Apple Watch the most profitable product Apple has ever made

1 May 2015

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A teardown of the entry level Apple Watch Sport by IHS Technology has revealed that, in comparison to what it costs to manufacture, it is an incredibly profitable piece of kit.

Costing less than a quarter of its retail price, the Apple Watch Sport offers the best return of any Apple device investigated by IHS.

Other Apple products reviewed by the company come in at anything from 29pc right up to 98pc, with the Sport’s 24pc manufacturing price a clear winner.

The total bill of materials used in the Apple Watch Sport 38mm cost US$81.20, with an additional US$2.50 manufacturing expense on top.

IHS only look at the components, not taking into account other, often extensive, expenses such as R&D, logistics, software and licensing.

“It is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost,” said Kevin Keller, senior principal analyst (materials and cost benchmarking services) for IHS Technology.

“While retail prices always tend to decrease over time, the ratio for the Apple Watch is lower than what we saw for the iPhone 6 Plus and other new Apple products, and could be of great benefit to Apple’s bottom line if sales match the interest the Apple Watch has generated.”

This should not be too surprising to those who keep an eye on tech profitability. Apple is infamously impressive when it comes to driving profit from its sales. In the first instance, that’s because people are willing to pay a premium for the Apple brand. Secondly, as evidenced here, the company really works its margins.

Apple Watch, via Shutterstock

Gordon Hunt is a journalist at Siliconrepublic.com

editorial@siliconrepublic.com