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HomePod Costs an Estimated $216 to Make

How on earth are the Echo and the Google Home have margins of 66 and 56%? That assessment is contradictory to every other reviewer/ source who speculate that Amazon and Google are losing money on their hardware, making their money on the services driven out of the devices.
 
TheHammer said:
These "estimates annoy me" The physical cost of the hardware is not the most expensive part when developing a product... It mean virtually nothing.
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Why do they “annoy” you? They don’t make any other claim, other than their estimate of the hardware costs. They don’t make any other assertions or claims?
 
OldSchoolMacGuy said:
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.
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How can I correct thee? Let me count the ways:

• Packaging: When you buy a toaster, you don't buy it for the box, or the carefully selected photograph on the box of the product in a model kitchen. That's the price of doing business & they (Apple) can eat that. McDonald's knows this when you buy 2 coffees to go & ask you if you'd like a 4-slot carboard tray.

• R&D: Another highly rich one. Much like with the iPhone, they only have to build it from the ground up once. After that, it's speed bumps & tweeks for every generation after. It's not like every year they go: "Oh, no?! What shape will it be?! I know. How about brick shape with rounded corners?! But, yes, a new diecast mold will be needed if you change the littlest shape (like iPhone brick form to thinner taper edge).

Shipping: Shipping??!! We've become spoiled in the age of Amazon. We all want free shipping & companies know this. It's probably a loss-leader for them. They know they make it up in bulk sales.

Advertising: A horse of a different colour. A different revenue & expenditure path that runs parallel with the finished producy; & often have to be interwoven along the path.

Assembly: I'll give you that... on a limit. It's up to Apple to streamline resources to get assembly costs down. Ahh... but even if they DO, it's not a savings they pass along to the customer as new generations come along. Beside, a Rolls Royce is made by hand component by component... & you pay for that attention to detail. Which is why no Apple Watch will equal a Patek-Philipe.

One would have to be out to lunch if it all doesn't end up a mixed wash many categories of costs & earnings... usually to the benefit of the company. Or they wouldn't still be in business.
 
bopajuice said:
I received a Sonos One for Christmas, and I recently listened to the HomePod. For me there is no reason to upgrade. Especially at twice the price of the Sonos. Not twice as good in my opinion. Not to mention 90% of my music library is available on Amazon.

As far as the ecosystem thing goes, I have not really felt I have suffered. I do like handoff and use it between my Apple devices, but for things like movies, music, and photos, I am invested in other non apple services, and we do just fine sharing between devices.
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Oh, I'm with you 100%. Look at my signature. I'm not locked into any particular ecosystem. I use what I like. But my quote, specifically regarding the ecosystem lock-in, was based on my opinion of Apple's perspective. I think they do what they do to get and keep you in the garden. If you do, great. If you don't, they really don't care because enough people do live in the garden to make us visitors just gravy.
 
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If it is really true that Apple’s margin on this product is 38% then it is certainly not correct that they are “making less money” on it than their other products, since this is exactly the level of margin they report across their product lines quarter after quarter. The BOM estimates are next to meaningless in getting us any closer to understanding the profitability of this or any other product they sell. It would be far easier and likely more accurate to simply back into their costs by assuming a margin of 38%, plus or minus low single digits.
 
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Their price point should discourage anyone from trying to compete. Version 2.0 of PodOS and device will offer more features and corner the market for years.
Sounds like someone new is making decisions behind the scenes. Good job.
 
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OldSchoolMacGuy said:
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.
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Apple's margins are reliably 30-40 percent (so this news is entirely predictable - just take 65% of 350 dollars and ... you get 227 dollars).

This isn't news. They list them on their financial reports.

That margin gets you great support.
 
Still RIDICULOUS margin considering this acts as an anchoring mechanism for one to stay in the iEcosystem and thus, purchase more iProducts
 
DTphonehome said:
If accurate, then they’re charging a totally reasonable amount for it.
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Funny enough audio equipment is usually the most market up. Generally 100% or more.
Used to work at Fry's and not only did they let their employees see that info, we'd get to buy stuff at 10% above cost. The biggest savings was always on audio equipment.
Other than that it was one of the worst jobs I've ever had.
 
