Strange Facts – $349 Apple Watch costs just $83.70 to manufacture!
The starting version of Apple’s smartwatch, the Apple Watch Sport 38mm (A1553) that you bought for $349, just costs $83.70 for Apple to manufacture! Before you say the “F” word, consider that Apple Watch has some issues too. This fact is unearthed by IHS Technology who added that Apple Watch has the lowest hardware cost to retail price ratio which is a bit harsh on the end-costumers. The estimated hardware to MSRP ratio for Apple products is in the range of 29 to 38 percent, that is quite surprising and also an eye opener about the final quality of product that you pay for.
Although it is a tradition that big brands have quite higher MSRP than the actual manufacturing cost, but Apple has raised some eyebrows with this reveal. The cost doesn’t include logistics, amortized capital expenses, overhead, SG&A, R&D, software, IP licensing and other variable costs which may arises during the shipment or other means.
Kevin Keller, senior principal analyst-materials and cost benchmarking services for IHS Technology had some wise words in defense of this high costing by Apple, and said that;
It is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost. 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.
What this means is that buying a gadget from a reputed brand like Apple is a little harsh on your pocket when compared to the components that are fitted-in. Going for gadgets that are from little less valued brands is a viable option since you get quality hardware for lesser price. However, one should forget the kind of research and development that goes into the development of high end products.