March 19, 2024
Apple Watch Hardware Components Estimated to Cost Just $81.20

Apple Watch Hardware Components Estimated to Cost Just $81.20

Posted April 30, 2015 at 5:33pm by iClarified
IHS Technology has published its preliminary estimate of hardware component costs for the Apple Watch. The company says the actual hardware costs are only about 24% of the manufacturer's suggested retail price. That's the lowest hardware costs compared to retail price of any Apple product IHS has researched.

The teardown of the Apple Watch Sport 38 mm by IHS Technology shows a bill of materials of $81.20 with the cost of production rising to $83.70 when the $2.50 manufacturing expense is added. The retail price of the Apple Watch Sport 38 mm is $349.00. The IHS Technology analysis does not include logistics, amortized capital expenses, overhead, SG&A, R&D, software, IP licensing and other variables throughout the supply chain such as the EMS provider.

“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.”


Apple Watch Hardware Components Estimated to Cost Just $81.20

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New Features and Manufacturing Methods
There are several new features and manufacturing methods used in the Apple Watch Sport, including: a Pulse Oximeter, Force Touch sensor, "Taptic Engine" feedback, encapsulated modular printed circuit board (PCB) assembly and stacked-die integrated circuits (IC).

“While these features have been promoted by Apple and none are necessarily revelatory,” Keller said. “It is noteworthy that many features are appearing for the first time – in combination – in one device. It could be a bellwether for other future Apple products.”

The Taptic Engine built into the Apple Watch, and integrated with the loudspeaker, contains a linear actuator which provides haptic feedback and vibrations. “We found that the device consumes a substantial amount of space inside the watch, and we would expect further miniaturization of this function in future iterations of the product,” Keller said.


The preliminary results of the teardown do not show any big surprises in the IC content; all of the manufacturers identified so far were expected. The Apple Watch NAND memory is a Toshiba Flash 8GB and DRAM is a Micron SDRAM 512MB. Broadcom, STMicro, Maxim, Analog Devices and NXP are used for connectivity and interface. One noteworthy change is a shift from Invensense to STMicro for the accelerometer/gyroscope.

“The display is LG’s plastic OLED display and the touchscreen overlay module is a TPK Slim GG utilizing their ‘Force Touch’ technology,” Keller said. “Force Touch was recently incorporated into the latest MacBook and is expected to be found in the next iPhone generation.”

Apple “Unibody” Tradition Continued
The fabrication of the enclosure continues the Apple "Unibody" tradition of precision machining from a single block of aluminum. Apple is now extending this design philosophy into a highly miniaturized realm, mating the legacy of precision watchmaking with Apple’s specialized manufacturing practices. As with their previous products, Apple has taken fabrication techniques – once typically restricted to low-volume manufacturing and prototyping – and scaled them into a high-volume production environment.

'”The encapsulation of the entire printed circuit board assembly into a single monolithic module is especially noteworthy,” Keller said. “Whereas many products might have some form of semi-flexible encapsulant applied to the board for protection, shock and vibration purposes, Apple has effectively created one large IC out of the entire assembly. This encapsulation is done by encasing the board in the same plastic/epoxy material used for conventional ICs. Indeed, many of the devices found inside the assembly are already encapsulated, effectively creating an IC-within-an-IC affair.

“To provide electromagnetic shielding, the encapsulated PCB assembly is further treated with a metalized coating deposited over the surface,” Keller added. “This shielding process is used in place of conventional stamped sheet metal shielding, saving a significant amount of space, as well as cutting down slightly on weight.”

Potential Boost for Wireless Charging
The Apple Watch is equipped with inductive charging technology and is being shipped with a wireless charger, based on Apple’s own proprietary MagSafe charging technology.

“It has been speculated that the Apple Watch could be compatible with the Wireless Power Consortium’s (WPC) Qi wireless charging specification,” said Vicky Yussuff, analyst-power supplies & wireless power for IHS. “AppleInsider recently shared a video which appears to show the Apple Watch MagSafe charger being used to charge the Moto 360 smart watch. This would suggest that Apple’s charger is Qi-compatible.

"Apple has not been announced as a member of the WPC or even a supporter of the consortium, so it is unlikely that they have produced a 'certified' Qi product. However, the Qi specification is an open standard meaning it is still possible for Apple to build products which are compatible to the specification. This could be the case with the Apple Watch MagSafe charger,” Yussuff said. “Although it cannot be verified if both the Moto 360 smartwatch and Magsafe wireless charger used in the video were both un-modified ‘off the shelf’ products, this could potentially be another boost for the wireless charging industry looking to increase interoperability.”

The Apple Watch battery appears to be somewhat simpler to replace than the batteries in many other Apple products. As long as the display can be carefully removed, the battery is attached with a simple snap-on connector.

IHS Technology will conduct a free webinar about its teardown of the Apple Watch Sport on May 5, 2015 at 12:00 pm EDT. For more information about the webinar and the Apple Watch teardown visit: https://technology.ihs.com/wearables.

