HomePod Costs an Estimated $216 to Make

[kdarling]

... no six element microphone array and accompanying ADCs (or 6 channel ADC).

Note: Both the Echo and Echo Dot have seven far field microphones.

As for making money, “CIRP data show that the average household with an Echo will end up spending $700 more than a house without Prime and an Echo, and $400 more than a household with just Amazon Prime.” (per year)

 

[Franco Borgo]

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to develop (which Apple is unlikely to share) and the total number of units sold which we won't know until the product is obsolete. .

Every quarter Apple tell us their gross margin and in the last one it was getting close to between 38 and 38.5% . But product like iPhone X 256 GB , and a 15"MBP with touch bar must be a lot higher one than 40%, so other product like the HomePod/AppleTV, which they will sell a lot less units must have a lot smaller margin.

My guess they use this simple formula based on that 38.25% report. 349 * (100-38.5)/100= 215.5
then they distribute that amount.

 

[Basic75]

"Apple is compressing their margins a bit, wanting to go big or go home,"

If they wanted to go big they should have included Bluetooth audio and an AUX input. As far as I'm concerned, they can go home, just not to mine. And I'm saying that despite the several Macs, iPads and iPhones in my household.

 

[Heineken]

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.

You do realise that Apple didn't lock anyone in? No one was held at gun point when buying Apple products? Not to mention that you can substitute most things with other things and it will work fine for the most part. To me this is almost insulting.

 

[recoil80]

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

I think their goal is to gain more Apple Music subscriptions, if you buy an HomePod you'll likely subscribe to AM if you don't want to use it as a simple Airplay speaker.

And I don't think the cost per unit is so high, but you have to take into account shipping, R&D and warranty to the margin is pretty low compared to an iPhone

 

[Mike MA]

That's somehow seconds the impressions one got since its launch. More of a hardware but software product. That doesn't need to be a bad thing though, as many people indeed are looking for a high quality integrated wireless speaker. AI for me at least is not so important but welcome for sure.
[doublepost=1518685296][/doublepost]

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.

Yes, definetely. Especially as Apple stated that R&D started 7 years ago! But I think the more remarkable point here is the sursprising high hardware cost. But as said before, it somehow aligns with the positve reviews in terms of adio quality.

 

[iphoneZ]

Lmao. You can get these in Shenzhen for $30 a pop and that’s gringo pricing

 

[cicalinarrot]

Rivals cost less, with smaller or no profit and have better AI.
But can they print the Olympic Games logo on on your $4K oak wood table?

 

[ApfelKuchen]

In other words Apple charges more, therefore makes more money.

Not quite. I addressed all your points regarding late-to-market and niche vs. mass market, too. Anyone who counts out Apple for the reasons you cited just doesn't know Apple history or culture. You're making the same mistake some Wall Street analysts make - assuming that Apple must be run like every other mass-market company in order to succeed.

Apple is run like a luxury goods brand, not a mass-market brand. Luxury goods companies have to give consumers a reason to pay more in order to justify higher prices. They often come late to market in order to judge that market, and to find ways to improve on the product. Not everyone will consider some of those reasons to be valid. Nonetheless, there are enough who believe the higher price is justified that Apple currently has $169 billion in net cash/cash equivalents (total cash/cash equivalents less outstanding debt).

 

[travelsheep]

Farmers nowadays make $ 4-6 on the entire life of a pig. HomePod still sounds like a good deal to me.

 

[justperry]

Lmao. You can get these in Shenzhen for $30 a pop and that’s gringo pricing

There will be cheap knock-offs for sure, I think the estimated cost to make here is way too much, more likely to be (much) less than $100.

 

[Jaybee75]

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.

Haha... i know exactly what you're talking about.. But: i still visit a lot of rock concerts, but the volumes are much lower today so i don't even need my earplugs anymore.

I have a B&W setup in my living room (Nautilus 803 ), my old stereo in my home office and that leaves my kitchen without music. I was thinking about buying a BT-speaker in the €100-€150 range for some time but i think i will get a home pod if i can get it at a discount or when Apple starts to sell refurbished ones. Kitchens are horrible for playing music with all the flat surfices at 90° angles so the adaptive system could be a good thing. Don't care too much about stereo base and such as it's just for casual listening while cooking.

from the article:

while smaller components like the lighting system used for Siri and other animations cost $60

From the images i've seen this assembly is just a bunch of LEDs. Really doubt that cost so much.

j.

 

[neuropsychguy]

I post something similar on many stories like this - whatever the estimated component costs are for any given product, we know the average for each Apple product after R&D and the rest of the overhead - about 20% less than the retail price.

Apple has net margins around 20% (gross are around 40% but that's only the starting point - net are the better margins to look at). Some products have higher profit margins than others (it's likely the HomePod has slim margins right now) but everything averages out to about 20%.

This means the minimum cost to make the HomePod is $280 per unit. That factors in marketing, research, manufacturing, taxes, etc.

The estimated component costs are interesting but certainly are off and they don't tell the whole story.

