New-gen Apple Watch shows higher-than-usual retail mark-up

IHS teardown analysis reveals hardware is 25% of MSRP

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New-gen Apple Watch shows higher-than-usual retail mark-up IHS says the hardware cost to retail price ratio for the Apple Watch is typical of first-gen products. (Justin Sullivan/Getty Images)
By  Stephen McBride Published  May 3, 2015

The Apple Watch has a retail mark-up that is considerably greater than other Cupertino devices released in recent years, a hardware teardown analysis has revealed.

According to a "preliminary estimate" by IHS Technology's Teardown Mobile Handsets Intelligence Service, the Watch carries hardware costs that are around 25% of the manufacturer's suggested retail price (MSRP), compared with ratios from 29% to 38% for other Apple products analysed by the company.

The teardown was based on the cheapest variant, the $349 Apple Watch Sport 38mm. Bill of materials costs came to $81.20 with $2.50 in manufacturing expenses, giving a production cost of $83.70. The retail price of the Apple Watch Sport 38 mm is $349.00. The analysis excludes logistics, amortised capital expenses, overhead, sales and administrative costs, R&D, software, IP licensing and other supply-chain expenses.

"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, 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."

Component analysis matches industry expectations. The Apple Watch NAND memory is a Toshiba Flash 8GB and DRAM is a Micron SDRAM 512MB, according to IHS.  Broadcom, STMicro, Maxim, Analog Devices and NXP are used for connectivity and interface. However, Apple changed supplier from Invensense to STMicro for the accelerometer and gyroscope sensors.

"The display is LG's plastic OLED display and the touchscreen overlay module is a TPK Slim GG utilising 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."

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