Apple Watch Sport Cost Summary
Direct Material Costs - $ 81.20
Conversion Costs - $2.50
Total Cost - $83.70
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Notably, during the Apple's previous earnings call, CEO Tim Cook said he had yet to see a component cost breakdown which was close to accurate.

"Generally there is cost breakdowns that come out around our products that are much different than the reality. I've never seen one that is anywhere close to being accurate."


Apple Watch Hardware Components Estimated to Cost Just $81.20
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Comments (18)
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apfelStreudel
apfelStreudel - May 1, 2015 at 2:43pm
Wow! In today's dollars that's $58.16 more than the materials cost Picasso for "Don Quixote." But, then again, you can't tell time with a painting-- at least not until someone makes it a watch face for the Apple Watch. Any developers reading this?
gamerscul9870
gamerscul9870 - May 1, 2015 at 2:57pm
Why do you think quality is as good as it's made for that speaks itself? Not to mention who said a thing about painting, heck this is isn't drawn to life. Taking notes yet?
bob53366
bob53366 - May 1, 2015 at 8:34am
it cost Apple 0$ to design and market the watch too!
bob53366
bob53366 - May 1, 2015 at 8:36am
I'll give you $200.00 go build me one!
gamerscul9870
gamerscul9870 - May 1, 2015 at 11:10am
So by making something out of $0, the only thing there would be sis the components. Why else does materials add more cost to how durable that are?
cryinShame
cryinShame - May 1, 2015 at 2:45pm
Exactly-- just like turning a creamsicle in on itself in 32 dimensions, then training a monkey to spell "caramel apple" backwards on a snowy terrace in the Himalayas. Point well taken.
Bigjiba
Bigjiba - May 1, 2015 at 4:36am
I'd rather they make this a loss leader for greater adoption but the shareholders would have a hissy fit. I'm still waiting on the moto to be compatible with iOS. At least until the apple watch comes back to full supply. 170 for a moto watch , I have very low expectations and its beautiful. 400 for a calculator watch? I'm sold on more features and ios integration but it's so pricy my expectations are so high. The reviews are so so. I just don't NEED this thing.
lolwat
lolwat - May 1, 2015 at 2:36am
That's x5 the original cost.... Talk about 500% increase and no craftsmanship/made in china factory.
gamerscul9870
gamerscul9870 - May 1, 2015 at 2:40am
What original cost? Previous app,e products were priced like the watch, so it makes perfect sense compared to whatever desperate excuse you're making of from top quality gadget with premium material with real innovation in an American factory.
Kzboi
Kzboi - April 30, 2015 at 9:27pm
Yea typing flip into Google is something really innovative and changed the world. Hopefully everyone understands how typing flip will change our lives forever
gamerscul9870
gamerscul9870 - April 30, 2015 at 9:30pm
And this helps a product all because of ONE SEARCH by basic typing how? In fact how much effort is that compared to products and OS?
Techno Krunkie
Techno Krunkie - April 30, 2015 at 11:18pm
That's what Android was defending when it was priced at 10.89 for the Android watch but sold for 299.99.
yas9in
yas9in - May 1, 2015 at 11:03am
Thank you so much. everything was as promised. typing Filip immediately caused my IQ to jump up 20 points and I could now see the truth, all our lives will be changed by this legendary new invention. the change is near. BELIEVE!!
dk2013
dk2013 - April 30, 2015 at 6:59pm
Actually, considering the material cost, the Apple Watch now seems reasonably priced. Not the Edition series, of course, but the base models. I think where they're making a killing is in the wristbands... Over $400 for the stainless steel band?!? Wow!
yas9in
yas9in - May 1, 2015 at 11:05am
the Edition ones are expensive because a. they are made out of solid gold and b. they are fashion pieces. stainless steel is also an expensive thing and the bands probably cost around 70% of what they're being sold for. compare that to Rolex/Omega who sell steel watches for upwards of $5000 and you'll see just how reasonable it all really is
dk2013
dk2013 - May 1, 2015 at 12:57pm
The stainless steel bands DO NOT cost 70% of what they're sold for. Nobody is attacking Apple, so don't just defend them blindly for the sake of it. My point, which still stands, is that the base models are very reasonably priced whereas for the higher models there's a substantial profit margin. Nothing wrong with that, just an observation. And FYI the material cost of the solid gold is probably less than a $1,000... you can find the price of gold yourself online.
zien
zien - April 30, 2015 at 5:55pm
I don't see the point of the showing the material cost. So what if the watch cost 83.70 to make? What about R & D? marketing, cost or assembling?
kbashakboom
kbashakboom - May 1, 2015 at 2:51pm
Your comment, though arguably flat-footed and thorough in its disregard for panache, makes perfect sense. Do you mind if I ask you a personal question? With your easy command of English and apparent common sense, what in hell are you doing HERE?
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