 

[steeevo]

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.

I agree this “walled garden” people keep going on about is because if you have an iphone and love it you then buy a macbook and you love that. As every windows pc i have had lasts about 3 years before it slows down to a stop. Then you buy the iwatch because you loved the mac. Then you want an apple speaker because you love apple products.

Apple smashes the competition out the park on product development, design, advertising and customer service.

There are alot of problems with software issues at the moment but i still love apple products and love being within the “walled garden”

 

[Abazigal]

Still RIDICULOUS margin considering this acts as an anchoring mechanism for one to stay in the iEcosystem and thus, purchase more iProducts

How so? Apple is in the hardware business. They don't give away hardware at cost price and hope to earn it back from advertising and services.

Every product Apple sells needs to be profitable in its own right, and from what I can see, that is precisely what they have accomplished. Be it smartphones, tablets, laptops, desktops, smartwatches, wireless headphones, streaming set-top boxes or music speakers, they each earn their own keep, even in areas typically considered profitless.

To me, it's a fair tradeoff.

 

[maflynn]

What doesn't go into that figure is the R&D costs and I gotta believe they spent a lot of time, effort and money on designing the HomePod.

I'd also point out developing a new tooling and devloping a new manufactoring process isn't cheap and given how it was assembled, as shown by the iFixit tear down, they've done some rather unique things. I think that needs to be considered.

So yeah the parts list is one thing, but that doesn't show the entire cost.

 

[jimbobb24]

Isn’t the title- the components of HomePod, not accounting for any design or engineering value, cost $X to purchase?

 

[Someirishguy]

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

If you buy the HomePod, you're basally locked in to Apple Music for life, which might help explain the lower margin. Can't wait to get one, I need more music in my life!! Don't care about the other smart stuff other that HomeKit.

 

[ascender]

What doesn't go into that figure is the R&D costs and I gotta believe they spent a lot of time, effort and money on designing the HomePod.

I'd also point out developing a new tooling and devloping a new manufactoring process isn't cheap and given how it was assembled, as shown by the iFixit tear down, they've done some rather unique things. I think that needs to be considered.

So yeah the parts list is one thing, but that doesn't show the entire cost.

That's why these cost breakdown articles are absolute clickbait - every single discussion about them will descend in to a very predictable pattern of people complaining about Apple margins whilst wilfully ignoring all of those other costs. Just seems like an utterly pointless article to write, let alone debate.

 

[acblue94]

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

Probably 59 cents. Alexa... google home all feel cheap.

 

[Heineken]

What doesn't go into that figure is the R&D costs and I gotta believe they spent a lot of time, effort and money on designing the HomePod.

I'd also point out developing a new tooling and devloping a new manufactoring process isn't cheap and given how it was assembled, as shown by the iFixit tear down, they've done some rather unique things. I think that needs to be considered.

So yeah the parts list is one thing, but that doesn't show the entire cost.

Do you think that R&D exists in a vacuum? Not everything in a HomePod is a result of that specific R&D, not even close. Most of R&D has been done years ago and in other projects too.

 

[69Mustang]

You do realise that Apple didn't lock anyone in? No one was held at gun point when buying Apple products?

I do realize Apple didn't literally lock anyone in. I also realize you don't know what lock-in means. It doesn't mean what you think it does. It has nothing to do with forcing someone to buy products. Lock-in is a vendor's desire for customers to buy all of the products from them. Every vendor desires lock-in. Every vendor does everything in their power to create an atmosphere that leads to lock-in. It has nothing to do with that hyperbole you put out there.

Not to mention that you can substitute most things with other things and it will work fine for the most part. To me this is almost insulting.

You really didn't read my quote did you? Because if you did, you would have noticed I said basically the same thing. They don't care if a person substitutes some other vendor's wares. It's right in my quote.

Honestly, you should be insulted by your interpretation of my quote.

 

[chatin]

The R&D costs must also be high as it's been in development hell for years. The Homepod looks like a passion project for Apply by the numbers.

 

[Heineken]

I do realize Apple didn't literally lock anyone in. I also realize you don't know what lock-in means. It doesn't mean what you think it does. It has nothing to do with forcing someone to buy products. Lock-in is a vendor's desire for customers to buy all of the products from them. Every vendor desires lock-in. Every vendor does everything in their power to create an atmosphere that leads to lock-in. It has nothing to do with that hyperbole you put out there.


You really didn't read my quote did you? Because if you did, you would have noticed I said basically the same thing. They don't care if a person substitutes some other vendor's wares. It's right in my quote.

Honestly, you should be insulted by your interpretation of my quote.

I don't like that phrasing lock in and it's only logical that if something works great for me that i will want it to continue. It's not a bad thing you know.

 

[69Mustang]

I don't like that phrasing lock in and it's only logical that if something works great for me that i will want it to continue. It's not a bad thing you know.

Who said it was a bad thing? Dude you are in your own head. Just because you don't like the phrase, that doesn't mean you should make up your own definition of what it means. But seriously, who said it was a bad thing?