a separate cost bucket and is budgeted and funded entirely differently than the equations used to evaluate overhead and profit on a fully approved and funded detail design and executed product.
Cost of Apple Watch
Ok, from an accounting and project perspective there may or may not be a profit built into this iteration of the Apple Watch. Component cost is one part of a complex matrix of costs that go into a product. This includes:
- Labor
- Shipping
- Research and Development (past and ongoing)
- Contracts
and on and on and on
It isn't as simple to label materials as the only costs (expenses) going into the next iterations but as a product matures it typically requires less cost to maintain and grow it.
That being said, early adopters typically pay more to get the leading edge product and are paying for the work going into the product. Late adopters reap the benefit in the long run but have to wait for the product to mature and therefore get cheaper. To expect that margins are going to be thin with an Apple product doesn't respect the quality and effort Apple puts into perfecting their products. Apple products might not be the right fit for you.
Ok, from an accounting and project perspective there may or may not be a profit built into this iteration of the Apple Watch. Component cost is one part of a complex matrix of costs that go into a product. This includes:
- Labor
- Shipping
- Research and Development (past and ongoing)
- Contracts
and on and on and on
It isn't as simple to label materials as the only costs (expenses) going into the next iterations but as a product matures it typically requires less cost to maintain and grow it.
That being said, early adopters typically pay more to get the leading edge product and are paying for the work going into the product. Late adopters reap the benefit in the long run but have to wait for the product to mature and therefore get cheaper. To expect that margins are going to be thin with an Apple product doesn't respect the quality and effort Apple puts into perfecting their products. Apple products might not be the right fit for you.
"Which Won't Sit Well With Tim Cook"
Thats a silly thing to put in a headline. At least the barely article addresses the fact they may have been brewing this thing in labs for years and all that R&D comes with a huge price tag which slowly gets spread out the more units you sell.
Thats a silly thing to put in a headline. At least the barely article addresses the fact they may have been brewing this thing in labs for years and all that R&D comes with a huge price tag which slowly gets spread out the more units you sell.
I do live in the US, and am fully aware of the cost of living (even more so because I live in super-expensive California) but you grossly misunderstood the point of my post. I don't really see where I was critiquing the work ethics of China (it's a known fact their wages are inhumanely low), but then again, I don't care to debate it either.
Apple watches assembled in China vs. homes built in the US. That was my point.
These analysts have no clue. Looking at:
https://www.abiresearch.com/press/apple-watch-insides-pcb-details-revealed-for-the-f/
I see a rather expensive miniaturized PCB with lots of flip-chip packages/ICs. Even more, there's no 4 Gb SDRAM, it seems to be SRAM, which could be more expensive as well. 10 USD for the ASIC seems a bit high to me.
https://www.abiresearch.com/press/apple-watch-insides-pcb-details-revealed-for-the-f/
I see a rather expensive miniaturized PCB with lots of flip-chip packages/ICs. Even more, there's no 4 Gb SDRAM, it seems to be SRAM, which could be more expensive as well. 10 USD for the ASIC seems a bit high to me.
There are tax incentives for R&D done in the USA.
http://www.irs.gov/Businesses/Small...search-and-Development-Manufacturing-Tax-Tips
Do you know what the materials cost of any other watch on the market is? And I don't mean smartwatches.
They have a general R&D pool. But that is for the intial specs. Once approved the R&D will be budgeted to a specific project and will encompass the majority of total R&D worked on that specific product (apple watch in this case). They need to track the total costs of creation, implementation and launch of a new product like this at a granular level so they can identify quickly if R&D on this product is going over budget or if the revenues derived from the product are at expected levels. If expenses are higher than expected or revenues lower than expected they will need to make decisions about what to do with that information.
As someone who used to teach accounting - I want to point out that gross profit margin doesn't include things like research and development, marketing, and advertising - because those items aren't part of any gross profit margin definition. R&D might come into some net profit calculation, and selling (marketing and advertising) won't come in until you look at operating income - especially when looking at things that Apple will report publicly.
That doesn't mean Apple didn't spend a considerable amount on R&D - I'm sure they did.
What it does mean is, given that markup, you should continue to hold Apple to a high(er) standard - and IMO, this version of the watch doesn't meet their lofty self-image. I have greater confidence in V2 or V3.
I laugh at the size of this markup - because you know these devices will soon be gathering dust in a drawer - just like my iPhone from 2007 and my iPhone3 from 2010 - and the speed to obsolescence for this first watch will be remarkably fast (< 1 year, 14 months tops!). That also means that Apple will be deeply discounting these things in the very near future so as to not encourage any kind of 3rd party-used-market come next year.
That doesn't mean Apple didn't spend a considerable amount on R&D - I'm sure they did.
What it does mean is, given that markup, you should continue to hold Apple to a high(er) standard - and IMO, this version of the watch doesn't meet their lofty self-image. I have greater confidence in V2 or V3.
I laugh at the size of this markup - because you know these devices will soon be gathering dust in a drawer - just like my iPhone from 2007 and my iPhone3 from 2010 - and the speed to obsolescence for this first watch will be remarkably fast (< 1 year, 14 months tops!). That also means that Apple will be deeply discounting these things in the very near future so as to not encourage any kind of 3rd party-used-market come next year.
These reports are stupid. They have no idea what Apple is paying for components or what the R&D costs are. It's just stupid click bait fodder to get people all outraged that Apple is gouging them.
It's a BS number... just try and spend $83.70 on components and assemble something even remotely similar to an iWatch.