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Why the Apple Watch may be a huge cash cow
Apple (AAPL) is set to cash in on its Apple Watch, based on input costs. (Tweet this)
Hardware for tech giant's newest device costs about 24 percent of the manufacturer's suggested retail price (MSRP), according to a Thursday report from analytics company IHS. Costs for previous products including the iPhone 6 Plus ranged between 29 and 98 percent of MSRP, according to IHS "teardowns" of Apple devices.
"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," Kevin Keller, senior principal materials analyst for IHS said in a release.
IHS tore down the Apple Watch Sport 38mm. Total production costs $83.70 compared to a retail price of $349, according to the analysis. Direct material costs amount to $81.20, while cost of assembly is $2.50.
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IHS noted that its input estimate did not include supply chain costs like software, licensing and research and development, among others.
Apple first took orders for the device earlier this month and started to ship them Friday.
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