HomePod Costs an Estimated $216 to Make

[MacRumors]

It costs Apple an estimated $216 in raw components to build the HomePod, which sells for $349, according to research conducted by TechInsights and shared by Bloomberg.

Internal components like the microphones, tweeter, woofer, and power management chips cost Apple an estimated $58, while smaller components like the lighting system used for Siri and other animations cost $60. The A8 chip, which powers the speaker's spatial awareness, Siri features, sound adjustments, and other smart features, costs an estimated $25.

TechInsights believes the external housing and other exterior components add up to $25, while manufacturing, testing, and packaging cost an additional $17.50.

At $216 for parts and a $349 selling point, the HomePod brings in less money for each device sold than other Apple products like the iPhone. The $999 iPhone X, for example, uses components estimated to cost $357.50, and the entry-level iPhone 8 costs Apple an estimated $247.51 to make but sells for $699.

HomePod also has a smaller profit margin than competing speaker products from other companies. TechInsights says that while the HomePod has a profit margin of 38 percent based on component costs, the Google Home and Amazon Echo have margins of 66 and 56 percent, respectively. Both of those speakers use less expensive components and were not created with sound quality as the primary focus.

"Apple is compressing their margins a bit, wanting to go big or go home," said Al Cowsky, TechInsight's costing manager. "In doing so, I suspect they reduced the selling price from a normal Apple margin in order to sell more units on volume."

Component costs reports from companies like TechInsights do not take into account expenses like research and development, software creation, and other related costs, and can't be counted as an accurate look at Apple's profit margin for any given product.

Back in 2015, Apple CEO Tim Cook said cost estimates are often "much different from reality." "I've never seen one that is anywhere close to being accurate," he said.

Article Link: HomePod Costs an Estimated $216 to Make

 

[jav6454]

Very tight margins... Apple is looking to bust their way into the living room even more at those margins.

 

[OldSchoolMacGuy]

As usual, people will ignore the assembly, packaging, shipping, marketing, R&D, and countless other costs that go into the device and complain about the price.

 

[gim]

That seems like a lot, I expected something below $150 to be honest.
Does anybody know the component costs for Amazon's Echo?

 

[DTphonehome]

If accurate, then they’re charging a totally reasonable amount for it.

 

[AppleScruff1]

Hopefully they raise the price. They ain't makin enough. ​

 

[vipergts2207]

I wonder why Apple took such an uncharacteristic route with regard to margins. Perhaps they expect a large influx of Apple Music subscriptions to make up for it? HomePod also isn't really designed to be a loss-leader and draw people into the Apple ecosystem itself, as it requires already owning at least one Apple device. Perhaps they thought people would balk at anything over $350.

 

[mejsric]

Here we go again.

 

[Rojaaemon]

Is that all?!

I'll just make one myself then.

 

[69Mustang]

As usual, people will ignore the assembly, packaging, shipping, marketing, R&D, and countless other costs that go into the device and complain about the price.

I think you're wrong. If these cost estimates are anywhere close to being right, the price for the HP is fair. Besides, how much more do you think the cost total would be if you added all the rest into the equation. $3-5 more maybe?

 

[donster28]

The HomePod is reasonably priced IMO. All that technology in one small package. I think we're going to see a trend of cheaper stuff from Apple if the HomePod becomes a hit...of course this is still wishful thinking at this point.

 

[OldSchoolMacGuy]

That seems like a lot, I expected something below $150 to be honest.
Does anybody know the component costs for Amazon's Echo?

Next to nothing. They do sell it at a slight loss (remember with them, you and your retail buying are the real product so they make more money by getting it in your house) but it's certainly less than $50.

 

[stiligFox]

That seems like a lot, I expected something below $150 to be honest.
Does anybody know the component costs for Amazon's Echo?

Probably quite a less considering the speaker quality and amount of them.

 

[69Mustang]

I wonder why Apple took such an uncharacteristic route with regard to margins. Perhaps they expect a large influx of Apple Music subscriptions to make up for it? HomePod also isn't really designed to be a loss-leader and draw people into the Apple ecosystem itself, as it requires already owning at least one Apple device. Perhaps they thought people would balk at anything over $350.

Apple is pretty experienced with pricing against what the market will bear. I'm guessing they saw $350 at the edge of the threshold for a single speaker marketed to the masses. They probably looked at their true Apple Music sub numbers, the iPhone product mix distribution in the customer base, and how those numbers cross reference with iPad/Mac ownership. Taking all that into consideration, $350 is probably that number that will allow a decent margin (not typical Apple margin) while not being an under priced loss leader and not negatively affecting the overall margin to an appreciable amount.

 

[OldSchoolMacGuy]

I wonder why Apple took such an uncharacteristic route with regard to margins. Perhaps they expect a large influx of Apple Music subscriptions to make up for it? HomePod also isn't really designed to be a loss-leader and draw people into the Apple ecosystem itself, as it requires already owning at least one Apple device. Perhaps they thought people would balk at anything over $350.