IJ Reilly said:
If it is really true that Apple’s margin on this product is 38% then it is certainly not correct that they are “making less money” on it than their other products, since this is exactly the level of margin they report across their product lines quarter after quarter. The BOM estimates are next to meaningless in getting us any closer to understanding the profitability of this or any other product they sell. It would be far easier and likely more accurate to simply back into their costs by assuming a margin of 38%, plus or minus low single digits.
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There’s a huge difference between BOM cost and COGS.

iPhone 8 BOM est. $250, sells for $700. iPhone X BOM est. $360, sells for $1,000. With a BOM est. at $215, the HomePod is probably losing money at the bottom line.
 
Do these estimates include worker salary, royalties and logistic expenses?
 
I’m not an audiophile. My hearing is likely damaged from too many 90s rock concerts and listening to music too loud.

However I do have an amazing B&W sound system in my car and a very nice 5.1 system in my house connected to an Airplay integrated receiver.

I also have a set of B&W MM-1s connected to my Mac that I can play standalone or in sync with my Airplay setup for my stereo.

With all that I just don’t see where a HomePod would fit into my needs. I don’t plan to talk to it.

If anything $350 would go to upgrading my original Apple Watch to a Series 3.

I don’t doubt that the HomePod is a good product. I just don’t see it working for my needs.
 
Even $216 is more than I want to pay for a speaker. As much as I'd love one, this puppy isn't in my future.

Also, I don't keep speakers in the middle of the room, so really three or four tweeters and maybe two microphones would have been just fine, and cheaper too. Just sayin'. The 360 degree coverage isn't something I would need.
 
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OldSchoolMacGuy said:
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.
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Lol. So predictable! People rarely ever read the articles they comment on. Others have already pointed out that the article debunks your assertion that packaging and so forth wasn’t accounted for.
 
OldSchoolMacGuy said:
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.
Click to expand...

Spot on. People are daft enough to believe this is the only cost involved.
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OldSchoolMacGuy said:
If you buy AirPods, you're unlikely to switch to Android also (yes they work with it but not as well).
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I did switch to Android on April last year (Samsung Galaxy S8, but back to iPhone X now) and had Airpods and iPhone 6s. Airpods work OK with many Android devices and I know myself people with Android devices who don't own other Apple products who have purchased these. Given, it works best with Apple devices. But they are not as restricted as Home Pod.
 
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There is NO WAY they leave that much of a little profit margin. A sound business usually sell at least 200% or 300% above it's cost of manufacturing...

Think about it. These will be sold in Bestbuy or some other stores and do you think those stores will sell these for $50 profit per item (while the other $50 going to Apple)??

They sometimes even have discounts!!

That price does NOT make any viable sense
 
bopajuice said:
I received a Sonos One for Christmas, and I recently listened to the HomePod. For me there is no reason to upgrade. Especially at twice the price of the Sonos. Not twice as good in my opinion. Not to mention 90% of my music library is available on Amazon.

As far as the ecosystem thing goes, I have not really felt I have suffered. I do like handoff and use it between my Apple devices, but for things like movies, music, and photos, I am invested in other non apple services, and we do just fine sharing between devices.
Click to expand...
I have two play 1’s in stereo mode and the sound is great, highly recommend getting another one, you won’t regret it.
 
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thadoggfather said:
Still RIDICULOUS margin considering this acts as an anchoring mechanism for one to stay in the iEcosystem and thus, purchase more iProducts
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Let Me add to your post, these are Apple products that the consumer wants to purchase and stay in their ecosystem, such as the Apple Watch, AirPods, HomePod, ect. Clearly the consumer knows they are making the commitment to stay in Apples ecosystem, Which is a direct result of satisfaction with the company.
 
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