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Apple Watch teardown reveals low hardware cost

Posted: 04 May 2015     Print Version  Bookmark and Share

Keywords:Apple Watch  bill of materials  Taptic Engine  Qi  wireless charging 

Apple Watch, it appears, has the lowest hardware costs compared to retail price of any Apple product that IHS Technology has researched, according to preliminary estimate of IHS and its Teardown Mobile Handsets Intelligence Service.

The teardown of the Apple Watch Sport by IHS estimates that the actual hardware costs are only about 24 per cent of the manufacturer's suggested retail price (MSRP). Estimated hardware cost to MSRP ratios for other Apple products reviewed by IHS are in the range of 29 to 38 per cent.

The teardown of the Apple Watch Sport 38mm by IHS Technology shows a bill of materials of $81.20 with the cost of production rising to $83.70 when the $2.50 manufacturing expense is added. The retail price of the Apple Watch Sport 38mm is $349. The IHS Technology analysis does not include logistics, amortised capital expenses, overhead, SG&A, R&D, software, IP licensing and other variables throughout the supply chain such as the EMS provider.

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

New features and manufacturing methods

There are several new features and manufacturing methods used in the Apple Watch Sport, including a Pulse Oximeter, Force Touch sensor, "Taptic Engine" feedback, encapsulated modular printed circuit board (PCB) assembly and stacked-die integrated circuits (IC).

"While these features have been promoted by Apple and none are necessarily revelatory," Keller said. "It is noteworthy that many features are appearing for the first time—in combination—in one device. It could be a bellwether for other future Apple products."

The Taptic Engine built into the Apple Watch, and integrated with the loudspeaker, contains a linear actuator which provides haptic feedback and vibrations. "We found that the device consumes a substantial amount of space inside the watch, and we would expect further miniaturisation of this function in future iterations of the product," Keller said.

The preliminary results of the teardown do not show any big surprises in the IC content; all of the manufacturers identified so far were expected. The Apple Watch NAND memory is a Toshiba Flash 8GB and DRAM is a Micron SDRAM 512MB. Broadcom, STMicro, Maxim, Analog Devices and NXP are used for connectivity and interface. One noteworthy change is a shift from Invensense to STMicro for the accelerometer/gyroscope.

Apple Watch

"The display is LG's plastic OLED display and the touchscreen overlay module is a TPK Slim GG utilising their 'Force Touch' technology," Keller said. "Force Touch was recently incorporated into the latest MacBook and is expected to be found in the next iPhone generation."

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