Why sell it for $2,499 or & $2,999 when we "suckers" have no problem with paying $3,499 – and the majority of us is happy with the purchase?
Got a tip for us?
Let us know
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
Here's How Much It Costs Apple to Make a Vision Pro Headset
- Thread starter MacRumors
- Start date
- Sort by reaction score
Why sell it for $2,499 or & $2,999 when we "suckers" have no problem with paying $3,499 – and the majority of us is happy with the purchase?
They probably can’t make a profit at that price. Apple has always gone for a roughly 38% gross margin before taxes on all of their hardware. It has gone down to 35% and up to 41%, but has always been in that general vicinity, which can be seen in their financial statements year after year. After taxes, that 38% is considerably less. A rule of thumb when it comes to pricing is that you triple the cost to get the retail price. This isn’t just for Apple. It’s for any manufactured product. For example, if it costs you $5 to make a widget, an appropriate retail price is $15, which would automatically take into account other costs such as marketing, R&D, distribution, overhead, etc. Tripling this cost should have put the Vision Pro at about $4600. If I were to guess, Apple is probably taking a smaller profit margin on this than their other products.
People who aren’t familiar with hardware pricing tend to think that the cost of materials is essentially where the profit margin is calculated. It isn’t. Marking up a BoM at 38% would generally end up losing money. While not directly comparable, I can point to the movie industry. Say a movie company produces a movie where the cost of filming, paying actors, crew, etc ends up costing a studio $100 million. Marketing generally ends up being at least 50%-100% of the cost of the movie, pushing the cost to $200 million. Now you take the retailer’s cut, e.g. the theater or distributor, which tends to be about 50% of the gross sales. To break even, that $100 million movie has to make $400 million. As I said it is not directly comparable to selling hardware, but I use this as an illustration to show just how high hidden costs can be outside of the amount paid to directly make the product. For a movie, they generally have to make 4 times the cost of the film to break even.
When it comes to hardware, it’s roughly 3 times the cost of making the hardware to make a reasonable profit. It’s true that Apple tends to distribute its own products, but there are still costs to running retail stores or distributing their products to third party retailers like Best Buy or Amazon, who need to make their own profits.
iPhone costs to buyers for the first several versions were dramatically understated. Keep in mind phones were heavily carrier subsidized at a cost of one or two year contracts in order to reduce the prices to where they were. Without the carrier subsidies, that original iPhone would have cost over $1000 easily. I don’t quite remember when carriers stopped subsidizing phones, but when they did, phone costs dramatically rose to where a flagship iPhone costs about $1000.
The labor costs for assembly doesn't even capture the full picture because a new complex product like this will suffer from lower yield. The $3500 cost doesn't cover just the BOM but all the defective parts and product that had to be thrown away. Sales is also significant for this. They are allocating a significant part of Apple stores, located in expensive zip codes, and having well paid retail staff spend 30 min on each customer for free. The $3500 has to cover that as well. Then you have ongoing highly paid software engineers continuing to develop VisionOS, after market support, loss of value from no questions asked returns for people "renting" for free, etc. Of course the 1000's of engineers spending close to a decade in R&D has to be amortized over the life of the product line.
Perhaps. It should put to rest those assuming lower prices ahead for an improved avp or even a cheaper version anytime soon.
I think it would come as no surprise that the Vision Pro (or any Apple product for that matter) is sold at a profit.
As for the extent of that profit, I am guessing that it, like any other Apple product, is priced to maximise profits (basic economic theory). And if the rumours of the Vision Pro being supply-constrained at launch due to limited supply of the 4k lenses, then it makes sense to price it at a point where demand meets supply.
Otherwise, make it too cheap and Apple leaves money on the table. Charge too much and nobody wants it. While we may see a price drop with Gen 2, I am personally not expecting that much of a reduction. It is still an impressive piece of hardware, and products are typically priced based on the perceived value to the end user, not necessarily just the raw cost of materials that went into constructing it.
Apple isn't run by idiots, and their motives aren't really that hard to fathom if we spend more than a few seconds thinking about it, rather than posting knee-jerk reactions online about how Apple is so greedy and profiteering.
As for the extent of that profit, I am guessing that it, like any other Apple product, is priced to maximise profits (basic economic theory). And if the rumours of the Vision Pro being supply-constrained at launch due to limited supply of the 4k lenses, then it makes sense to price it at a point where demand meets supply.
Otherwise, make it too cheap and Apple leaves money on the table. Charge too much and nobody wants it. While we may see a price drop with Gen 2, I am personally not expecting that much of a reduction. It is still an impressive piece of hardware, and products are typically priced based on the perceived value to the end user, not necessarily just the raw cost of materials that went into constructing it.
Apple isn't run by idiots, and their motives aren't really that hard to fathom if we spend more than a few seconds thinking about it, rather than posting knee-jerk reactions online about how Apple is so greedy and profiteering.
