LEAN 101: How Apple created its highest ever margin with the Apple Watch

Glen White
- Lean - May 08, 2015

Apple Watch manufacturing costs unveiled.

According to analysts IHS Technology, the £299 Apple Watch Sport has a manufacturing and component cost totalling just £53. IHS claims that this cost makes the Apple Watch the highest margin product Apple has ever produced.

IHS worked out these figures using US prices and it estimates that that 24 percent of the device’s retail price comes from hardware costs.

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

“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.”

However, Apple chief executive Tim Cook, on an analyst call following Apple’s results last week, argued about the accuracy of these ‘teardown’ claims. “Generally there are cost breakdowns around our products that are much different than the reality. I’ve never seen one that is anywhere close to being accurate,” said Cook.

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