IHS Technology released its teardown results Thursday, revealing that the actual cost to build the recently released Apple Watch is only $84, almost 25 percent of its tag price of $349.
The analytics group tore down the 38mm Apple Watch Sport to compute for the materials costs. After adding the manufacturing and materials expenses, the team concluded that the Cupertino-based company spent only $83.70 for the device; $81.20 for the parts and $2.50 for labor.
The team clarified that their analysis did not include other expenses such as the logistics, software, IP licensing, and others that the company considers when determining the tag price. They also explained that it is normal that the selling price is much higher than the amount spent to build it.
"It is fairly typical for a first-generation product rollout to have a higher retail price versus hardware cost," Kevin Keller, senior principal analyst-materials and cost benchmarking services for IHS Technology, said in a press release. "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."
The teardown also confirmed that Apple has integrated new features to its latest product, including the Pulse Oximeter, Force Touch sensor, Taptic Engine, encapsulated modular printed circuit board (PCB) assembly and stacked-die integrated circuits (IC). Keller believes that these features might be integrated into Apple's other products in the future.
Apple disputed the breakdown released by IHS Technology, Quartz reported.
"Generally, there's cost breakdowns that come out around our products that are much different than the reality," Apple CEO Tim Cook said this week on the company's Q2 earnings call. "I've never seen one that is anywhere close to being accurate."