Reasonableness is in the eye of the buyer. It is priced at whatever the market will bear. If there are enough buyers in the market at that price, whether it is $3,500 for the Vision Pro or $150,000 for Hermes furniture, then that is the price that they will sell it for, regardless of how much it costs to produce. If Apple loses money on it, then they will adjust. If Apple makes a killing on it, the shareholders will be happy for about 10 minutes and then want more.
I don't understand the greed critics. Everyone is greedy, everyone has their hand out whether it is a Fortune 500 company or a small non-profit. Money makes the world go 'round.
When the iPhone originally launched, it required a 2 year AT&T contract (in the U.S.) but that "requirement" was dropped by the end of 2008. After that, iPhones were available at contract and no-contract prices. Contract became a "bad word" by 2017 or so but carriers today still "subsidize" phone purchases through things like inflated trade allowances spread over 24 to 36 months.
Yes, there are some trade-in allowances that companies offer these days that sort of look like carrier subsidies, except you have to trade in a phone to get it. A bit over a year ago I got a $900 trade-in allowance for purchasing a Samsung ZFold 4 by trading in an iPhone X. Not surprisingly, 2017 happens to be when the iPhone X came out at its introductory price of $999 if indeed 2017 was the year that all carrier subsidy plans were essentially dropped. My first iPhone was the 3G version, which if memory serves, was around $400’ish including subsidy on a two-year plan. The $400 seemed cheap, but the subsidy hid its true price.
Would you have even foreseen five years ago that they’d be doing that in 2024‽‽‽
Restaurants operate with low single digit margins and barely stay in business. However, they will sell you alcohol with 10x markup. McDonald's will price gouge you on fries and fountain soda that cost pennies but franchisees don't seem to make Meta sized margins. Speaking of margins Meta is making zero to negative margins on their Quest line yet their corporate margins seem obscene. Perhaps it's better to understand that a business has numerous components that may be synergistic with carefully calculated gains and losses that offset one another. That being said the ASP for the Vision Pro is nowhere near "ludicrous" when you factor in all the costs and it's probably below Apple's target margin at the corporate level. It's impossible to derive a "right price" from R&D or any other single component.
Last edited:
Yes, many carrier deals require trade-in to get the "subsidy" (inflated trade amount) but not all. For example, you can get a new 128GB iPhone 15 Plus through AT&T for under $400 (retail price is $929) with savings spread over 36 months and no trade-in required.
Thanks for one of the most ignorant posts in this thread. Apple work with partners to produce amongst the most efficient CPUs on the planet. Do you think that Apple just sent an email to Sony and said send us the best mini display you have. You think it's a co-incidence that these AVP displays have not been seen in any other headset? Apple invested around 28 Billion dollars in RD in 2023 Alone. What do you consider "very little" in research.
M2 and R1 cost how much?? Older reports online suggested the M2 chip costs much less, somewhere in the $30-80 range. The first one that jumps up on Google: https://medium.com/macoclock/is-apple-fleecing-you-a682c851a48e
I suspect the can costs more than the soda inside of it. For fountain sodas, I’ve heard the cost is about 2-3 cents per cup (16-24oz). That’s probably why free unlimited refills are so easy for restaurants to have.
Forget soda. Let's look at the BOM cost for screen protectors and plastic iPhone cases that sell for $40+
Other companys with app/game store most often sell their devices with minimum profit.
Apple wants the whole cake and the cherry.
I quit upgrading my apple products so often and put my money in stock instead.
I say let apple burn (even my stock will take a loss)
Problem with stock companies are that they are too greedy.
Take a look at how a company like valve behave opposite apple are willing to share happiness with their customers.
Apple wants the whole cake and the cherry.
I quit upgrading my apple products so often and put my money in stock instead.
I say let apple burn (even my stock will take a loss)
Problem with stock companies are that they are too greedy.
Take a look at how a company like valve behave opposite apple are willing to share happiness with their customers.
What R&D? The majority of the R&D has been done by the other companies as the $500 Quest 3 can do pretty much everything the Apple Vision Pro can do.
Seeing that all the ground work other companies have done for Apple, there is no way in hell the R&D cost is $2000 per headset, as Apple didn't "invent" most of it.
What an utterly ignorant take on how technology is developed.
You think sensor fusion capability just fell from the sky? You think the ability to push this amount of pixels just happened? You think the depth mapping frameworks and APIs just grow from trees? Apple has spent over a decade developing and rolling out everything that makes the AVP work right out in the open.
You think a product is just the sum of the components purchased from suppliers?
You could dump the exact components that the AVP is made up of but out in a table at Meta and they wouldn’t be able to make it work as well. Millions of engineering hours has been invested in the development that puts these components together to work. An OS working *in tandem* with a real time sensor fusion OS doesn’t just happen.