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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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iPhone 5s/6/6+ have the highest margins, and account for the largest portion of the Apple Pie.
No they don't but they might be close to that for the Apple Watch (hence Tim Cook's comments).
I don't think many people understand this. We could play this game all day long by analyzing everything people buy these days. How about the cost of ingredients of a $30 dinner. I think it's also worth noting that people make a living of this. Not only Tim Cook and the factory workers who build it, but people in all areas.
The reason we pay more for it is then the price of raw material or parts is that we can't make it ourselves. I couldn't even build a $10 Mickey Mouse children's watch, with parts probably not even worth $1
Let's do this the Mastercard way
Parts.... $83.70
OS .... $200.00
Experience... priceless
Parts.... $83.70
OS .... $200.00
Shinyness... $120.00-$16,000.00
I didnt read all this but its clear that there is no amount associated with many of the higher cost parts of a product like this, including but not limited too the list below.
Marketing
R&D
Distribution
Inventory
Service
Repair
Many people will say "Oh those numbers are not that high blah blah blah", broken out many of these numbers are not substantial, but they do erode at the profit potential to some degree. The number quoted here is not profit margin, rather gross profit margin.
Just my 2 cent.
Edit: I think its also good to point out the numbers assigned to these are completely arbitrary. As Apple has economies of scale to its advantage. Can't be mad that a company uses its purchasing power to its advantage. No mom and pop shop could buy and sell this watch at a $400 price tag and make a profit.
Marketing
R&D
Distribution
Inventory
Service
Repair
Many people will say "Oh those numbers are not that high blah blah blah", broken out many of these numbers are not substantial, but they do erode at the profit potential to some degree. The number quoted here is not profit margin, rather gross profit margin.
Just my 2 cent.
Edit: I think its also good to point out the numbers assigned to these are completely arbitrary. As Apple has economies of scale to its advantage. Can't be mad that a company uses its purchasing power to its advantage. No mom and pop shop could buy and sell this watch at a $400 price tag and make a profit.
I agree. MacRumors slams Apple all the time. Of course, it's obvious why. MacRumors needs to cater to the 50%+ users of this site who are Android trolls. They love these type of headlines, and will keep coming back generating money for MacRumors.
I think Apple will be making less profit than this report seems to be suggesting. Parts and tooling don't suggest many unknowns such as non working watches. Surely a report like this is based on averages for older tech too, it would be better to,give a range of prices worst and best to give a price range than absolutes.
Profit margins will be in line with most other apple products realistically, apple wouldn't want to be at risk of being undercut with a similar product of the same quality. The iPad is the perfect example of that, where no one has come close to making a tablet better for the price.
Profit margins will be in line with most other apple products realistically, apple wouldn't want to be at risk of being undercut with a similar product of the same quality. The iPad is the perfect example of that, where no one has come close to making a tablet better for the price.
This is likely the reason Tim said that these calculations get the figures wrong. (No doubt they do, but they are not likely to be off by a tremendous amount.)
I agree the wording is weird. But I'm sure it doesn't sit well with Cook that inaccurate figures get passed off accurate, plus some just seeing a headline or figure and thinking the is the total cost of the product which it clearly is not. On the earnings call Apple's CFO said gross margins for the Watch would be lower than the guidance Apple provided for next quarter. That guidance was around 39%. To get to a gross margin of 39% the COGS would be around $213. So if these figures are in any way accurate that's $130 not accounted for by iSuppli.
Marketing = Done by blogs like this, and some print/tv ads $6million / 300,000 devices pre sold = $20 per presale watch
R&D = $5 its basically a iPod nano with a couple iPhone parts
Distribution = N/A huge discount with FedEx , already shipping tons of products
Inventory = ? what inventory, they are selling as fast as they build them
Service = $0 probably 100 broken publicly so far, call the Genius Bar for appt
Repair = Apple sets aside 5% stock as replacements
$83.70
$20
$5
= $108.70 appx
looks like a Stamp Sized interface of a freaking rip off that still doesn't have WiFi or LTE
R&D = $5 its basically a iPod nano with a couple iPhone parts
Distribution = N/A huge discount with FedEx , already shipping tons of products
Inventory = ? what inventory, they are selling as fast as they build them
Service = $0 probably 100 broken publicly so far, call the Genius Bar for appt
Repair = Apple sets aside 5% stock as replacements
$83.70
$20
$5
= $108.70 appx
looks like a Stamp Sized interface of a freaking rip off that still doesn't have WiFi or LTE
Perfect analogy.
Another good analogy would be selling a seed for the price of a fruit.
R&D, marketing, shipping, research, IP acquisition, talent acquisition, prototyping/test model manufacturing, ...
This all ain't cheap.
The amount of ignorance in these comments is shocking. To assume that the component cost alone is the "true" cost of device is absurd. Hundreds of millions of dollars for R&D alone is not factored in, let alone the cost of tooling setup for manufacturing, software design and testing, advertising, packaging, shipping, etc.
Ignorance....
Ignorance....
Nope, passed all my classes and did quite well in my undergrad at University of Rochester. Worked with Steven Landsburg and Gabor Virag while pursuing my BS.
Do you not teach your students any models with a Total Cost curve?
You must also realize that basic micro is for explaining theory and groundwork; not the be all end all for industrial production. Especially with technology companies, adding fixed costs into pricing decisions is quite necessary. It works similar to accounting for patent costs in models. With your logic, Adobe would sell Photoshop for the exact cost of the server sending the download.
I disagree. They are attempting clickbait/sensational headlines to drive reads and spark debate within the forums. I don't think MR is trying to cater to anyone except themselves.
No need to bring Android into this - this isn't about Android.
That's way off.
They forgot to calculate the prices of cutting and polishing the sapphire, or the work put into the software. That's a good chunk of the watch right there.
Got my SS 42mm BSB today, and love it.
They forgot to calculate the prices of cutting and polishing the sapphire, or the work put into the software. That's a good chunk of the watch right there.
Got my SS 42mm BSB today, and love it.
For sure. Can't understand why some care so much to begin with.
Either you like the watch for what it offers and then purchase it. Or you don't like it and decide not to purchase it. I suspect most could care less about the parts costs inside.