It's a device that will keep people in the Apple ecosystem. If you have one of these, you're not gonna leave Apple Music. If you buy AirPods, you're unlikely to switch to Android also (yes they work with it but not as well). If you have an Apple Watch, you're not switching to Android either. These products are a great way to keep people on their platform and continue to make money there.

 

[PickUrPoison]

The HomePod is reasonably priced IMO. All that technology in one small package. I think we're going to see a trend of cheaper stuff from Apple if the HomePod becomes a hit...of course this is still wishful thinking at this point.

It’s actually been happening for awhile now. iPhone SE for $349 is not a bad example.

But look at Apple Watch, AirPods and the $329 2017 iPad; can better products be found at a lower price? How much more would you have to pay to get better products? Do better products even exist, regardless of price?

 

[69Mustang]

From the article:

Google Home and Amazon Echo have margins of 66 and 56 percent

Should be fairly easy to estimate the component cost.

That seems like a lot, I expected something below $150 to be honest.
Does anybody know the component costs for Amazon's Echo?

Next to nothing. They do sell it at a slight loss (remember with them, you and your retail buying are the real product so they make more money by getting it in your house) but it's certainly less than $50.

Probably quite a less considering the speaker quality and amount of them.

 

[TheHammer]

These "estimates annoy me" The physical cost of the hardware is not the most expensive part when developing a product... It mean virtually nothing.

 

[OldSchoolMacGuy]

From the article:

Should be fairly easy to estimate the component cost.

The Echo and Home are both being sold at a loss. There's no 66 and 56 percent margin on them. Numerous sources have agreed they're sold at a loss in order to get the much more valuable things they bring.

The Echo Dot has about $31 worth of parts, according to analysis by ABI Research. Components in the Google Home Mini cost about $26. The figures do not include overhead, shipping and other expenses, meaning discounted versions likely sold at a loss.

http://fortune.com/2018/01/03/amazon-echo-google-home-prices/

An Amazon Echo owner will spend about $400 more per year than a normal Prime member (and Prime members spend about 4x more than a non-member). So you can see how beneficial it is for Amazon to get people to have an Echo. Even if you sell it at a loss, you still come out way ahead in the end due to the increase in overall sales from that person.

https://marketingland.com/survey-am...-400-per-year-prime-subscribers-amazon-231351

With the Google Home, Google gains a lot more search data from that person, which they use to make more money. That data is much more valuable than the little loss they take from selling the Home for $20 with a $20 credit this holiday season.

 

[Will.O.Bie]

As usual, people will ignore the assembly, packaging, shipping, marketing, R&D, and countless other costs that go into the device and complain about the price.

I actually found the price reasonable considering the sound quality it puts out. Then again you are right, people will complain about it's price yet they own a $1000 phone...smh

 

[bopajuice]

If thats the case, it makes me think they made it just to have their hat in the game. They really are missing the boat on so many fronts. The arrive late to the smart speaker party, invest in something above and beyond to make something superior, charge a lot more, and think they will corner the market. They very well may considering the fan base, but really it's more a game of catch up. How long can they sustain this business model?

 

[ikramerica]

I highly doubt it costs that much. Apple would be losing money on every one sold, taking overhead, warranty and retailer margin into account.

If it really sounds as good as a high quality set of bookshelf speakers it's totally worth it.

 

[69Mustang]

The Echo and Home are both being sold at a loss. There's no 66 and 56 percent margin on them. Numerous sources have agreed they're sold at a loss in order to get the much more valuable things they bring.
http://fortune.com/2018/01/03/amazon-echo-google-home-prices/

Not sure if you realize but your link includes no information about the Echo or the Home. It does reference the Echo Dot and Home Mini. You can't render an informed opinion about the products we're actually discussing (the Echo and the Home - not dots or minis) based on an article that has no info on the products.

<snipped for lack of relevancy>

None of this has anything to do with the discussion.

 

[DoctorTech]

As usual, people will ignore the assembly, packaging, shipping, marketing, R&D, and countless other costs that go into the device and complain about the price.

From the story... "TechInsights believes the external housing and other exterior components add up to $25, while manufacturing, testing, and packaging cost an additional $17.50"

You are correct that shipping, marketing and R&D costs are not included but that was not the point of the story. To include R&D costs into product cost we would have to know both the total cost to develop (which Apple is unlikely to share) and the total number of units sold which we won't know until the product is obsolete. I have no idea how accurate these estimates are but I have worked in the automotive industry and we always bought competitors vehicles when they launched a new product and we disassembled them to estimate what their costs were. I was part of the team that dissected radios and automatic air control modules to see what microprocessor and memory chips were being used. We never cared about R&D costs but we always wanted to know estimated product costs (components, assembly, test, etc.).

 

[341328]

Not every product has to have high margins.... if a product helps the ecosystem then that's a win.