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Teardown of Apple Watch requires lower manufacturing costs

  • Author:Abby
  • Release on:2015-06-01

IHS Technology's recently conducted teardown of the new Apple Watch Sport has indicated that components and basic manufacturing cost of a single device is about 24 percent of manufacturer's suggested retail price or MSRP. The teardown did not include marketing, overhead, software, IP licensing and other variables but only encompassed components and assembly costs. Overall, IHS estimate the component costs to be about $81.20 versus an MSRP of $349 in the US.

Unfortunately, the low cost of the components probably does not mean that manufacturers will be able to fully replicate the Apple Watch's finish. Apple apparently invested heavily in order to manufacture the Watch's unibody construction and smooth finish. As IHS noted, Apple took techniques typically used in prototyping and low-volume manufacturing and scaled them, likely at a high cost.

Addressing the cost aspect of the teardown, Apple CEO Tim Cook noted during Apple's most recent earnings call that he had "never seen [a teardown] that is anywhere close to being accurate", but that could be because the R&D, marketing, overhead and other costs are not included in product teardowns. In addition, Apple CFO Luca Maestri noted that margins on the Watch will be lower than the company’s average.

Nevertheless, IHS noted that most components are not particularly exotic, with some coming from Toshiba, Broadcom, STMicroelectronics, NXP and LG. The research firm said, however, that the PCB assembly was a "monolithic module", creating what they call "one large IC out of the entire assembly". This, along with an EM shielding process that deposited a metallized coating over the surface, saves both space and some weight.